That this House has considered the impact of financial fraud and economic crime.
It is an honour to serve with you in the Chair, Ms Vaz. I thank the House for allowing me to secure this debate. I also welcome the Minister to their place, and I thank the shadow Minister, the hon. Member for Hamble Valley (Paul Holmes), and the Liberal Democrat spokesperson, the hon. Member for Dorking and Horley (Chris Coghlan), for attending.
I must start by declaring an interest. In my previous role before entering this place, I was head of fraud and compliance for a fintech firm, responsible for screening billions of dollars of transactions a year. When it comes to dealing with financial criminals, unfortunately I have seen it all. From the use of artificial intelligence—
Order. Apparently, there is an acoustic problem for everybody sitting in the front row. Could the hon. Gentleman move to the back as the mics are not working?
I am really sorry, but Hansard may not have picked up the earlier part of your speech, so could I ask you to start again, please? Thank you very much. You are doing a grand job for your first attempt.
With apologies to right hon. and hon. Members who will be hearing the same thing, I will start again.
It is an honour to serve with you in the Chair, Ms Vaz. I thank the House for allowing me to secure this debate. I also welcome the Minister, and I thank the shadow Minister, the hon. Member for Hamble Valley, and the Liberal Democrat spokesperson, the hon. Member for Dorking and Horley, for attending.
I start by declaring an interest. In my previous role before entering this place, I was head of fraud and compliance for a fintech firm, responsible for screening billions of dollars of transactions a year. When it comes to dealing with financial criminals, unfortunately I have seen it all. From the use of artificial intelligence avatars to bypass biometric screening, to sophisticated shell companies and complex layering, to spearfishing and parasitically targeting legitimate companies to advanced cloning techniques, I cannot overemphasise the danger that fraud and financial crime now pose or the complex layers that exist behind it.
Fraud places an emotional burden on victims. It ruins lives. We all know that as MPs from our surgeries. I will touch on a case that I heard about recently. The criminal aspect of fraud is not just about hobbyists in basements; we are increasingly talking about nation states who in some cases are working alongside advanced organised crime groups that are taking the mantle. They are often experienced professionals who work to circumvent the systems we use. Criminals are smart and frequently shift their modus operandi to get around our systems.
Although the responsibility to be smarter and take that proverbial step ahead falls to Government and firms, the situation is more complex than that. The risks are real, and if scams continue to increase exponentially we will have a dangerous environment for businesses. We will have more constituents telling more stories about how they have fallen victim to fraud, and the national cost could become so undesirable that we may well become the worst developed country globally per capita when it comes to fraud rates. If we do not act, there is a risk that fraud and economic crime could suffocate growth.
I declare an interest: prior to entering Parliament, I worked at Pay.UK, the payment system operator for the UK. I thank my hon. Friend for securing this important debate. He raises an important point, not just about the cost of fraud to people and businesses, but about data sharing across banks. Does he agree that a modernised payment system might allow us to collect more data, which could be used across the industry to identify, tackle and prevent fraud at the source, saving businesses and customers lots of money in the future?
It is brilliant to have Members such as my hon. Friend, with his experience at Pay.UK, in this place, and I completely agree about the renewal of the payments architecture. If it had risk analysis and artificial intelligence monitoring at its heart, we could detect payments fraud at the very centre, which could save banks billions of pounds in compensation and be a better result for consumers.
Industry innovations such as “money mule insights” prove that the latest data analytics allow for much more sophisticated ways of targeting of criminals via data sharing between payment providers. Lloyds Bank got in touch with me this week to highlight that its mule-hunting team had identified a 44% increase in money mules over the past year. Data sharing between banks is critical in targeting money mules. At present, banks file suspicious activity reports, but they are often unable to share suspicious payment transaction data with each other. If they did, there would be an opportunity to harness suspicious payment data to detect and block fraudulent and criminal transactions in real time. I now believe that we have an unmatched opportunity to rebuild fraud and economic crime analysis with the renewal of faster payments and a new payments architecture. In conclusion on this recommendation, much greater payments data sharing is crucial if we want to stop fraudulent transactions from being processed.
Let me turn to recommendation 6, on the obligations on social media companies. The Government could introduce a shared responsibility and liability for social media and telecommunications firms to tackle fraud origination and incentivise them to invest to prevent fraud. A new anti-fraud centre could govern regulatory powers over social media companies and impose penalties or issue guidance to reduce fraud. That would tackle the things we heard about earlier, such as fraud originating from Facebook Marketplace.
I turn to my final recommendation: to expand the Financial Conduct Authority’s powers over the Post Office, which is the biggest cash provider in the country, through its everyday banking service, and has always played an integral role in providing access to cash for the nation. That should continue. As banks close their branches, the importance of the Post Office is growing. However, following the Horizon scandal, its reputation has been damaged. The Horizon system is still fundamentally being used today for the everyday banking service, which processes billions in cash deposits and withdrawals each and every month. To give banks and consumers confidence in the Post Office, the FCA should gain direct regulatory oversight of the everyday banking service. That is critical for resilience and managing financial crime risks. I can confirm that I am in the process of writing to the FCA’s CEO to encourage them to provide an update on their work on money laundering via the Post Office.
I thank the hon. Member for his assistance. I expect to take the first of the Opposition spokespersons at 5.08 pm. They will have five minutes each and the Minister will have 10 minutes. If hon. Members wish to speak, they should bob.
I welcome the Minister to his place and congratulate my hon. Friend the Member for York Outer (Mr Charters) on securing this massively important debate. This is a subject that I have been more than aware of throughout my entire professional career. In the light of that, I also declare an interest: I have been working in the financial services industry for many years.
According to the UK fraud costs measurement committee, the level of fraud in the UK directly affecting consumers in 2023 was estimated to be a staggering £8 billion. The former Conservative Government did not prioritise economic crime sufficiently, according to the Treasury Committee. Now, it is up to the new Government to take action to improve the supervisory system and combat economic crime, which is growing. Improvements need to be made to assess the extent of economic crime and fraud in the UK—it is telling that there are no clear measures of the true impact of fraud on individuals, businesses and the economy. Some of my hon. Friend’s suggestions will help us to get a real understanding of the impact.
A wide range of crimes fall under the category of fraud and economic crime, and the sums of money involved range from small to huge. To give a personal example, only last month in my constituency in Southend, some of my constituents were left feeling tricked, over—believe it or not—an inflatable fun day. They bought tickets in good faith, but it was a fictitious event. Some parents were left out of pocket after buying a number of the £15 tickets online, and clearly children were left very upset. Those sorts of things should not happen, but it is one small example of how fraud can impact families on a day-to-day basis.
The police force in my county of Essex has a serious economic crime unit, which seized £2 million-worth of assets and made 15 arrests in February alone after an intensive, month-long investigation. The squad investigates offences including romance scams, online marketplace scams, rogue traders, investment fraud, bribery and corruption.
It is a pleasure to serve under your chairship for the second time today, Ms Vaz.
I thank the hon. Member for York Outer (Mr Charters) for setting the scene so well. One of the great things about debates with new Members is that they bring their expertise, knowledge and interests in various subject matters to our debates, which enriches the House greatly. I very much look forward to contributions from other hon. Members when the time comes.
I am pleased to see the Minister in his place. He and I have been friends a long time while on the Opposition side of the Chamber, as it was. I am pleased to see him in a place that is a well-deserved honour for him. I am also pleased to see the shadow Minister, the hon. Member for Hamble Valley (Paul Holmes), in his place.
I am pleased to speak in this debate in the short time that we have. I have heard of countless economic crime cases, including scams and frauds. Constituents must be aware of the dangers, so it is vital to give some background in discussion of such matters. When I speak, I always bring in a Northern Ireland perspective, and I wish that I could tell the hon. Member for York Outer that things in Northern Ireland are better, but they are not. When he hears the figures, he will probably be shocked at just how bad they are.
Last year, according to the Police Service of Northern Ireland, £23.1 million was lost to fraud over 13 months in Northern Ireland. Between December 2022 and January 2024, there were some 5,412 reports of fraud, with lost sums ranging from £5,000 up to almost—unfortunately—£250,000. I just cannot comprehend how that can happen, but it happened. Those sums were taken by criminals from people’s bank accounts. The figures give an idea of where the scams are and where we need to focus. In 2023 alone, there were 3,400 cases of economic fraud. In many such cases, frauds and scams are committed at a distance through social media, online websites, phone calls and text messages.
I commend my hon. Friend the Member for York Outer (Mr Charters) for securing this important debate and for shining a light on an issue that has been neglected for far too long.
A growing concern facing my constituents in Wolverhampton North East is the rise of fraud, particularly scams perpetrated from overseas. We often hear calls for more arrests and prosecutions of the criminals, and I fully support that. However, we also need to acknowledge that a significant and increasing number of these fraudsters are not operating from within the UK. Instead they are part of international fraud rings based in hotspots such as India, the Philippines, South Africa, Brazil and parts of eastern Europe.
With advanced technology we have machines capable of making thousands of calls or sending thousands of texts per minute. The criminals can easily target people here in Britain. Our country unfortunately is a prime target for such activity. We do much of our shopping and banking online, and the widespread use of the English language makes it easier for fraudsters abroad to deceive and manipulate their victims here.
The real question is what we do about this. I suggest that when we negotiate trade deals with countries where such criminal activity is prominent, we push for stronger co-operation in fighting fraud. Let us make fraud prevention part of the agreements, giving the countries a real incentive to work with us to tackle the issue. Without such action, fraud will continue to grow, impacting more and more families in places like Wolverhampton North East. It is time we took strong, global, co-ordinated action to protect our residents from the scourge of international fraud.
It is a pleasure to serve under your chairmanship, Ms Vaz, in this brilliant and necessary debate. I commend the hon. Member for York Outer (Mr Charters) for securing this debate on financial fraud and economic crime and for his professional expertise in this area. I should declare an interest: I spent 11 years working in financial services and also worked in the Foreign Office on counter-terrorism, so I know how vital this debate is.
The hon. Member for York Outer made really interesting points in his seven proposals, particularly on the link between tackling fraud and economic growth and his call for a national anti-fraud centre based on the Australian model. The Liberal Democrats called for an online crime agency in our manifesto, so it is something we would be interested in supporting.
We need a dedicated body to tackle online crimes such as personal fraud; our police forces are overwhelmed. Local forces lack the specialist skills required to combat the complexity of modern online crime. Although the National Crime Agency focuses on the most serious offences, we need an agency specifically equipped to deal with online fraud.
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We currently suffer from relatively weak national co-ordination in tackling fraud and economic crime, which is made more complex by the fact that the perpetrator is often not in the same geographical location as the victim. This can cause local police forces to deprioritise fraud reports, but if we can fix that, we may be able to fix the foundations. Although the online fraud charter introduced by the last Government was a positive step, it is non-statutory and voluntary. Nothing in the charter addresses the issue of compensating consumers who have been defrauded by content originating online. There are no penalties for non-compliance, and that must be thought through, but we can turn the page.
While this Government are in their early stages, I believe it is time to smell the coffee and grasp the nettle —whichever analogy hon. Members prefer—so that we can become a world leader in anti-fraud and protecting consumers and businesses, and become a country where companies want to do business and will not be ripped off. The prize is that our fintech, regtech and financial services sector will want to become ever more internationally competitive if we truly get to the heart of fraud and economic crime.
Before I go any further on how we can make some fixes, I will quantify the challenges that we face. Fraud accounts for more than 40% of crime in the UK but receives only 1% of police resources. That statistic is chilling, but wait until we hear the cost of payments fraud to the UK economy: it is roughly £1.2 billion. There is also a cost to individuals. I have a constituent who attended an advice surgery just this weekend and told me that they had lost life savings, to the tune of a five-figure sum. Fraud often hurts the most vulnerable, either those on low incomes or those with lower tech proficiency, who are also more likely to fall victim.
However, more than three quarters of authorised push payment fraud originates online. Research from Innovate Finance on fintech illustrates the challenge posed by online purchase scams. It found that Facebook Marketplace represented a staggering 51% of all fraud cases for the firm in question. After I secured this debate, a main UK bank got in touch with me outlining similar statistics in which a huge part of the fraud that it encountered originated from Facebook Marketplace, so we must get better at stopping fraud at the source. There are some positives to consider: tackling payment fraud could contribute £6 billion to the UK’s GDP over five years, which would really strengthen our economy.
A smorgasbord of issues are causing our downfall, so I will outline seven positive steps to begin to tackle fraud and economic crime. They come from meetings that I have had with trade bodies, consumer groups, banks and payment providers and from many industry reports. We can become a world leader in anti-fraud and economic crime. Little investment is needed from the Government, but a new regulatory apparatus and new levels of co-ordination are needed. I stand as a firm friend to the Minister and the Government in making that change happen, so I will outline some positive suggestions for tackling fraud.
Recommendation 1 is that the new Government should set an anti-fraud target. In June 2023, the previous Government published their fraud strategy, saying that they would cut fraud by 10% on 2019 levels by December 2024. They achieved that, but the target was not ambitious enough and, importantly, excluded businesses, so the Government should commit to a fraud target that is genuinely ambitious and do so in collaboration with business. I do not want to pick an arbitrary number, because it is about focusing on action rather than aims, so one option is to set a target that we should have a lower fraud rate per capita than international peers—for example, an ambitious target that the per capita rate of fraud should be lower in the UK in five years’ time than that in France, Germany and other countries.
Recommendation 2 is for the creation of a new national anti-fraud centre. We need a strong new anti-fraud centre to face the complex interdisciplinary challenges that fraud poses. Action Fraud has skilled individuals, but regrettably it is no longer fit for purpose. That is my view, and often the view of industry. We need to reform it, and that means a review of its shortfalls, as well as the ways in which we can build on some of its successes in receiving reports. During my career, I came across a case in which a UK business was scammed out of more than £200,000. It submitted dozens of pages of detail to Action Fraud, and did not even get a call back from the police.
We should look to Australia and create a national anti-fraud centre to drive forward the Government’s fraud strategy with a clear vision and clear accountability. It could be part of the Serious Fraud Office or the National Crime Agency, or it could be its own entity, but it should be able to bring charges. The Australian Labour Government launched a cutting-edge national anti-scam centre in 2023. They rightly recognised the scale of the challenge, and took it on directly. The first action was to tackle investment scams, before disrupting criminal gangs who were advertising non-existent jobs. It is time to refresh the ecosystem that will fight fraud for decades to come, with a strong new national anti-fraud centre at the heart of Government. That would join up the SFO, the Financial Conduct Authority, Action Fraud, the NCA, the Met police, the National Fraud Intelligence Bureau and local police forces, and it would do that with a central leadership, because our institutions are currently too fragmented to properly deal with fraud.
Recommendation 3 is that this Government should replicate the previous Government’s appointment of an anti-fraud champion in Parliament. The appointment of an anti-fraud champion would ensure better co-ordination across Departments and could be a precursor to a new national anti-fraud centre.
Recommendation 4 is that we should support data sharing between sectors. We have to create a framework to enable data sharing between social media companies and payment participants. If information can be shared between the two, there is an opportunity to stop transactions at the source. Because of GDPR, there is no clear mechanism for data collaboration, but if we can find a way to create a precedent, that would provide regulatory certainty.
Recommendation 5 is to create a new framework that requires banks to share payment data. If we are to make progress, we need to find a way for banks to work collaboratively on payment data sharing. I regularly meet banks and industry leaders who are receptive to that recommendation.
In conclusion, those are seven recommendations that I would like to implement. I think they would have a huge impact on our ability to better target fraud and economic crime. I will write to the Government outlining the recommendations, which are the culmination of meetings across industry, and I stand willing to work closely with them on implementing them, should they be interested in doing so. I look forward to hearing from colleagues across the House in the debate and to working constructively with Government and other hon. Members to tackle fraud. It is crucial we do that for financial credibility, for our constituents and for our country.
As my hon. Friend the Member for York Outer mentioned, fraud can have a devastating impact on individuals and their families, affecting not only their finances but their wellbeing, leaving them feeling manipulated and deceived. Of course, there is the long-term impact on their finances, which has a knock-on impact on the economy, as people no longer have their hard-earned savings to spend on much-needed goods and services, or just on enjoying themselves.
As I have mentioned, my background before coming to this place was in financial services, most recently in mortgages. With your indulgence, Ms Vaz, I will share a different type of fraud, where the consumer often unwittingly targets the lender. It is not usually out of malice, but done with the desire of achieving their housing dream, which for many can be seen as out of reach due to loan-to-income restrictions and high deposit requirements. Mortgage fraud can include overvaluing properties, overstating a salary or income, concealing a second mortgage from the primary lender or mis-stating the use of a property to either benefit from a more preferential rate of interest or to borrow more than the lender assesses that a client can afford.
The UK’s leading fraud prevention service, Cifas, revealed in January 2024 that one in six of UK adults—16%—admitted that they or somebody they knew had misled mortgage companies about their annual salary in order to buy their home. I agree with Cifas that more needs to be done to raise awareness of how serious a crime mortgage fraud can be. Not being honest about one’s income, debt history, employment or the value of the property is a serious matter. Being caught will have long-term effects on one’s ability to gain a mortgage, and could have other financial consequences.
I call on the Minister and the new Government to work with the relevant partners and stakeholders to strengthen and expand the fraud strategy that was announced in May 2023 to combat the ever-growing and more sophisticated fraudulent schemes that target individual consumers. Equally, awareness needs to be raised among consumers about the consequences of them falling unexpectedly into the world of fraud when applying for finance, especially mortgages. I would like to see collaboration between banks and other lenders, the regulator and the Government, to drive awareness of mortgage fraud through misrepresentation. That, of course, would be complemented by the Government’s plans to make the dream of home ownership more accessible for all.
I will probably age myself by saying this, but I remember getting a message from a general in Nigeria. My goodness! Right away, my hackles were up, because I do not know any generals in Nigeria. When I was told that I had won $100,000 or whatever it was, I knew I could not have done, because I did not enter any competition, and I had no friends or relatives out there. It was clearly a scam, but they claimed that if I sent them my bank details, they would forward an astronomically large amount of money to me. The point I am making is that if something sounds too good to be true, it probably isn’t true. Someone turns up and says, “You have won this amount of money, just send me your bank details and we will transfer the money to you.” I am not smarter than anyone else—I do not profess to be and am not—but whenever someone comes along with something that is just that good, it cannot be good, so beware.
I want to give the example of an elderly lady who came to see me—I speak for the elderly and the vulnerable as my focus for the short time I have. Just last week, in my office I dealt with an issue where a lady clicked a link on Facebook to lodge money in an online pot to gain interest over a period of time. Her details were given and the £276 immediately taken from her account. The dangers of social media are broad enough, and online fraud and scamming seem to be at a peak. Unfortunately, I see that regularly in my office. We advised her immediately to put a block on her card and to contact the local PSNI to make a report. But she is only one example, unfortunately, of what so many people face on a daily basis, every week in my constituency.
I am just looking up something from Danske Bank, which I belong to. It sends such things regularly, as a wee warning perhaps, and a caution:
“We want to remind you that we are all at risk of fraud, even if you are scam savvy. Bank impersonation scams are on the rise”
—which the hon. Member for York Outer referred to—
“but remember, we will never call you to ask for log-on details, PIN numbers or passcodes, including those we send by text.”
My bank sends that to me every month or every six weeks. If banks did that as a reminder to people to keep it fresh in their minds, it would be very helpful.
The UK economic crime team is responsible for leading the industry’s fight against economic crime, but more needs to be done to support those who are not perhaps tech-savvy, which I profess that I am not: I sometimes do not understand the dangers that are out there. The online fraud steering group has numerous aims in tackling economic crime, including making the UK look like the least attractive place to commit such crimes, but they still happen with a regularity that tells us that that is not the case. Whether internally in the UK, or internationally where foreign actors interfere, we need to ensure that our constituents are protected and, most importantly, aware.
The PSNI back home in Northern Ireland has a crime prevention officer who specifically visits elderly and vulnerable people, including groups who meet every week. They go and talk to them and give them information. I would suggest that that could be done with greater regularity to remind people, because people do need to be reminded on a regular basis.
I will finish now because I am conscious that others want to speak. In terms of money laundering, we have seen terrible examples in Northern Ireland where, to be fair, the PSNI in conjunction with other police forces across the United Kingdom and further afield have been able to get on top of it, but it still happens. There are scams and fraud, so there is more work to be done. I look to the Minister with great respect. I know he will come back with the answers that will perhaps encourage us and give us some hope. I look to him for guidance on his updated plans to make our economic system run smoothly—it has to—and ensure that across the whole of the United Kingdom of Great Britain and Northern Ireland we have a good structure for dealing with the issues and also the means to do so.