Newsletters Business Crime & Financial Services 14th Feb 2020

Why has there been a decline in fraud prosecutions?

(In) Action Fraud  

Why has there been a decline in fraud prosecutions?

Just last week the Director of the Serious Fraud Office slammed the “antiquated” fraud laws which prevent the SFO from effectively prosecuting fraud allegations. The SFO have repeatedly struggled to achieve success in fraud prosecutions. This coupled with the findings of the Sir Craig Mackey’s report into ‘failed’ fraud investigations has led to growing concerns that the UK authorities are letting down victims.

In 2018/19 tax fraud convictions alone decreased by a fifth to just 648, seeing the first reduction in prosecutions since 2014/15. And despite nearly 2,000 fraud offences being committed daily in England and Wales, just one in 50 is prosecuted.

One factor undoubtedly contributing to the reduction in prosecutions is the scarcity of resources available to prosecutors. Complex fraud prosecutions, whether successful or unsuccessful, inevitably come at a significant cost to the public purse and so prosecutions are often rightly reserved to cases where there is a need to send a deterrent message or where only a criminal sanction is appropriate.

The SFO’s focus on large, complex fraud cases involving multinationals as opposed to lower- level fraud leaves room for more routine fraud to slip by undetected.

The same issues regarding lack of resources occurs in the context of lower level fraud investigations. The CPS has had its budget cut by a quarter since 2010 and an undercover investigation carried out by The Times last year revealed that only one in 200 police officers were dedicated to investigating fraud. Victims of fraud must report it to Action Fraud, which is overseen by the City of London Police, the force that specialises in fraud investigations. The Times investigation discovered that call handlers at Action Fraud responsible for recording victims’ fraud reports undertook just two weeks’ training and were taught to mislead callers into thinking they are talking to police officers. Call handlers quickly decide during calls whether or not to categorise victims’ reports as crimes, but are told never to reveal this to victims.

Another factor inevitably undermining prosecutions is the difficulty in investigating fraud offences. It is estimated that 86% of fraud is committed online and around 78% of cases involve offences where suspects and offenders do not live in the same area. The result is that at a time when fraud now accounts for one- in -three crimes, just 2% are detected.

Potential Solutions?

Apart from the urgent need to increase resources the time may have come for a review into how lower-level fraud that doesn’t amount to ‘serious and organised crime’ is investigated. The ex-Met Police Deputy Commissioner, Sir Craig Mackey’s investigation revealed that fraudsters “operate with impunity” because forces are not adequately equipped to investigate. Sir Mackey reported that Action Fraud was failing to answer a third of calls and was “lagging behind industry standards”. He observed that police computer systems were so poor that staff had to use makeshift spreadsheets to collate reports with matching details.

The SFO Director, Lisa Osofsky, has also made plain her support for amendments to the existing law on corporate criminal liability. She previously told the Justice Select Committee that the SFO was hamstrung by the current identification principle, whereby prosecutors must demonstrate the guilt of a “directing mind and will” of the company in order to secure a conviction. Osofsky’s preference is for introduction of the US concept of vicarious liability, where a company is liable for the acts of an employee when committed in the course of their employment and to the benefit of the company. However, she would also welcome the introduction of a new failure to prevent economic crime offence, akin to the similar offences relating to bribery and tax evasion.

On the 5th February reports broke that the National Cyber Security Centre, a branch of GCHQ, is currently devising a hotline for businesses that fall victim to cybercrime to combat the concerns that Action Fraud is failing to adequately tackle the issue. The hotline will be launched in March 2021 and aims to make it easier for corporates to report online crimes. The intelligence agency wants a more sophisticated response to cybercrime and every victim who uses the hotline will either be called or visited by police officers to update them on their case.

In conclusion, there is clear room for improvement in the investigation and prosecution of all levels of fraud. The Home Office is “carefully” considering the Mackey report and the GCHQ’s plans are a welcome development. In the meantime however Action Fraud remains the first port of call for victims of fraud and cybercrime.


Brendan Kelly QC & Helen Lavery 


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