An acceptable definition of fraud would be ‘a wrongful or criminal deception intended to result in financial or personal gain’. There are numerous types of fraud, outlined under a variety of legislation, but essentially, it entails the suspect demonstrating some form of dishonesty and/or deception.
The Fraud Act 2006 was brought in to update legislation and assist with tackling the growing array of frauds which were being facilitated by rapidly developing technology and to replace a plethora of offences outlined within the Theft Acts 1968, 1978 and 1996. It established a new general offence of Fraud, as being committed by either: false representation, failing to disclose information, or by abuse of position.
How wide a problem is it?
A 2019 report into the financial cost of fraud estimates that it costs the UK alone somewhere in the region of £130bn – £190bn a year and according to the Office for National Statistics, more people are likely to fall victim to fraud than any other offence. Citizens Advice believe that 75% of people have been targeted by a fraudster in the past 2 years and that 1 in 10 of us know someone who has actually lost money. In the financial year 2018/19, over 700,000 crimes were reported to Action Fraud (65% were registered by businesses and 35% by individuals), with victims losing in excess of £2bn. Unfortunately, the problem is worsening, with losses in the decade since 2009 having increased by 56.5%. Globally, annual losses are estimated to be as high as £3.89 trillion (80% larger than the UK’s GDP).
What are the common types of fraud?
It is virtually impossible to quantify the different types of fraud. Examples of commonly perpetrated frauds include: advance fee schemes (the victim pays money in anticipation of receiving a larger amount in return), identity theft (when a fraudster assumes someone else’s identity), Ponzi schemes (the payment of dividends to initial investors using the funds of subsequent investors) and investment fraud (duping investors with false claims).
At Matrix intelligence, we are often approached to investigate investment fraud. Sadly, the victim is often nearing, or has reached, retirement age and they have approached us because they have little hope for recourse through the police. That is not to denigrate the outstanding job that the police do, but it is simple recognition of the fact that they have insufficient resource to combat the problem. Whereas Action Fraud will record incidents of fraud, the police have to prioritise their efforts and unless the fraud is especially high profile, or high value, it is unlikely that there will be a positive outcome for the victim.
We are sometimes approached by victims of fraud directly, but more often it is by their lawyer. We always commence by conducting a preliminary investigation (at no cost to the victim) to ascertain the facts, however; whereas we can often successfully identify a path to identifying the perpetrator/s, it is often not financially viable to do so. Depending upon the value of their loss, we often have to manage expectations and explain to the victim that they would be throwing good money after bad and that even if we did identify the fraudster, they then still have to secure a conviction and then hope that there are assets which can be seized to recompense them via a full fraud investigation.
Technology and fraud
The problem with trying to combat fraud is that it is expensive to do so and criminals are continually adapting and evolving their techniques. The emergence of new technologies has enabled businesses and law enforcement to fight back, however; fraudsters are often better resourced and can exploit the same technologies to stay one step ahead. Additionally, whereas businesses may often readily identify the threat posed by fraud they often lack the appetite to apportion a suitable percentage of their budget to combat it.
Our increasing reliance on and use of technology also leaves us vulnerable to fraudsters, as business can now be transacted without any personal interaction and people are now more willing than ever before to transact business with someone they have never actually met. Leaving aside our vulnerability to cyber-crime and identity theft, fraudsters now have global reach and they can scale their operations to target individuals in multiple countries. Fraud investigation must move as quickly as the perpetrators in this respect.
How to prevent fraud
The only guaranteed way to tackle fraud is to prevent it in the first place. Remaining with the example of investment fraud, there are a number of red flags that investors should look out for, including: companies calling them out of the blue, being pressured into making a decision, repeated calls or emails, promised returns which seem too good to be true, being asked to keep the investment quiet, or the individual/company not being registered on the FCA website.
If there is any doubt as to the authenticity of an investment, then another recourse and perhaps the most effective, is to conduct due diligence to verify the credentials of the individual who has approached you. This goes beyond simply checking their LinkedIn profile, or searching for their name on a corporate website and more often than not, it requires the appointment of a corporate intelligence and investigations company.
Are you a victim and require fraud investigation?
If you suspect you may have been a victim and require fraud investigation, Matrix Intelligence can assist you by investigating the crime, identifying the individuals responsible and tracing any assets that may be recoverable. For free advice and a no obligation proposal, please contact us on 0203 873 1089 or email: info@matrix-intelligence.com.
