Scamming: Vulnerable Individuals

Jessica Morden Excerpts

Thursday 8th September 2016 Commons Chamber

[Julian Knight]

That is absolutely correct. We also need better training for bank staff. Nationwide is very good at spotting the signs of when an individual is being defrauded. I remember one case that was told to me by my grandmother, who is 91, of a lady on her estate who had tried to withdraw several thousand pounds from the Nationwide with two burly men behind her. That case related to fake tarmacking and the usual fake repairs. Nationwide must be commended for stopping that withdrawal from happening. The Post Office, too, has put in place such training. My right hon. Friend is right to make the link between scamming and the ever-increasing instances, due to longevity, of dementia in our society. This is another challenge we must meet as a society through financial institutions, and family and other support networks.

The clear knock-on effects for personal independence and relationships add huge invisible costs to the headline figures I mentioned, both by increasing demand for state support and simply in terms of human misery. One of the reasons why fraud is so difficult to tackle is that it can take many different forms. Con artists are adept at exploiting people’s unfamiliarity with the technical aspects of a product or service in order to trick them. They are also quick to exploit the latest news story or Government initiative, and sometimes simply try to exploit our generosity after a natural disaster by posing as someone in need of disaster relief. An email apparently coming from a disaster zone and asking for help is a very common trick of the fraudsters.

Several constituents have visited my surgery to complain that their insurers will not allow them to take money out of their pension funds to invest into unregulated investments—so-called “penny shares”—which allow scammers to sell people worthless stocks and other asset classes. I am sure that other hon. Members have received similar visits. I have had to be very clear to those individuals that their insurers are perfectly right and that they should never put their pension at risk. I encourage Members to remain vigilant about such stories. This “pensions unlocking”, as it is called, is just one way in which con artists are trying to exploit the Government’s new, more liberal pensions system. I fully support the Government’s desire to give more power to individual savers, but such cases highlight the importance of developing anti-fraud protections alongside policies, rather than after they are implemented. That applies to our regulators, too.

Impersonating banks is another common form of financial fraud, as the constituent of my hon. Friend the Member for Banbury discovered. According to Financial Fraud Action UK, scammers are now targeting individuals directly for passwords, passcodes and PINs as security systems become ever more sophisticated and complex. FFA UK reported that losses to financial fraud totalled £755 million in 2015, but that was only what was reported. Worryingly, that figure represented a 26% increase on 2014, despite bank and card company security systems intercepting and preventing £1.76 billion of fraud, or £7 in every £10 of potential losses.

Fraud is also flourishing on the internet. According to consumer group Which?, more than 5 million online scams were carried out last year, with an astonishing £9 billion lost to fraudsters. It also reports that six in 10 of us reported being targeted by online scammers in the 12 months up to May this year. Frankly, I am surprised the figure is only six out of 10; I am forever being asked to wire money to various parts of the world, basically for it to be laundered. The most common types of fraud are phishing emails—usually purporting to be from a bank or senior official—seeking money, and bogus computer support.

Alongside this cutting-edge crime, the more traditional forms of fraud flourish too, such as false tradesman tricking people into paying extortionate amounts for unnecessary work and often providing cover for outright distraction burglaries into the bargain. I was struck by a case sent in by the Chartered Trading Standards Institute on this very point. The case involved a 78-year-old pensioner from Lincolnshire who lived alone and was isolated from family. The pensioner was conned out of his house by a conman who convinced him that major repair work was needed on his property. After being cold-called and visited, he agreed to will part of his property in return for the work being carried out. However, the documents he signed actually gave the house to the scammers, who then placed him in a caravan park. It was only the victim’s testimony in court that guaranteed a conviction. The officers involved had no doubt there were other victims, silent victims, who had lost homes in this way.

The huge financial and human costs of fraud make the case for action clear, but the problem could very well be much more serious than we realise. The CTSI believes that only 5% of scams are ever reported, with fear and shame keeping victims silent and preventing them from seeking help. There are already some very strong efforts in this area. In addition to the preventive measures by banks and card companies that I have already mentioned, trading standards has been collaborating with charities and the police to afford better protection to victims. For example, there has been a concerted effort to provide previous victims, and those whose age or health makes them likely to be victimised, with call blockers. These have so far protected 1,600 vulnerable people and blocked 95% of 81,000 attempted nuisance calls.

Based on the overall statistics, trading standards estimates that more than 11,500 scams, which would have been carried out, have been stopped. Expanding the capacity of trading standards, as many have called for, would make these efforts more effective. More needs to be done, especially when the resale of personal information makes so many people vulnerable to crimes such as identity theft. The CTSI has called for much stricter regulation and control of personal data to counter industrial-scale and legal harvesting of personal data which can then be put to illegal use or sold on. So often, the first purchase of the information can be done through clicking a box, for example to sign up to a newsletter. The information then goes into the ether. I do not believe that people know quite what they are signing up to: there is no transparency. The first few purchases of that information might be bona fide and legitimate. Further down the scale, however, we start to find in investigations that holding companies, which are a front, are effectively buying in the information for fraudsters.

Despite the fact that 85% of people, a huge majority, think that businesses have an equal or greater responsibility to protect their customers from fraud than consumers, the Cyber Security Breaches 2016 Survey found that only 5% of firms invest in ongoing monitoring of hacks into their systems, despite more than six in 10 reporting such breaches. I know from personal experience that some banks have a long way to go in their own security arrangements, too. Very recently, HSBC asked my wife to send some very sensitive financial and personal information to a private email address. That was legitimate. It was bona fide. But what on earth is a bank doing allowing private and sensitive information to go outside its own networks?

Some firms report to me the astonishing claim that some of our current systems work against responsible corporate behaviour. A partner in the financial consultancy firm Fairway wrote to me that the Financial Ombudsman Service was holding his firm accountable for losses incurred via some very risky, and frankly quite murky-sounding, investments that his firm had clearly warned its clients to avoid because they would put their life savings at risk. One adjudicator at the FOS had apparently suggested that the firm should have refused to advise the people involved. How can we have a system that makes it harder for people engaged in potentially problematic and risky investments to receive professional advice? It is essential for us to ensure that our regulators are focusing on the authors of dodgy investment schemes which blur the line between legitimate business and outright fraud, and not unfairly penalising those who try to help.

The Government can also make a real difference by stress-testing policies and building anti-fraud protections into them as they are developed, rather than waiting until afterwards. I know that the Cabinet Office has made great strides in relation to the sharing of information throughout the Government to track down benefit fraudsters and other financial scammers.

[Jessica Morden (Newport East) (Lab)]

I congratulate the hon. Gentleman on an excellent speech. I strongly endorse what he has said about Government schemes. He mentioned pensioners earlier, and in recent years, particularly in south Wales, they have been targeted by green deal scams. I agree wholeheartedly that it is important for the Government to build in safeguards when they are developing policies, to prevent people from being scammed on the back of legitimate Government schemes.

[Julian Knight]

That is a very good point. I remember the fraud that took place way back when tax credits were launched. The fraudsters cotton on incredibly quickly, and they see the opportunities. They seem to be extremely flexible in that regard. Scam artists are very quick to move on any new opportunity. They cost the Government hundreds of millions of pounds by exploiting the green deal, and, before that, Labour's tax credits proved so vulnerable that the online portal set up to claim them is still closed a decade later.

We also need much clearer warnings for people. Despite the best of intentions, much of the advice on offer is too cautious, and contains too much room for doubt. There is too much reliance on caveat emptor. It would be much better to lay out some very clear rules, such as these. If a tradesman knocks on your door to say that you need surprise repairs, just say no. Thank him or her, and, if you are worried, call a reputable professional yourself. If someone tries to convince you that you have won a lottery that you did not enter, just say no: it cannot be made clear enough that that never happens. If someone tries to persuade you to make a risky investment with your pension, just say no: that precious investment has to look after you in your old age. If you want to invest, always take the time to seek proper, independent professional advice.