Scamming: Vulnerable Individuals

Julian Knight Excerpts

Thursday 8th September 2016 Commons Chamber

[Julian Knight (Solihull) (Con)]

I beg to move,

That this House believes that the elderly and vulnerable are a high-risk group from having harm done to their financial, emotional and psychological wellbeing from criminals who target them with scam calls, post and visits; praises the work that trading standards bodies do to combat scams; calls on financial institutions and the communications industry to put in place mechanisms to protect potential victims from scams; further calls on the Government to recognise the threat from scams to victims’ ability to live independently; draws attention to the measures proposed by Bournemouth University, the Chartered Trading Standards Institute and National Trading Standards Scams Team on financial harm as useful first steps in tackling such scams; and calls on the Government to make suggestions on further steps to tackle such criminality.

It is difficult to overstate the damage done to our economy and society by fraud and scam artists. Such people prey on some of our most vulnerable citizens and can strike at many points in our lives, whether we are buying a home, hiring a tradesman or investing in our pensions. As a former consumer rights and personal finance journalist, I have seen at first hand the real harm that these fraudsters can do. They not only leave people poorer, but can cause a huge range of health and confidence problems far into the future.

While working for the BBC in 2003, I covered the story of a Southampton pensioner who fell victim to scam artists pretending to represent something called the Canadian lottery. They convinced him to wire £1,600 to Canada as an administration fee to unlock his winnings, which of course never materialised. Instead, there were only escalating demands for more cash, and good money went after bad; indeed, in the end that individual paid out more than £9,000 to those fraudsters. In a particularly cruel twist, I remember he told me that he had been told to wait up with his wife, because someone would call at his house to deliver a cheque for his winnings and a bunch of flowers. The door was never knocked on. When he spoke to the fraudsters again, they laughed down the phone at their own cruelty. It is very easy to form snap judgments about people who fall victim to these sorts of schemes—indeed, the victims often blame themselves, which is one reason why only 5% of cases come to light—when we ourselves have been lucky enough never to fall victim to one.

[Sir Greg Knight (East Yorkshire) (Con)]

My hon. Friend is making a good case. Does he agree that these crooks are getting ever more sophisticated? Using scanning technology and the ability to take pictures from the internet, they often copy the logos and trademarks of reputable companies, which makes it even harder to detect the scam.

[Julian Knight]

My right hon. Friend is absolutely correct. There is an ever-rising tide and the methods are becoming more sophisticated. While we are talking about logos, these people use governmental logos—that of Her Majesty’s Revenue and Customs among others—so that they can pretend to be quasi-governmental. They also use logos that are very similar to governmental logos and those of other institutions. He is quite right to raise that point.

As I say, it is easy for us to rush to snap judgments, and some people do that about what they perceive as their own foolishness. However, the gentleman I was discussing was no fool. He had run his own business for more than 30 years. The scammers were not only persuasive but, as they often do, preyed on his very best instincts, especially the thought of how he could help his children with the winnings.

I thank the hon. Member for North Ayrshire and Arran (Patricia Gibson) for co-signing the motion. I also thank all right hon. and hon. Members who have talked to me prior to the debate to recount their stories of constituents who have been affected. I was struck by one from my hon. Friend the Member for Banbury (Victoria Prentis), who wrote to tell me that an elderly lady in her constituency was robbed of almost £35,000 by people posing as, of all things, an anti-fraud unit from her local bank. Unfortunately those fraudsters were not caught, and as the banks are not liable, her savings have not been returned. That has had a devastating impact—not just financial but emotional—on the lady concerned.

Those incidents are just two among the thousands that occur each and every year. They highlight why we need to do more to combat this detestable style of crime. I thank the many external organisations that got in touch with me, especially those that provided so much useful data and information, such as the Chartered Trading Standards Institute, Age UK, Financial Fraud Action UK, Standard Life and the Fairway financial consultancy.

The cost of fraud to the economy is truly astonishing. According to the Chartered Trading Standards Institute, it amounts to £52 billion a year. Numbers can get thrown around, but to put that into context, £52 billion is more than we spend on defence or education. If we were to cut that figure by just 10%, we would reinject £5 billion into people’s savings and the wider economy itself. That would equate to much of the economic boost that has come about in recent years due to payment protection insurance payouts.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

I am grateful to my hon. Friend for leading the debate. A quarter of the population of my constituency is over the age of 65, and the average age of those being scammed is 74, so my constituents are particularly concerned. He talked about financial cost, which is of course important, but those being scammed are some of the most vulnerable in society. This is an issue of not just the financial cost, but the human cost.

[Julian Knight]

I could not agree more. The demographics in our constituencies are very similar, certainly in terms of age—in Silhill ward in my constituency, 40% of people are over 65. As my hon. Friend says, the average age of scamming victims is 74. Fraudsters have many different ways of making their approach, but in the main they instinctively target elderly people—although not to the exclusion of everyone else—because, frankly, the older generation is quite polite. They do not want to put the phone down straightaway and they might respond to a letter. However, as I will explain, as soon as someone does that, they enter a whole new world in terms of the information gathered by these fraudsters.

The national average cost of fraud per victim is purportedly just over £1,000, but the amounts can be a lot higher. I was staggered to find that in my constituency the average cost is £9,000 for each event of fraud, which probably reflects our relatively affluent population and also the fact that we have an older population, as my hon. Friend and I discussed a moment ago. Older people are disproportionately the target of scammers, but we must not forget that the youngest reported victim that I have been alerted to was only 19. Can we imagine starting out in life, effectively, as an adult, and finding that one of our first experiences is to be hoodwinked by one of those despicable fraudsters? That demonstrates that no one who is old enough to handle their own finances can afford to be complacent about the risk of fraud.

Being stung is often only the start of the process. A victim’s details can be sold on more than 200 times, putting them in the sights of a much larger pool of international criminals. The National Trading Standards scams team has found an astonishing 106,000 potential victims of fraud on captured criminal target lists. The fraudsters call those sucker lists, which shows what they think of people. Investigations suggest that the names of 560,000 victims from the UK are already in circulation.

We must not fall into the trap of considering only financial costs as the social and human damage caused by fraud can be just as severe. Indeed, according to trueCall, the phone screening service, the impact of scamming is comparable to that of violent crime. For starters, 29% of victims suffer a major depressive episode in the 20 months after a crime, compared with just 2% of non-victims.

[Dr Sarah Wollaston (Totnes) (Con)]

Has my hon. Friend also considered the risk and actual harm caused when scammers market fake medicines online? That is a particular problem. Operation Pangea has been seizing many such products as they come into the UK, but people need to be aware of the danger of buying from online pharmacies. They need to be sure that they are buying from a reputable agent of the pharmacy industry in the UK, and people can look at logos to check that they are doing so.

[Julian Knight]

I thank my hon. Friend for raising that point. She will have come across that issue in her role as Chair of the Health Committee. As I understand it, such cases are not simply a question of being defrauded of money; they can actually cost people their lives, in the worst possible circumstances.

As well as depressive episodes, 45% of victims suffer a generalised anxiety disorder compared with just 15% of non-victims. The stress that victims suffer can both exacerbate pre-existing health conditions and induce post-traumatic stress, and 10% of victims have unexplained hospital admissions within three months. The circles of these frauds—their effects within our wider society—roll outwards and outwards. More horrifyingly, people who have been defrauded are two-and-a-half times more likely than non-victims to be in care or dead within two years of the event. Scammers take so much more than cash. They can rob us of our self-confidence and elderly citizens of the ability to live independently.

We should not forget the people who fight back. I have enjoyed reading stories of people called scam baiters, who turn the tables on these predators by wasting their time and making fools of them. I particularly liked one story that the BBC covered a few years ago of a gentleman who managed to persuade a Nigerian scammer to daub himself in war paint to prove his dedication to a made-up religion. Overall, however, the clear knock-on effects for personal independence and relationships add huge invisible costs to the headline figures of fraud.

[Dr Julian Lewis (New Forest East) (Con)]

I congratulate my hon. Friend on the excellent case he is making about this very important subject. From personal experience, I know that some scammers concentrate on people who are beginning to suffer from short-term memory loss. Will he explain to what extent that is a feature of this phenomenon? If it is, as I suspect, a very significant feature, does it not highlight the importance of people who are beginning to lose their faculties trying, whenever possible, to give power of attorney to reliable relatives so that they are not vulnerable to being taken advantage of in this way?

[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.

[Mark Tami (Alyn and Deeside) (Lab)]

Is the hon. Gentleman as worried as I am about the number of people who respond to communications? He mentioned the lottery. Once people have responded to one communication, they will receive many more. I heard of one person who received up to 10 or 20 a day. Moreover, the communications are coming from abroad, which means that they cannot be intercepted and stopped. It is causing a great deal of heartache to very vulnerable people.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before the hon. Member for Solihull (Julian Knight) responds to that intervention, let me point out that, while I appreciate that he is making some extremely important points and the House is very attentive, a great many other Members wish to speak, not just in the current debate but in the next. I am sure that he will conclude his speech very soon.

[Julian Knight]

I am actually on my last paragraph, Madam Deputy Speaker, but thank you for the reminder.

The hon. Member for Alyn and Deeside (Mark Tami) is absolutely correct. If the Post Office is alerted to the position, it will stop mail and set up a separate “scam mail box”, which is a very good initiative.

Fraud is a detestable crime which preys on our worst fears and best instincts, and I hope that, together with the police and other organisations and across the Government, we can start to stamp it out.

[Several hon. Members rose—]

--- Later in debate ---

[Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)]

I congratulate my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) and the hon. Member for Solihull (Julian Knight) on securing this debate on a subject I must confess I did not know nearly enough about. But I do know now that my own constituency is affected by scams in the same way as are many other hon. Members’. One of the local police divisions informs me that the main scam taking place there is one that has been referred to in this debate. Crooks pretend to be from the bank and state that unusual activity is happening on the victim’s account. Information is requested, and then a so-called safe account is set up, and the victim is asked to transfer the money to that new account, which, of course, is almost the opposite of safe.

A local officer there, PC Blades, informs me that

“we are talking about large sums of money being taken”,

with an equally large impact on the victim. He also confirms that it seems that

“a lot of fraud activity goes unreported as persons feel ashamed at being caught out with such scams.”

Tragically, as we have heard, this is the picture all across the country, with the average victim being 74, and the average loss £1,000, but with many losing much more, yet only 5% of victims report being scammed to the authorities. I have been astonished to learn about the scale of the problem—the number of people losing out, the financial losses resulting, the range of industries affected, the different types of scam, and the techniques and technologies employed, from vishing to phishing and cold calling to copycat websites.

The only thing that is less of a surprise is the personal distress and misery caused, which Members have eloquently described. I, too, was horrified to read that victims of mass marketing-type fraud in particular are often placed on so-called suckers lists and their details are then sold on to other fraudsters, increasing their risk of becoming a repeat victim. So anything that can be done to clamp down on that practice must be done.

This is all rather depressing reading, so how do we set about that task of preventing scams and bringing perpetrators to justice? We all have a responsibility in raising awareness by highlighting ScamSmart or Know Fraud, by supporting Scorpion or Pension Wise, and by backing campaigns such as scam awareness month and the excellent “Avoiding scams” information leaflet from Age UK. I confess that Action Fraud had barely entered my consciousness until a few months ago. By introducing this debate, hon. Members have made me determined to ensure that as many of my constituents know about it as possible.

The messages that we have to promote are not particularly difficult ones, but they are easy to forget under pressure, particularly for vulnerable people. The first message, which other hon. Members have mentioned, is that if it sounds too good to be true, it probably is—certainly if a cold call is involved. I know that we will be returning to that issue next week. Another message is that people should take expert advice, and the local citizens advice bureau will be happy to help. Also, people should not be afraid to doubt someone’s honesty when they are being asked to part with cash. Unfortunately, a lot of people find that difficult.

[Julian Knight]

I appreciate what the hon. Gentleman is saying about the information from the local citizens advice bureau—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. A load of time has been used already and we have an oversubscribed debate next, so it is unfair to use more time making interventions. Does the hon. Gentleman really need to intervene? I think that he was hoping to speak for two minutes at the end anyway.

--- Later in debate ---

[Julian Knight]

I thank all Members for their contributions to this debate. The variety of stories and concerns highlights the fact that this subject touches so many of our constituents, and, in some instances, our immediate families. I welcome the Minister to her place and her commitment to focus the Government on tackling this most cruel and silent of crimes. This issue concerns not just Government, but private firms, the third sector and the wider society in general. Fraud will always be there, but we can make it harder for those involved if we act together.

Question put and agreed to.

Resolved,

That this House believes that the elderly and vulnerable are a high-risk group from having harm done to their financial, emotional and psychological wellbeing from criminals who target them with scam calls, post and visits; praises the work that trading standards bodies do to combat scams; calls on financial institutions and the communications industry to put in place mechanisms to protect potential victims from scams; further calls on the Government to recognise the threat from scams to victims’ ability to live independently; draws attention to the measures proposed by Bournemouth University, the Chartered Trading Standards Institute and National Trading Standards Scams Team on financial harm as useful first steps in tackling such scams; and calls on the Government to make suggestions on further steps to tackle such criminality.