Fighting Fraud (Fraud Act 2006 and Digital Fraud Committee Report)

Lord Sandhurst Excerpts

Friday 30th June 2023 Lords Chamber

[Lord Sandhurst (Con)]

My Lords, the committee, of which I was a member and which was so excellently chaired by my noble friend Lady Morgan of Cotes, reported last November. We heard from 56 witnesses. They covered a range of experience: academics, Ministers, the police, the Crown Prosecution Service, prosecutors in the courts, the Home Office, financial services, regulators and a range of internet platforms and service providers, as well as telecoms companies. Above all, we heard from the victims.

The picture was absolutely clear. We face in this country a really serious problem with fraud. Too many of our institutions have failed to take it seriously enough or to address it effectively. We have to act, and now. Our report identified the issues. It provided in one easily readable, if quite long, document a route map for police, government, regulators and major commercial players. There is no excuse to say that they do not know what to do, or to deny that there is a problem.

I will remind the House briefly of some core findings. Fraud is the most commonly experienced crime in England and Wales, yet is excluded from the crime figures. It accounts for approximately 41% of all crimes against individuals. Losses total at least £4 billion a year. The Bank of England has admitted that it directly affects consumer confidence. Most fraud happens online; 80% of reported frauds are cyber-enabled. The exponential growth in fraud and scams, we found, has been invisible. Fraudsters face little risk of being caught. Victims are embarrassed to report it. Law enforcement is underresourced.

We found that this underprioritisation has created a permissive culture across the Government and law enforcement agencies. This then permeates through to affect the attitudes of the private sector players in the fraud chain—internet service providers, telecoms companies and the like. They have not stepped in to do what they can to prevent customers being scammed. Indeed, I received an email to the effect that they feel they have not had a fair hearing from our committee; I do not know whether others did.

Organised criminals around the world turn to the UK as a lucrative market to commit fraud. As we have heard, their proceeds are used to fund human trafficking and the drugs trade. The telecoms sector has to date had no real incentive to prevent fraud and has allowed blame to be placed elsewhere for too long. There have been no sticks, and certainly no carrots. It must do more to tackle phishing emails, smishing texts and fraudsters making spoof phone calls, as well as those emails that infiltrate our machines.

Until all fraud-enabling industries fear significant financial, legal and reputational risk for their failure to prevent fraud, they will not act. We were clear that the Government must act to introduce a new corporate offence of failure to prevent fraud across all sectors to address this, and we did not limit that to so-called large companies.

I welcome the important measures in the Online Safety Bill to prevent fraudulent content and scam advertising on online platforms and to hold tech companies accountable when they fail, but these will bite only on fraudulent advertisements. They are an important plank but they are only one plank—you cannot build a house from them. The telecoms industry, financial services, the insurers, indeed all our great service industries in this country, must face the same requirements and get their act together.

The Government published their Fraud Strategy in May and appointed Anthony Browne MP as anti-fraud champion. That is a good start but it is not enough. Let me explain: I applaud the proposals to ban cold calls on all financial products, to ban SIM farms, to make it harder for fraudsters to spoof UK numbers making it look like they are calling from a legitimate UK business, and to stop people hiding behind fake companies, and I applaud the plans to create new powers to take down fraudulent websites—but we need a facilitation offence. Telecoms companies must be put under duties to do more. Plans to improve the law enforcement response and trade and charters addressing areas of business activity are welcome, but they are not enough to ensure the changed culture needed to drive down fraud in this country.

Surprisingly, to date the Government have been reluctant to introduce what we regarded as adequate provisions to push business to take steps to prevent fraud. Regulation has to be proportionate, of course, but reasonable steps to prevent fraud taken by all businesses will reduce the opportunities for these scammers. They will help our economy grow; everyone will be more prosperous as a result. Thankfully, on Tuesday this week, this House expanded the scope of the duty to prevent fraud imposed by the economic crimes Bill. I just hope that it will not be taken out in the other place, because it would likely bounce back again here.

Only if all businesses are driven to take proportionate steps to stop fraud will things change. Economic benefits for all will flow. The costs to business and the consumer will be off-set by a clean, fraud-minimised environment. We will all win. People have to look at the big picture, beyond the ends of their noses. If the Government are serious about their promise to make sure that every part of the system is incentivised to take fraud seriously, they must not only introduce new charters for business but ensure that the different sectors, whether banking, finance, tech, insurance or telecoms, are all driven to make life much more difficult for the fraudster. That requires a duty to prevent fraud applied across the board.

Enforceable obligations must apply not just to large businesses. The six key steps we identified in the report are critical. Ministers must act now, and they must act decisively.