Economic Crime and Corporate Transparency Bill (Second sitting)

Stephen Kinnock Excerpts

Tuesday 25th October 2022 Public Bill Committees

[Stephen Kinnock (Aberavon) (Lab)]

Q You talked about outsourcing identity verification, but is that not just a recipe for disaster? If we keep on outsourcing these things, rather than Companies House controlling the process, you are just going to open it up to more fraud and dodgy dealing?

Martin Swain: I do not think we would have the capacity to do ID verification internally, certainly not within the timescale that we are looking at bringing it in. I go back to my point—and I will pick up the point with UK Finance—that we will be operating ID verification to standards that are appropriate across sectors that use ID verification. With any aspect of these reforms, there is potential for gaps in the system. What we are trying to do is design out gaps in the system. However, I think we know from the current companies framework that there are gaps in the system, and even where you plug those gaps, others will appear.

[The Chair]

Thank you very much indeed to both of you for your evidence. It has been very helpful. We now move on to the next panel.

Examination of Witnesses

Commander Nik Adams, Simon Welch and Michelle Crotty gave evidence.

[The Chair]

Good afternoon. We now have Commander Nik Adams from the City of London police, Simon Welch representing the National Police Chiefs’ Council, and Michelle Crotty from the Serious Fraud Office. May I ask each of you to introduce yourselves briefly, please?

Commander Adams: Good afternoon. I am Nik Adams, commander in the City of London police and the current lead on economic and cyber-crime.

Simon Welch: Good afternoon. I am Simon Welch, the national co-ordinator for the National Police Chiefs’ Council on the economic crime portfolio.

Michelle Crotty: I am Michelle Crotty, chief capability officer at the Serious Fraud Office.

[Stephen Kinnock]

Q The national policing fraud strategy of 2019 said that, although the majority of the police response to fraud is delivered by local forces, capability and capacity varies widely across different areas. The strategy said that the regional organised crime units were “extremely limited” in their capacity. Has the situation improved since 2019, and if not could you say a word about what extra resources or powers might be required? I am not quite sure who is the best person to answer that.

Commander Adams: Shall I start, as the City of London senior rep? I have the advantage and the disadvantage of having been in this job only since April, so I can give you a view of where I think things have got to. I obviously was not part of the network when that report was written. I think it reflected an approach to economic crime that has been very much built bottom up historically, which led to the assessment that policing was fairly fragmented, with different levels of investment and different prioritisation across forces.

As long as economic crime and fraud, in particular, are not part of the strategic policing requirement, it is difficult to really get police forces to galvanise that response. We have seen, however, some fantastic work by the Association of Police and Crime Commissioners to get fraud and economic crime into police and crime plans. We have seen through the support that the City of London police has provided, as the co-ordinating force, a great deal of consistency starting to layer on in local forces. In this year alone, we have visited 29 out of all 43 forces to look at their delivery of the economic crime response and of shared good practice across the country. That bottom-up has given us those improved levels of consistency.

Through the spending review and the police uplift programme, we are seeing significant investment at both a regional and a national level to help us to build some of those capabilities. By the end of this year, we will have proactive economic crime teams built around a consistent model in every single regional organised crime unit. With the anticipated investment from the economic crime levy, we will see the growth of regional economic crime teams—proactive financial investigation at a regional level—and, with our support, the continued network of those teams across the country, which will give us a growing and more consistent approach as we go forward.

[Stephen Kinnock]

Q The challenge that we have is that money laundering prosecutions have dropped by 35% over the last five years in the UK, and the number of crimes being investigated—[Interruption.]

[Dame Margaret Hodge]

I will read out the two figures. The number of crimes under investigation has halved in the past three years, and convictions for fraud offences, according to national crime statistics, have decreased by 67% since 2011. What you are talking about is theoretical; it is not what is happening. At the same time, fraud is going up and up.

[Stephen Kinnock]

Will you say a word about why that is? The system seems not to be working, so what do we need to do to fix it?

Commander Adams: I will start and then bring in Simon, who is an expert on money laundering. The first thing to say is that fraud is getting increasingly complex. About 70% of all fraud emanates from overseas and, as Adrian touched on, it is very difficult for us to obtain prosecutions and convictions across jurisdictions. That is a real challenge for us, as are the growth in technology, the way in which fraudsters are now exploiting people and the changes in tactics.

Fraudsters are moving away from unauthorised payment fraud, where people’s details are stolen and used fraudulently—banks are now preventing somewhere in the region of 65p in every pound of that type of activity—and we are now seeing much more sophisticated frauds, where people are socially engineered, or manipulated, into physically approving transactions. That of course is much harder for technological solutions to prevent, when the target is a human being.

Of course, all that complexity requires a much more complex and sophisticated policing response. As I described, the growth that is coming down the line—in particular the proactive growth—will not start landing until the end of this year and then, of course, we are several years before we have fully experienced and really competent and effective investigators working on those crimes. All those things will layer on over a period. We anticipate that the technological advances will continue, both in support of us and in challenging us in how we can investigate and progress these crimes. Simon, do you want to comment specifically on money laundering?

Simon Welch: On money laundering, the amount of offences—detected offences—is going down. Criminals are getting a lot more savvy about our tactics and things like that, so we find that they are not having assets in their own names so much—vehicles, houses, things like that—and our opportunities for confiscation are probably going down a bit. However, what you can see from the seizure figures is that the cash value is up, but the volume is down. We are targeting and getting good results from the cases, but it is a smaller number of cases. In reality, POCA is now quite old, and people are used to us going after the money, so they take far more steps to protect that money from us being able to confiscate it.

[Jackie Doyle-Price]

Q Clause 156 extends the pre-investigation powers of the Serious Fraud Office. What is the benefit of that? How will that improve the ability to track all economic crime?

Michelle Crotty: At the moment, we have those pre-investigation powers for overseas bribery and corruption. They allow us to investigate earlier, in particular to identify banking evidence earlier, and to see whether there is a case to pursue. By extending that to fraud and domestic-based issues, we are enabled to do that in those cases. At the moment, we have to take on a case formally and to commit resource in order to exercise the powers. To some extent, we can negotiate on occasion with companies to get that material, but if we have the power of compulsion, it would make it quicker and easier to get the material and so identify whether there is a case there.