The UK Government Must Treat Fraud as a Threat to National Security

Fraud in the UK has become everybody’s problem but nobody’s priority. It is the volume crime of our times, with 3.7 million reported incidents in 2019/20, and that is almost certainly an underestimation. Yet, only 1% of the policing response is dedicated to dealing with it. Not only is fraud against individuals undermining the government’s ambition for the UK to be the ‘safest place in the world to be online’, but fraud against business and the financial sector is undermining the UK’s financial infrastructure and the country’s reputation as a place to do business. As a new RUSI report details, it is the silent threat that can no longer be ignored.

Until now, fraud has received a predominantly victim-centric, criminal justice-oriented response. While these are undoubtedly important parts of the puzzle, there now needs to be a step-change in the response. The seriousness of fraud should be reflected as a priority in the UK’s national security architecture, thereby activating the extensive expertise, coordination and resourcing this brings to the collective response.

Out Of Sight...

Issues with reporting, combined with many victims believing they will not get an adequate response, have meant fraud has flown under the radar for too long. As it has done so, the scale of the problem has increased; advancements in social engineering techniques have allowed criminals to target a wider range of people, beyond just the ‘vulnerable’; and the impact on the UK’s public finances has been steadily worsening.

The pandemic has brought home the economic reality of the impunity with which fraudsters act: the National Audit Office estimates losses of £15–26 billion from the Coronavirus Bounce Back Loan Scheme alone. This includes both fraudulent applications and legitimate applications which have defaulted on the loan payment – although the exact distribution between the two is unknown, there is belief within government that fraud losses are likely to be significantly above the general estimates of public sector fraud levels of 0.5% to 5%. This reduces the government’s ability to deliver frontline services: fraud is a heist on the taxpayer. It may be years before the full scale of the problem is revealed, and the worse these figures become, the more the public’s faith in the ability of the government to manage public finances risks deteriorating to a point where fraud against the public purse becomes morally accepted.

...Out Of Mind

Inaction on this issue has also meant that there has not been enough attention paid to the linkages between fraud and serious organised crime as well as fraud and terrorist financing. There is little available information on the extent to which organised crime networks rely on fraud as a primary source of revenue; how their revenues from fraud fund other serious organised criminality; and what the balance is between international and domestic organised crime networks defrauding UK citizens. What is known is that there are networks of professional enablers that are involved in facilitating fraud such as pension liberation fraud, while there are many examples of how established organised frauds like courier fraud and identity fraud have been repurposed to fulfil the financing needs of a wide range of terrorist actors. It is little surprise therefore that fraud has earned the title of the ‘Cinderella of crime’ amongst practitioners keen to see it receive a level of attention commensurate with the widespread harm caused.

The UK’s stated National Security Objectives establish a commitment to ‘Protect our People’ and ‘Protect our Prosperity’. The evidence on fraud points to a failure in both these commitments. A new cross-government public–private strategy for a properly resourced and networked policing response is desperately needed. Crucially, this requires buy-in from the intelligence and security communities, shaping the issuance of a related set of national security intelligence requirements. It also demands that the informational and operational siloes that exist across law enforcement agencies and private sector companies are unlocked with more ambitious bulk data-matching and analytical initiatives. Finally, recognition of the importance of the ‘Government Counter Fraud Profession’ as part of critical government infrastructure is key.

We should no longer be making the case for fraud as a national security concern – we should acknowledge the risk of not doing so.

The views expressed in this Commentary are the author's, and do not represent those of RUSI or any other institution.