On Aug. 1, the National Crime Agency announced that it had shut down Russian Coms, resulting in the arrests of four individuals, with further action promised over the coming months.
Russian Coms was a platform that had been used by hundreds of criminals to make more than 1.3 million scam calls to defraud victims around the world between 2021 and 2024.
It was a sophisticated fake call scheme that allowed fraudsters to make calls appearing to come from preselected numbers, such as financial institutions, telecommunications companies and law enforcement agencies, enabling them to gain the victim's trust before stealing their money and personal details.
Such was the sophistication of the scam, mobile phones were sold by criminals which were preloaded with fake apps so that in the event it was seized or recovered by law enforcement, it would look like an ordinary smartphone. It was also installed with a burn app that instantly wiped the phone, preventing any unwanted examination.
According to the NCA, it is believed that Russian Coms was used to target approximately 170,000 victims across the U.K., causing financial losses in the tens of millions of pounds. In the cases reported to Action Fraud — the U.K.'s national reporting centre for fraud and cybercrime run by the City of London Police, the lead police force on fraud matters — the average loss to each victim was over £9,400 ($12,371).
Unfortunately, scams such as this are not uncommon. In fact, according to the NCA, "[f]raud accounts for approximately 40% of all crime against individuals in England and Wales," and the House of Commons Justice Commitee estimates it costs the U.K. over £137 billion a year. The scale of fraud being committed in the U.K. is immense, and law enforcement agencies are struggling to keep up.
While it is commendable that the NCA managed to take down the Russian Coms platform, it is notable that the action only came about because of the sheer scale of the fraud. Had the platform been used to swindle a handful of victims out of their life savings, it is unlikely that any action would have been taken.
In fact, according to a March 2023 report from the House of Commons Committee of Public Accounts, out of the around 900,000 fraud cases reported in England and Wales each year, less than 1% result in an offender being charged or prosecuted.
On May 3, 2023, the government released its strategy to tackle fraudsters and cut fraud by 10%. However, this strategy has so far failed, with a 2024 BDO UK report suggesting that the value in reported fraud increased in 2023 by as much as an alarming 104% compared to 2022, and the number of reported cases rose by 18% in 2023.
Although these figures should be put in context, with more than half of the value of fraud in 2023 deriving from the Entain deferred prosecution agreement and the Bernie Eccleston settlement with HM Revenue & Customs, it still highlights that fraud is not on the wain.
Why are there so few fraud prosecutions despite the significant number of offenses? The problem lies with how frauds are reported and investigated.
Victims of fraud must report it to Action Fraud — not an investigative agency, but rather a call handling center. When a report is made to Action Fraud, it is sent to the National Fraud Intelligence Bureau, which, like Action Fraud, is also overseen by the City of London Police.
The bureau then reviews the report before deciding whether to send it to a police force for investigation. However, not all reports made through Action Fraud are sent to a police force, and there has been extensive criticism that reports made to Action Fraud simply fall into a black hole without being investigated.
Indeed, the House of Commons Committee of Public Accounts' 2023 "Progress combatting fraud" report expressed serious concerns over its findings that "many victims feel lost in the system" owing to a lack of a response when reports to Action Fraud have been made.
According to Action Fraud's own figures for 2020-2021, the latest available, of the 875,622 frauds reported to Action Fraud, Cifas and U.K. Finance, only 35,209 were disseminated for further investigation.
A 2022 Justice Committee report into fraud and the justice system found that Action Fraud was "unfit for purpose" and that it was failing victims of crime, leading to the nickname "Inaction Fraud."
In 2021, the government announced that Action Fraud would be scrapped and replaced with a new Fraud and Cyber Crime Reporting and Analysis System. The system was due to be operational this year but has now been pushed back to sometime in 2025.
Even when a report does make its way from Action Fraud to a police force, the police force cannot be compelled to accept the report from the bureau. The uncomfortable truth is, the police have neither the appetite, nor the expertise and resources to investigate either low-level fraud or high-value, complex fraud.
This is evidenced by a 2022 report published by the Justice Committee, which found that just 2% of police funding was dedicated to combating fraud; and statistics reported by the Social Market Foundation on the police workforce in England and Wales, which show that in 2021 only 1,753 officers and staff, or 0.8% of the total police force, were primarily focused on economic crime.
Beyond pure resourcing challenges, the Justice Committee report also found a "lack of focus" on fraud, demonstrated by failure to record data on this form of crime, which in turn prevents law enforcement bodies from being held accountable for their performance in relation to fraud.
The above numbers changed little in recent years, leading the Justice Committee to find that the justice system is "ill-equipped" to deal with the growing fraud pandemic.
As there is no central fraud investigative police force in the U.K., it is left to each individual constabulary to determine their own strategy when it comes to fraud investigation.
As police budgets and resources have continuously dwindled, it can come as no surprise that fraud is not high on the list of priorities when compared with violent crime, drugs and sexual offenses.
This is combined with a significant lack of skill and expertise at local force level to deal with sophisticated frauds, particularly ones utilizing the advancement of technology, such as artificial intelligence.
In addition to the police, there are other agencies such as the Serious Fraud Office, HMRC, the Financial Conduct Authority and the NCA, each capable of investigating and prosecuting frauds that fall within their remit.
However, their remits are extremely narrow when put into context with the total volume of fraud in the U.K.; HMRC prosecutes fraud relating to the public revenue, the FCA fraud relating to financial markets and products, the NCA fraud relating to organized crime, and the SFO only serious or complex fraud.
The SFO used to have a policy of not investigating fraud with a value of less than £1 million, however the value threshold was removed and replaced with a case acceptance statement of principle, which states that the SFO director will take into account "whether the complexity and nature of the suspected offense warrants the application of the SFO's specialist skills, powers and capabilities to investigate and prosecute" before deciding whether to open an investigation.[1]
The practical effect of this is that SFO prosecutions involve frauds with values of substantially more than £1 million — the consequence being that the majority of fraudsters in the UK are unlikely to be investigated or pursued by governing bodies, and so they are able to continue their operations with little fear of being caught.
With the police unable or unwilling to investigate frauds with the slightest element of complexity, and the SFO only interested in complex, high-value frauds, the vast majority of fraud slips through the net, going undetected and unpunished.
Increasing Fraud Prosecutions
Many ideas have been proposed to bolster the U.K.'s ability to detect and prosecute fraud, including Theresa May's much-maligned ambition to incorporate the SFO into the NCA, which, despite looking a certainty at one point, never came to fruition.
There have also been calls for the U.K. to adopt the U.S. model of reinvesting seized assets to further fund the detection and prevention of economic crime. The U.S. Department of Justice runs the Asset Forfeiture Program, which was established to receive the proceeds of forfeiture. The funds collected by the program can then be used to finance further asset recovery and forfeiture operations, as well as to finance general investigative expenses.
Currently, any funds recovered by the SFO in the U.K., including significant fines from deferred prosecution agreements, go straight to the Treasury. The funds are not retained by the SFO, whose funding comes from the Treasury, after negotiation with the attorney general's office, as part of the spending review process.
The budget is based on what the SFO thinks it will need to investigate and prosecute cases for the upcoming year, although further requests for blockbuster funding can be made. Any monies previously recovered by the SFO are not reflected in the budget.
If recovered funds could be retained by the SFO and put to use, the SFO could hire more lawyers and investigators, invest in new technology, and expand its scope to open more investigations into domestic frauds. Alternatively, funds could also be channeled to the police, to bolster their existing resources to tackle fraud.
This model could also be adapted for funds recovered by the Crown Prosecution Service, half of which currently go to the Home Office and half to the police. Recovered funds could be used to establish a new specialized police fraud unit, sitting within the City of London Police, capable of investigating and prosecuting all fraud, no matter how complex.
A recent Academic's Roundtable hosted by the charity Justice, in connection with Jonathan Fisher KC's independent review into disclosure and fraud offenses, highlights support for the "keys to the warehouse" approach to disclosure, where the defense is given access to all nonsensitive material in financial crime cases.
To effectively implement this, the police would need specialist training to identify what evidence needed to be collected in the first place, and the recovery model could ensure that funds are available for this to happen.
One criticism of the recovery model is that it could incentivize prosecuting agencies to accept settlements, such as a deferred prosecution agreement or forfeiture, instead of prosecuting obviously criminal conduct. In reality, such settlements are subject to judicial oversight, so there are safeguards already in place.
While there are differing views on how best to tackle fraud in the U.K., it is clear that whatever the strategy, there needs to be significant investment in recruiting and training investigators with the necessary skill and expertise to deal with complex fraud, the utilization of technology to adapt to new and changing methods of fraud, and meaningful engagement and information sharing between the various intelligence platforms.
Without that, fighting fraud will be a losing battle.
This article first appeared on Law360 website here.
[1] https://www.sfo.gov.uk/publications/guidance-policy-and-protocols/sfo-statement-of- principle
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