Telecom sector must do more to prevent fraud
A“PERMISSIVE culture” exists around fraud, and more joined-up action is needed to prevent scams from happening in the first place, according to a House of Lords committee.
A new corporate criminal offence of “failure to prevent fraud” should be introduced, to help incentivise all industries to play their part in combating scams, the Fraud Act 2006 and Digital Fraud Committee urged.
The telecoms sector must do more to tackle scam messages before they reach victims and combat spoof calls, while the tech sector must slam the brakes on fraudsters using online advertising and social media platforms to reel in consumers, the committee said.
Plans to hold platforms to account via the Online Safety Bill for online fraudulent advertising appearing on their services must not be allowed to slide and should be strengthened, it added.
Meanwhile, the financial services sector has been “bounced into action” due to the burden of reimbursing customers who have lost out due to fraud, the committee said.
“Until all fraud-enabling industries fear significant financial, legal and reputational risk for their failure to prevent fraud, they will not act,” the report said.
It continued: “The private sector must be encouraged to combat fraud
not only through facing the threat of corporate criminal liability or regulatory action, but also through the creation of a safe harbour for the sharing of data for the purposes of preventing fraud.
“It is only through a holistic approach involving every part of the fraud chain that fraud will be prevented upstream before money leaves a victim’s account.”
Payments should be delayed in certain circumstances to allow more time for banks to review risks and contact customers, the committee
suggested. When fraudulent payments do slip through the net, it should not be the sole responsibility of the financial services sector, in particular the victim’s bank, to pick up the bill, it said.
“All stakeholders in the fraud chain, including the payee’s bank, must know they have a duty both to prevent fraud and to address their failings and the victims’ losses once it has occurred,” the report said.
The committee also called for a “united, centrally-led public awareness campaign that takes its lead from best practice exhibited in public health campaigns”, to help tackle fraud. The report said: “Without fear of facing investigation or justice, organised criminals around the world turn to the UK as a lucrative market to commit fraud.
“They know that they can operate with limited fear of prosecution or redress for their crimes, the proceeds of which they use to fund further criminal activity including human trafficking and the drugs trade, and they do not have any regard for their victims.”
Law enforcement agencies are “chronically underfunded” for fighting fraud and Action Fraud, the UK’s reporting centre for fraud and cyber crime, remains inactive and misunderstood, the committee said.
The report said: “The effect of such under-prioritisation has been to create a permissive culture across Government and law enforcement agencies towards fraud and the criminals who perpetrate it.
“This then permeates through to affect the attitudes of private sector players in the fraud chain, which describes the steps involved in a fraud, who have not stepped in to do what they can to prevent consumers being scammed.”
The “alphabet soup” of bodies responsible for fighting fraud is ineffective, the committee said, and creates a vacuum of responsibility and a
culture of blame-shifting. It said a Cabinet sub-committee is needed with a mandate to tackle fraud.