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State of Financial Crime 2023 Report

Fraud to be Reclassified as a UK National Security Threat

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The UK government has announced that fraud will be reclassified as a national security threat, giving it the same status as terrorism. Additionally, fraud will be added to the Strategic Policing Requirement, meaning the armed forces will be required to treat fraud as a top priority alongside public disorder, serious and organized crime, civil emergencies, cyber-attacks, and child sexual abuse.

The reclassification follows the 2022 Annual Report on Suspicious Activity Reports (SARs) by the National Crime Agency (NCA). Published in January 2023, the report highlights that the past two years have been dominated by organized crime threats, particularly fraud, against members of the public, UK businesses, and government departments. 

UK fraud epidemic

Fraud is the most commonly experienced crime in the UK, estimated to account for 40 percent of all crimes committed across the country. In 2022, total losses amounted to £4 billion, a 67 percent increase from 2021. Despite these figures, fraud teams account for 2 percent of police resources and the number of prosecutions represents 0.75 percent of reported fraud cases. 

Cheque, card, and online banking are the most reported type of fraud by volume, according to the most recent UK National Risk Assessment (NRA). The assessment also highlighted that cybercrime is a major enabler of fraud. Our 2023 global compliance survey corroborates the link between fraud and cybercrime, with emerging typologies such as synthetic identity fraud featuring as a significant concern for organizations. While the 2020 NRA report estimated that the internet plays a role in at least 54 percent of all fraud, the proportion of fraud incidents that were cyber-related in the year ending March 2022 increased to 61 percent.  

A key part of the government’s overhaul regarding fraud includes the replacement of the national reporting service Action Fraud, following criticisms of its performance. The replacement service is intended to more seamlessly integrate into the current fraud landscape, sharing data with the National Cyber Security Centre (NCSC) and the National Economic Crime Centre (NECC), both of which have been created since Action Fraud was launched. The government also hopes to improve automation in the service, allowing more timely sharing of information.

Wider corruption crackdown

The UK government also introduced the Register of Overseas Entities in August 2022. The register required foreign firms to declare their beneficial owners by January 31, under the new Economic Crime (Transparency and Enforcement) Act 2022.

Now that deadline has passed, organizations that have not submitted information to Companies House could face severe sanctions, including prosecution or financial penalties. According to the government’s press release, Companies House is now assessing and preparing cases for enforcement action. Further regulations proposed in the Economic Crime and Corporate Transparency Bill 2022 will empower Companies House to impose financial penalties on land owned by non-compliant organizations, as well as pursue other legal avenues.

Key takeaways

To combat the rising threat of fraud, firms should ensure their anti-fraud tools can detect common scenarios and project future risks to help compliance staff anticipate threats. This can be done cost-effectively and efficiently by implementing an AI overlay to existing tools. In addition to not requiring a total system overhaul, AI overlays provide organizations with the ability to customize their rule sets. 

Additionally, as the government prepares to unveil its new scam strategy, firms should ensure they keep up to date with developments and review the government’s latest response to the Justice Committee’s Fraud and the Justice System report in the meantime.  

The State of Financial Crime 2023 Report

Read more about the evolving fraud and scam landscape and uncover what it means for your firm as more fraudsters enter the metaverse.

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Originally published 09 February 2023, updated 10 February 2023

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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