It’s a Fraudster’s World: Exploring the Scale, Impact, and Globally Interconnected Nature of Fraud Against Consumers

Table of Contents

• Acknowledgements 5
• About the authors 6
• Richard Hyde 6
• John Asthana Gibson 6
• FOREWORD FROM THE SPONSOR 7
• About this report 8
• Executive summary 9
• The aims of this report 9
• The evidence base for this report 9
• Fraud is committed on a vast scale around the globe 9
• The cost of volume fraud perpetrated against individuals 10
• Variation in fraud types across the surveyed countries 10
• Overall, the UK compares well with many other countries over the prevalence of the fraud threat 10
• Whilst other countries are faring worse, fraud remains high in the UK 11
• Fraud remains a significant problem for the UK 11
• The “fraudemic” is slowly garnering more attention from politicians 11
• The UK’s lacklustre response to fraud is a key reason why it remains prevalent 11
• Collective action problems bedevil a more effective domestic counter-fraud effort by the UK 11
• Fraud is a global problem requiring effective domestic counter-fraud regimes in order to underpin a successful international global response 12
• Fraud victims and fraudsters are widely distributed across the world 12
• States have failed to rise to the fraud challenge 12
• The interdependency issue dictates the need for an ambitious international response 12
• A collective action problem holds back international cooperation on fraud 12
• There are effective and popular solutions governments can implement 13
• Financial levers to incentivise firms in the “fraud chain” to overcome the collective action problem are popular 13
• Data and intelligence sharing commands a plurality of support across most of the countries surveyed 13
• Overall more people support rather than oppose frictions in payments systems 14
• Recommendations 15
• Domestic measures to tackle the failures in the UK’s fraud response 15
• International measures to boost the global counter-fraud effort 16
• chapter one – introduction 17
• The world is in the midst of a ‘fraudemic’ 17
• Key drivers behind the explosion of fraud 17
• The low-risk, high-reward nature of fraud drives its popularity amongst criminals 17
• The pursuit of financial gain at scale is especially prominent amongst organised criminals, where illicit profits are a central motivation.38F However, these motives also frequently apply to the more casual and opportunistic fraudster. 18
• A confluence of factors has driven the growth in fraud 18
• Networked communication and financial technologies have lowered the barriers to entry and increased the range of attack vectors for criminals 18
• The mediating role of technology on criminal opportunities and victim behaviour 19
• The failure of the state to control the rise in fraud 20
• The structure of this report 22
• chapter two – THE FRAUD PICTURE ACROSS 15 COUNTRIES 23
• How fraud victimisation in the UK compares to other countries 23
• Between 2021 – 2023 there were more than 200 million victims of fraud 24
• Levels of repeat victimisation vary across countries but even in the best performing country a third fall prey more than once 25
• The Fraud Threat Prevalence Index 26
• The UK’s comparatively positive position in the FTPI 27
• The nature of the fraud being perpetrated varies across countries 28
• Authorised Push Payment (APP) fraud is somewhat more common across the 15 country sample but there is variation between places 28
• The diversification of fraud victimisation and fraudsters 29
• Fraudsters are based all around the world and frequently target victims in other countries 29
• Fraudsters are targeting different types of frauds at different countries to increase their chances of successfully defrauding victims 30
• Chapter three – the impact of volume fraud on victims and countries 31
• Direct financial losses incurred by individual fraud victims 31
• Victims suffering a direct financial loss was common across the 15 country sample 31
• The UK stood out as the country that reimbursed victims most often 31
• The distribution of the quantum of financial losses varied significantly across surveyed countries 31
• The average amount of financial loss was highest amongst Singaporeans 32
• The wider negative impacts of being a fraud victim 33
• Wider negative impacts are common amongst fraud victims in all countries 33
• The total aggregated (short-to-medium-term) socio-economic cost of fraud across the 15 surveyed countries was more than £420 billion 35
• The longer-term costs of persistent volume fraud 35
• The reporting of fraud by victims across 15 countries 36
• Victims most often report fraud to their bank or other relevant financial institution 36
• chapter four – the nature of the state response to volume fraud against individuals across 15 countries 39
• An insufficiently strong response to volume fraud from the state 39
• The poor law enforcement response to fraud across 15 countries is reflected in high numbers of reported frauds going un-investigated 39
• In every country only a small proportion of frauds end up in the arrest of a suspect 40
• Victim satisfaction is another way to measure the efficacy of the law enforcement response in each country 42
• chapter five – public views on counter-fraud policy measures 43
• An effective response to fraud requires an enhanced state response 43
• Beating fraudsters requires making fraud costlier for fraudsters and much risker to perpetrate 43
• Collective action problems hold back a more effective effort against fraud 44
• Tackling the collective action problems holding back the response to fraud 44
• Aligning incentives to deal with the “fraud chain” collective action problem 44
• Strong public support for financial incentives that would make “fraud chain” organisations take fraud seriously 45
• Data and intelligence sharing underpins an effective response to fraud 46
• The collective action problems hindering data and intelligence sharing 46
• Public support for alternative data and intelligence sharing arrangements 48
• Examples of public-private fraud data and intelligence partnerships helping underpin coordinated action 50
• There is considerable support for more frictions in payment systems in many countries 50
• Digital payments inadvertently encourage fraud 50
• Frictions in payment systems are necessary to reduce fraud risk 50
• Cryptocurrencies are becoming a more prominent factor in the fraud landscape 52
• Widespread public support for more law enforcement powers to tackle fraud 52
• chapter six – DEVELOPING AN EFFECTIVE COUNTER-FRAUD STRATEGY FOR THE UK 54
• The UK government should put much greater priority on tackling fraud 54
• Correcting the domestic law enforcement failure against fraud 55
• Law enforcement needs stronger leadership on economic crime issues 55
• Enforcement capacity and capabilities need to more closely match the scale of the problem 56
• Backing-up law enforcement with the powers and punishments for fraudsters 57
• Bolstering the law around fraud 57
• Increasing the penalties for fraudsters 58
• Tackling the collective action problem that holds back effective counter-fraud action across the “fraud chain” in the UK 59
• The government should expand initiatives that increase public awareness about fraud risks 62
• Chapter seven – An effective counter-fraud effort requires a high quality DOMESTIC fraud response to underpin INTERNATIONAL COOPERATION 64
• UK fraud policy needs to recognise the interdependency between all countries over fraud 64
• A common problem such as fraud should generate a mutual interest amongst governments 64
• Extensive cooperation has not developed because of a global collective action problem 64
• Building up an international response to fraud involves dealing with a number of obstacles 64
• The virtuous circle of an improved domestic response to fraud and an effective contribution to the international counter-fraud effort 66
• Effective domestic counter-fraud regimes provide a base for more international cooperation 66
• Better national counter-fraud responses are unlikely to be enough 66
• Building an international consensus about the importance of fraud 68
• International action on fraud needs to take place across a number of domains 68
• A global fraud convention is needed to encourage and organise cross-border cooperation 69
• The UN is the best forum for building an international framework for overcoming the collective action problem 70
• A UN convention would encompass most countries and is likely to result in a high degree of compliance 70
• Interpol and the UNODC have the capabilities to help build a wider ecosystem of support for a fraud convention 71
• Support for fraud control capacity and capability building in poorer countries is essential for an effective international counter-fraud regime 71
• ANNEX 1: total number of fraud victims in 15 surveyed countries 73
• ANNEX 2: total number of frud victims in 15 surveyed countries 74
• ANNEX 3: the component parts of the “fraud threat prevalence index” 75
• ANNEX 4: international distribution of fraud 76
• ANNEX 5: the wider negative impacts of fraud across 15 countries 77
• endnotes 79