Total loss caused by fraud in the UK shows downward trend

Recent statistics on fraud in the UK have shown some small reductions in the amount lost due to fraud, but there is still more to do by the financial sector and other sectors for fraud prevention and consumer protection. These are among the main findings of two industry reports.

According to KPMG’s latest mid-year Fraud Barometer report, the total value of alleged fraud cases with a value of above £100,000 heard in the UK Crown Courts dropped in the first half of 2024 by 14% to around £305 million. The figure is down from the £354.2m recorded in the same period in 2023. However, the number of cases also increased by 16% during the same period, up from 105 cases to 122. UK Finance’s 2024 annual fraud report published in May this year, showed a similar trend.

Alan Sheeley, civil fraud expert at Pinsent Masons, said: “Whilst it is promising to see that the total value of fraud as reported by KPMG is down 14% compared with the same period in 2023, the figures nonetheless underscore the importance of continued vigilance and proactive measures in combating fraud, particularly in the public and financial sectors.”

UK Finance further noted that although the amount stolen through unauthorised losses and authorised push payment (APP) fraud in 2023 dropped 4%, a staggering £1.17 billion was still stolen by fraudsters from consumers last year, and fraud remains a major problem and threat to the UK. UK Finance’s report showed that unauthorised losses and APP losses were down in 2023 from 2022, by 3% and 5% respectively, but the amount lost last year still equated to £708.7m for unauthorised activities and £459.7m for APP fraud.

Despite the continued large losses from APP fraud, the Payment Systems Regulator (PSR) has recently suggested lowering the amount banks and payment companies would have to reimburse fraud victims under its proposed mandatory reimbursement regime, from a cap of £415,000 to £85,000.

Tom Aries of Pinsent Masons said: “The PSR’s recent proposal to lower the reimbursement amount may look unusual in the context of the UK Finance figures on APP fraud. However, there have been concerns in the industry that the proposed mandatory reimbursement requirement with a high compensation limit may be subject to misuse and could have unintended consequences for banks and payment companies. The PSR proposing to cap compensation at £85,000 could be, in part, an attempt to balance those concerns. It is also perhaps noteworthy that such a cap aligns with the Financial Services Compensation Scheme limit for depositors. Whatever the cap ends up being, the figures in these reports nonetheless emphasise the need for companies to continue to develop and deploy measures to protect against APP fraud.”

Breaking down fraud cases by type, KPMG’s report noted that in the first half of 2024, 16 cases of account takeover fraud - where a criminal takes over the victim’s genuine card account - with a combined value of £7.2 million have so far reached the UK Crown Courts. The case volume is higher than other types of fraud and makes it one of the most common types of fraud in the UK at present.   

UK Finance’s figures on account takeover fraud also demonstrated this notable uptick. It said that the total volume and the total loss of account takeover fraud cases both reached their highest level ever reported. In 2023, the total number of such cases jumped up 85% to 121,650 from the previous year, and the total value of these cases showed a 37% year-on-year increase to £47.4m.

Sheeley said: “There is clearly still more to do in the UK to fight against financial fraud, this includes victims knowing what remedies they may have. Aside from criminal prosecutions and compensation schemes, it important that victims of fraud know that they may also have remedies available to them in the civil courts. However, civil fraud claims are complex, and fraudsters are becoming ever more sophisticated. It is therefore important, if you are a victim of fraud seeking a remedy in the civil courts, that you obtain specialist legal advice as quickly as possible.”

Among different sectors, the KPMG report highlighted the public sector as being the most affected by fraud in terms of value so far in 2024. Around 26 fraud cases related to the government have been heard in the first half of 2024, with a combined value of £193.4 million, representing a 30% increase compared to the same period in 2023.

Sheeley said the jump in fraud cases in the public sector is noteworthy, but this increase could be a consequence of a more proactive approach taken to identifying and prosecuting fraud.

In UK Finance’s report, its managing director for economic crime Ben Donaldson said that the financial services sector spends more than any other sectors on combating economic crime, including fraud. Owing to their efforts, a total of £1.2bn of unauthorised fraud alone was prevented in 2023, an increase of 7% from the previous year. But a cross-sector approach is crucial in tackling fraud, and the technology sector is one of the sectors that should step up in fraud prevention, he suggested.

“There have been some important and welcome improvements, including the government’s fraud strategy, the Online Fraud Charter, the Online Safety Act, and good progress by some tech companies. To really move the dial, the commitments made in the Online Fraud Charter need to translate into concrete action across the tech sector,” said Donaldson.

With the introduction of the Economic Crime and Corporate Transparency Act 2023 (ECCTA), and the ‘failure to prevent fraud’ offence which will come into force following the publication of guidance by the UK government, the numbers in KPMG’s and UK Finance’s reports serve as a cautionary warning to organisations to review their current policies and procedures in this area.

Financial crime expert Melanie Ryan of Pinsent Masons said: “With fraud being increasingly prevalent in the UK, it is important for organisations to take note of the new failure to prevent fraud offence brought into law by the ECCTA. Those large organisations which are in scope need to ensure that they are conducting appropriate risk assessments with a view to preparing robust anti-fraud policies and procedures to ensure compliance with the requirements of the law once in force”.