The growth imperative: Will the Labour government prioritise the fight against fraud for UK Plc and the business community? | Criminal Law Blog
Over the past few years, the epidemic level of fraud has become an unfortunately key part of our national conversation, due to its rapid rise and the authorities seeming inability to hold it in check.
In 2023 UK Finance described the UK as “the fraud capital of the world” and there has long been a concern that the level of fraud is undermining the reputation of the UK as a safe place to do business and is a strategic threat to the country.
As the new Labour government champions an agenda for growth, will the fight against fraud be a priority?
Background to unprecedented levels of fraud
In 2022, the House of Lords Fraud Act 2006 and Digital Fraud Committee held an inquiry on a wide range of issues relating to fraud, with the resulting report, entitled “Fighting Fraud: Breaking the Chain”, finding that “fraud was the most experienced crime in England and Wales and has brought significant financial and emotional costs to millions of victims”. This report coincided with a separate a publication from the National Audit Office, which had similarly damaging conclusions. On any measure incidents of fraud in its many forms and varieties had reached unprecedented levels by early 2023, and we explored data and studies from both Cifas and the University of Portsmouth Centre for Counter Fraud Studies, which illustrated a correlation between fraud and declining GDP, and the knock on effect it has on the business community as well as individuals.
Just as the calls for action (or complaints about inaction) got to a feverish pitch, the then Conservative government released its long-expected Fraud Strategy on 3 May 2023. Survey results released on the same day showed that one-in-five businesses had been the victim of a fraud in the previous three years; another report published on 11 May revealed that more than £1.2 billion was stolen by criminals through authorised and unauthorised fraud in 2022, with the total number of fraud cases exceeding 3 million; and the CEO of UK Finance made the memorable comment that the UK was now “the fraud capital of the world”.
The Fraud Strategy – and the Economic Crime Plan for 2023-26 which came a couple of months earlier – contained some interesting plans, some of them relatively ambitious, and some less so. The goals of completely overhauling the ActionFraud reporting system and recruiting several hundred specialist fraud investigators were encouraging, at first sight. However, as we wrote last year, the planned level of investment was disappointingly low (a rather unclear commitment of “over £30 million across three years”).
Time for change … Is the Labour government focused on tackling fraud?
Labour’s General Election Manifesto referred to building on the Conservative’s Fraud Strategy:
“Fraud accounts for almost two in five crimes, but the Conservatives have failed to respond to the scale of the challenge. Labour will introduce a new expanded fraud strategy to tackle the full range of threats, including online, public sector and serious fraud …”
There is very little detail, so it will be interesting to observe how quickly the new government returns to this promise and provides further detail, including timings.
To get a better idea of what Labour’s plans may be, we can look further back at earlier policy papers. Labour’s Policy Review Tackling Serious Fraud and White Collar Crime, published in 2012, stated that Labour “has always believed that white collar crime should be treated very seriously”. It discussed “exploring the scope to update further the UK’s laws on corporate criminal liability so that they no longer insulate companies from any meaningful chance of prosecution” as well as “firming up” the penalties regime for white collar crime, and reform of the SFO, foreshadowing many of the changes that have already happened since the paper was published.
Will the tide be turned?
Since then, the party has been reasonably vocal on fraud, chiefly led by the work of Emily Thornberry MP, then Shadow Attorney-General, who published the Turning the Tide on Corporate Fraud report in September 2022. The report called for “real change” and focused on several core areas:
- Giving the SFO a law it can enforce
- Taking a ‘convictions first’ approach to corporate fraud
- Simplifying disclosure rules in corporate fraud cases
- Stemming the loss of experienced SFO staff
- Restoring pride in the prosecution of corporate fraud
- Reviewing options for resourcing the SFO
Since the report was published, some of these points have been – at least partially – addressed.
Most notably, cross-party efforts have led (eventually) to the introduction of the new criminal offence of failure to prevent fraud, although its coming into force has been delayed by the General Election as the necessary statutory guidance needs to be finalised and published by the Home Office. The same statute (the Economic Crime and Corporate Transparency Act 2023) also overhauled the doctrine of corporate criminal liability in underlying cases of economic crime, expanding the scope to include actions of senior managers in organisations. This piece of the legislation has been in force since 26 December 2023.
An even greater expansion of the doctrine fell away when Parliament was dissolved on 30 May 2024 while the Criminal Justice Bill 2023-24 was still making its way through the parliamentary process. The Bill may not be reintroduced in its current form due to some of its other provisions which the new Labour government may not be keen to support, and it is not yet clear whether and when another suitable Bill will be found to use as a vehicle for the corporate criminal liability provisions.
How much of the previous Labour programme for change will be used as a framework by the new Lord Chancellor and Secretary of State for Justice, Shabana Mahmood or the new Attorney-General, Richard Hermer KC, who was appointed over the former Shadow AG, Emily Thornberry MP, is yet unknown.
Also significant is the new energy which seems to have been injected into the SFO under its new leadership of Nick Ephgrave QPM, who took up the post in September 2023 and has overseen the agency conduct a number of raids and opened corporate fraud investigations as well as reigniting the debate on incentivising whistleblowers as a means to increase the number and success of complex fraud and corruption cases. The agency has also come under the microscope, most recently in the shape of HMCPSI’s SFO Disclosure report and its own five-year Strategic Plan which prioritises technological integration and global collaboration to combat serious crime.
Although certain actions have been taken by the previous government which have moved the fight against fraud in the right direction, there has been criticism around the level of investment in the essential systems, agencies and people to make the criminal justice system effective. With the new government handed a resounding mandate on 4 July, it is now Labour’s chance to turn words into real action against fraud.
Further Information
If you have any questions or concerns about the topics raised in this blog, please contact Louise Hodges, or any member of our Criminal Litigation team.
About the Authors
Louise Hodges represents individuals and companies embroiled in criminal and regulatory proceedings whether in the UK or internationally. She has acted in relation to high-profile Serious Fraud Office (SFO) investigations and Deferred Prosecution Agreement (DPA) negotiations.
