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Investigating Fraud

There has been a growing recognition of the pluralisation or fragmentation of policing (Bayley & Shearing, 1996; Johnston, 2000). With fraud investigation this trend has been around much longer and has occurred on a much larger scale. The public police account for a relatively small piece of the overall pie of investigative bodies. This was made very clear by the Fraud Review Team (2006a), which found there were only 524 police officers dedicated to the investigation of fraud. Their small number is illustrated when one considers that there are probably around 8000 Accredited Counter Fraud Specialists actively working, and that these do not represent all fraud investigators (Button et al., 2007a). Some of the largest groups of fraud investigators in the public sector are listed in Table 1 below. The largest group are in HM Customs and Excise although the 7500 overestimates the actual number of fraud investigators because many focus upon drugs, smuggling, more general administrative work and so on, whereas in the DWP the 3250 staff are all actively engaged in the investigation of social security fraud. Therefore it would be fair to state the DWP employs the largest single group of fraud investigators in the country, larger than many police forces. Its influence is further illustrated by the next largest group, local authority fraud investigators. There are around 2000 investigators spread across the 450+ local authorities of the UK, focusing upon housing benefit and council tax fraud as well as internal fraud. (This is a conservative estimate based upon research undertaken by the NAO in 1997, which estimated five fraud investigators per local authority on average). Many of those working on housing benefit fraud work very closely with the DWP fraud investigators. In fourth place comes the police, with the 524 police officers employed in fraud squads, followed by the NHS with over 300 staff in its central NHS CFSMS and throughout NHS Trusts. The rest of the table provides some of the other major groupings. As well as those listed in the table there are many pockets of fraud investigators spread throughout the public sector in most government departments and agencies, including the UK Passport and Identity Service, the UK Charities Commission, the Department for International Development and the Driver and Vehicle Licensing Agency.

Organisation Type of fraud investigated

Her Majesty's Revenue and Customs (HMRC)

http://www.hmrc.gov.uk

Excise and tax

Department for Work and Pension (DWP)

http://www.dwp.gov.uk

Benefits

Local authorities

Housing benefit fraud

The Police

High volume fraud and economic crime

Serious Fraud Office (SFO)

http://www.sfo.gov.uk

Serious and complex fraud

National Health Service

All fraud against the NHS

Financial Services Authority (FSA) http://www.fsa.gov.uk/

Insider trading/market abuse, misleading statements and practices

Office of Fair Trading (OFT)

http://www.oft.gov.uk/

Cartels

Serious and Organised Crime Agency (SOCA) http://www.soca.gov.uk/

Organised fraud by criminal gangs


(Source: adapted from Fraud Review Team, 2006a)

Table 1 Largest groups of fraud investigators in the public sector

In addition to the state sector there is a substantial private sector investigating fraud. This can be divided between the in-house investigators employed by commercial companies and the contracted private investigators. Some of the areas of commerce employing the most fraud investigators include financial institutions, credit reference agencies, insurance companies and telecommunication companies (including mobile). Most companies in these sectors have dedicated in-house investigators charged with the responsibilities for dealing with fraud. The interim report from the Fraud Review Team (2006a, p. 71) identified the six largest UK banks alone as having 2500 investigators.

In addition to in-house investigators, a substantial sector of private investigators offers fraud investigative services. It has been estimated there could be as many as 15 000 private investigators and most offer fraud investigative services, with some specialising in it (George & Button, 2000). In recent years private investigators have been joined by a growing number of prestige accountancy practices offering investigatory services in addition to the traditional forensic accounting services. For example, the KPMG Forensic practice has a fraud investigation and dispute advisory team of over 300 people, including ex-police officers, forensic accountants, expert witnesses, data mining consultants and fraud risk management specialists. The team investigate and advise on all suspicions of fraud and deception including, for example, procurement, treasury, payments and revenue fraud and accounts manipulation, as well as giving expert evidence in commercial disputes. It takes on cases ranging from less than 50 000 to major international scams or disputes with sums at risk in excess of $1 billion and has clients across the globe, including Africa and United Arab Emirates (KPMG Forensic, 2007).

Type of staff Background Powers

Counter fraud specialists

Civilian fraud investigators largely employed in the public sector, but growing in the private sector trained according to common packages overseen by the CFPAB. Most have no special powers, although some in DWP have special powers to secure information.

Civilian fraud investigators

Diverse range of fraud investigators found in some public sector bodies, but largely in-house private bodies and private investigators utilising wide range of different training packages. Generally no special powers, although some public bodies may have specialist powers to secure information.

Police fraud squad officers

Police officers who have undergone basic detective training and specialist fraud training. Additionally, many generic detectives investigate simple small-scale frauds. Powers of constable.


Table 2 Investigative fraud staff

The types of staff engaged in fraud investigation also vary, as Table 2 illustrates. Police fraud investigators generally hold constabulary powers and are trained as detectives, although some police forces are beginning to experiment with civilians (Button et al., 2007a). As constables they have greater powers of arrest, search and, subject to regulation, the ability to undertake intrusive surveillance. These powers, which are not held by the vast majority of fraud investigators, mean many have to cooperate with the police on certain investigations to undertake searches and arrest uncooperative suspects. There are then a group of fraud investigators that have varying special powers in HM Customs and Excise, the DWP and local authorities. Many of these powers relate to access to information about a suspect. For example, the Social Security Fraud Act 2001 (otherwise known as the Fraud Act), provided an extended framework for the investigation of fraud in the UK and Northern Ireland. It did this by increasing the powers of benefit fraud investigators, under the Social Security Administration Act 1992, so they were better able to gather personal information on benefit claimants. For almost all other fraud investigators there are no special legal powers.

The discussion so far has illustrated that the largest group of fraud investigators are civilians. Up until the late 1990s there were no common standards on training, education, professional associations and so on. However, over the last decade there have been attempts to professionalise fraud investigation, largely rooted in the public sector, with the most significant development being the emergence of the CFS as discussed earlier.

One of the core functions of the CFS is the investigation of fraud and related offences. Cases will be referred to a CFS largely through whistleblowing facilities, data-matching exercises or anomalies thrown up by audits. A CFS has knowledge of the law relating to fraud and, in some cases, will also have specialist legal knowledge of a particular area of law (such as benefits law). Drawing upon this knowledge the CFS will be expected to be able to plan and initiate an investigation of suspected fraudsters. There are a huge variety of sources of investigations in the different organisations mentioned above, from intelligence-led referrals in the DWP to high-risk applications in the UKPIS. Nevertheless, a CFS would be expected to use the appropriate databases, documentary evidence, transcripts of interviews, witness statements, surveillance evidence and any other relevant information to conduct an investigation. Central to this role is the ability to interview suspects and witnesses according to PACE 1984 and other regulations (or equivalent in Scotland). However, the extent to which a CFS conducts interviews under caution does vary between local authorities and the DWP (where it is common) to the Abbey and UKPIS (where it is rare). The reason for the difference is that, in the latter, invitations to suspected fraudsters to attend interviews under caution are rarely accepted, whereas in the former the disincentive of losing benefits may apply if cooperation in interviews does not occur.

Another common function that distinguishes the CFS from traditional fraud investigators is pursuing preventative work, though the commitment to this varies between organisations, with the NHS probably being the most committed. Making presentations on fraud to enhance an anti-fraud culture and focusing upon intelligence gathering and analysis or data matching and sharing are common tasks undertaken. Surveillance is not a core function of all CFSs. In some organisations, such as Abbey, surveillance does not occur at all; there are other organisations where its occurrence is rare, such as the NHS, where it is also entrusted to specialist sections. For the DWP and local authorities, the ability to conduct surveillance in compliance with the Regulation of Investigatory Powers Act 2000 and other relevant legislation is a key part of their role. The preparation of cases for criminal prosecution or lesser sanction is another important responsibility. However, the number of cases that end up in court does vary between the different CFS-employing bodies. All CFSs would be expected to be able to prepare a case for handover to their own prosecution department (as with the DWP and the NHS) or to the police for criminal prosecution (as with UKPIS). CFSs are also required to prepare cases for the pursuit of civil recovery, the termination of employment, the application of some other sanctions specific to the organisation or ultimately criminal prosecution. CFSs are also expected to give evidence in court in order to facilitate successful prosecutions where deemed appropriate.

Beyond the CFS, however, there are a substantial number of civilian fraud investigators spread throughout the public sector and most of the private sector who do not share the CFS model but who carry out similar functions. There is therefore still a substantial body of people investigating fraud beyond any professional framework. It is also important to point out some of the other 'occupations' who become involved in fraud investigation: auditors frequently uncover fraud and in some cases will conduct fraud investigations, and computer forensic specialists may also become involved.