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Last Updated: Wednesday, 15 November 2006, 12:06 GMT
Queen's Speech heralds fraud shake-up
By Jeremy Scott-Joynt
Business reporter, BBC News

The bars of a prison cell
If the plans work, more criminals will see the inside of a prison cell

There's no such thing as fraud.

Not in criminal law - or not directly, at least in England and Wales.

There is plenty of fraud in the UK, of course.

In the six months between January and June this year, major cases worth more than 650m went through the High Court alone - and most estimates believe the total cost to individuals, businesses and the government each year is many times higher.

But until now, there has been no specific criminal offence of fraud.

TYPES OF FRAUD
Phishing: The use of emails which guide unsuspecting users to fake banking websites to steal their login details
Long firm fraud: Setting up companies to trade legitimately, then disappear with the gains from one last, big deal
Lottery scam: Using letters or emails to convince someone that they have won a foreign lottery - and then charging them thousands in "taxes" and fees
Boiler rooms: cold-calling people to talk them into buying worthless shares at inflated prices
Police have had to use offences such as conspiracy to defraud, or obtaining money by deception, or even - in a phrase redolent of masked 19th-Century burglars with a jemmy under their cloak - going equipped to steal.

This has often meant defendants squeaking through on technicalities.

Other difficulties include the widespread under-resourcing of fraud squads; the regular collapse of fraud trials as juries groan under the weight of complex evidence; and the ever-increasing sophistication of the crooks, and perhaps it is no wonder the UK sometimes seems like a fraudster's paradise.

Simpler laws

Now, though, the government has vowed that things will change.

Gloved hand taking cash from safe, BBC
Identity theft can mean your bank accounts gets rifled

To that end, the Queen's Speech has included new legislation which could simplify fraud trials, tighten up the national strategy on fraud and - controversially - re-open the question of judge-only trials for fraudsters.

The moves build on two recent developments. The first is the Fraud Act, which comes into force next year. For the first time in more than 150 years, it creates an offence of fraud - whether by false representation, abuse of position or failing to disclose information.

The second is the outcome of the Fraud Review, which the government unveiled in July this year in an attempt to answer critics who argue with some force that the key problem is not the tools on offer, but the resources available to use them.

As a result of the Fraud Act, a boiler-room scam trying to offload penny shares on unsuspecting investors by means of a glossy if bogus prospectus or website would be committing a fraud of misrepresentation, regardless of whether any money actually changed hands.

A bank employee seeking to bend a deal in the direction of associates would commit fraud by abuse of position, while a solicitor or estate agent giving bad advice on a land deal in which a friend had a competing interest would commit a fraud by failing to disclose information.

In each case, senior police officers say, the emphasis is on what was done and how, rather than on the outcome.

Add in other offences which tackle the kind of sole trader who flits from one company name to another, or which outlaw the possession or creation of tools for fraud, and the police think they have a powerful new tool on their hands.

Strategic thinking

But there is also a need to address the question of resources and to take a more strategic approach to fraud prevention.

The Fraud Review acknowledged the need for urgent action, and promised a raft of measures, some of which may make it into the legislation promised in the Queen's Speech.

One would be the establishment of a national fraud strategic authority as a public-private partnership.

It may also introduce a national fraud reporting centre - intended to make sure that since fraudsters can operate nationwide, their activities can more easily be tracked and intelligence gathered across the boundaries of the 43 police forces in England and Wales.

That could lead to a clearer picture of just how prevalent, and how damaging, fraud is in the UK - and, some argue, will make the case for more resources irresistible.

However, it remains unclear whether the strategic authority will have a sufficiently specific remit not to get bogged down in inter-agency squabbles, or whether it will act as a figleaf to get the fraud problem off ministers' desks.

And as yet, there is no promise of extra money, not even the 15.5m that the Fraud Review said would be needed to double the number of fraud detectives outside London from their current level of about 300.

Farewell to juries?

Instead, the government is set to propose a simplification of the system for prosecuting frauds.

That could mean less onerous rules for disclosing evidence, or more freedom for prosecutors to follow the lead of their US counterparts in zeroing in on particular aspects of a fraud.

It could also mean plea bargains, in which the prosecution might be allowed to offer a reduced sentence to fraudsters who agree to testify: the tactic which has helped land the big fish in cases such as WorldCom and Enron.

Most controversially, the idea of ditching juries in the most complex fraud cases is back on the agenda.

The law which makes it possible is already on the statute books. But it failed to gain the necessary approval from the House of Lords, and is now languishing in legislative limbo.

The government continues to argue that juries cannot be expected to cope with trials which last several years and involve thousands of pages of complex accounting paperwork.

Critics argue that other countries, for example the US, manage perfectly well with juries.

Better case handling, more targeting of specific elements of a large fraud and, of course, the greater clarity of the new fraud offences will do the job just as well, they say.




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