Motion made, and Question proposed, That this House do now adjourn.—[Mr. Khan.]
I am delighted to have this opportunity to raise an issue that should be of interest to everyone in the House, although I suspect that many Members do not even know that the scam I shall describe is going on. There are people who are ignorant of the fact that they are victims of boiler room fraud. I am delighted that today’s business finished a little early, because it gives the Solicitor-General and me the luxury of a little more time to elaborate, to fully explore the issue, and to identify what we all ought to do to ensure that people are properly protected. I am chairman of the all-party identity fraud group; that is how the scam was brought to my attention. I am grateful to see that the Solicitor-General is present. That gives an important signal that the Government intend to take the issue very seriously.
In the past few days, I have mentioned the debate to a number of MPs, and others have seen it announced on the Annunciator. Some of them thought that it had something to do with plumbing. They had not the faintest idea what boiler room fraud was. They asked, “What’s that all about, then, Nigel?” When I explained it to them, they took it very seriously. They went white when they realised the scale of the problem.
Boiler room fraud is a big crime, yet not many people know about it. The police have called it the biggest fraud threat to households. It is even bigger than credit card fraud. The estimated loss last year was more than £500 million. One estimate puts the figure close to £1 billion. The fact is that nobody really knows what the top-level figure is, because, as I said earlier, not everybody involved knows that they are a victim.
Boiler room fraud is the name given to share investment scams—mostly share investment scams—where crooks posing as brokers use high pressure marketing techniques to sell investors shares that turn out to be worthless. This usually happens over the telephone, and usually the victims are cold-called—they receive calls that they have not initiated. The shares might be shares in real companies, but they are sold above the market price and turn out to be highly illiquid, preventing the investor from selling them on, but as often as not, investors are sold shares in companies that do not even exist.
The criminals will do anything to part victims from their money, including lying, cheating and threatening. They are persistent and they are ruthless. The conmen who operate the boiler rooms try to locate themselves beyond the reach of UK law enforcement. Many of the boiler rooms targeting the UK appear to be located in Spain. The police estimate there are around 400 boiler rooms operating in Spain, employing over 600 people. They earn big money. I should not use the word “earn”—they steal big money.
Other popular locations for boiler rooms are the USA, Dubai, Berlin, France—they can operate from anywhere. In this era of the telephone, fax and email, a boiler room can be located anywhere in the world, and tracking them down can be difficult, because they are dishonest about their true location.
Many boiler rooms go to great lengths to build up a believable facade of respectability. They choose respectable names such as Bayer Investments, Legacy International, and Total Asset Management, which all sound legitimate. They might have a UK telephone number, but this can just be a forwarding service to anywhere in the world.
The people used by boiler rooms are highly trained to con victims out of their money. They have posh British accents or American accents, and many of them adopt what may seem to be Biblical names so that people will trust them from the beginning. Mostly, the names are false. Boiler rooms hire young people by advertising in newspapers to get them to come to Spain—I shall use Spain as an example because it seems to be very popular. The advertisement invites young people to come and work in Spain as a financial adviser, or young people may be recruited at employment fairs and lured into a job. In some cases their passports are taken from them when they arrive in the country, and they are threatened that they had better not tell anyone what they are doing. It is frightening.
My advice to newspapers is to take more responsibility for the advertisements that they accept. I also have advice for parents. Boiler room conmen seem to be picking on gap year students—young people between school and university, or those who have just left university—or young people who happen to be out in Spain already, who see people coming to bars flashing lots of money and driving fancy cars. That seems attractive to them.
I advise parents to pay more attention to what their youngsters get up to in their gap year. They should investigate far more thoroughly what their jobs are all about, because if a young person is offered a job as a financial adviser working abroad, the chances are that it is one of these scams.
The youngsters have to learn a script. They are drilled and trained thoroughly so that they sound believable. They do their homework about their would-be victims. They look up share registers to find out whether people regularly invest in shares, and the sort of shares that they invest in. They go so far as looking through yachting magazines or car magazines such as Auto Trader to find out who is selling those items. They know that if those people sell their car or yacht, they will shortly have a few thousand pounds in their pocket, and their telephone number may appear in the magazine, so the conman has all the information necessary to try to part them from their cash.
Why have I called for this debate? Members and their constituents might wonder, given that the crime is not new. I have done so because only very recently has the massive scale of the crime become apparent in the UK. I first heard about it when I was contacted by BBC Radio 4’s “You and Yours” programme for a comment. Reporter Shari Vahl has conducted an investigation into boiler room fraud for the past two years; I pay tribute to her determination and doggedness and to “You and Yours” for raising this issue. Every time it is mentioned on the radio or television, the police are inundated with mail, phone calls and e-mails from people who have finally concluded that they have been conned. The more we get the issue on the TV or in newspapers, the more people will come forward with their own evidence.
Even the police have been shocked by the scale of the crime. One officer on the case has admitted that the problem is much bigger than he had realised. I am sure that the majority of hon. Members have constituents who have been affected. I suspect that even today some of our constituents will have written cheques to send the con men; some may not yet have sent the cheques. One clear piece of advice would be that they should not send that cheque, no matter what harassment they are getting from the con men, but seek independent financial advice today—otherwise they will be the next victims. The con men may well lie low for a little bit while there is more publicity about this issue, but then they will come back again; as one boiler room closes down, another opens. The con men are persistent.
I want the Financial Services Authority to do more and the police to be given more resources, more training and better guidance. I have nothing but praise for the City of London police. I was with them today, and they are clearly focusing on and specialising in this scam. Other police forces, however, will not be up to speed with what is going on; I shall give examples of that later.
Boiler room fraud has been called a billion-pound business by an insider. As I said, that figure is hard for the police to verify, but they admit that they are merely scratching the surface of the problem. The police have given the figure of £500 million, which reflects the boiler room fraud that they know of. A senior fraud squad officer said:
“I’ve never dealt with a crime where there are such consistently high losses and so many victims. There’s a tidal wave of grief coming from these people.”
Here are some examples that give an idea of the scale of the problem. In the past two months, the FBI in Florida raided a $50 million boiler room based in Sao Paolo, Brazil. Twenty people were arrested. There are known to be thousands of victims of that one boiler room, and all are thought to be British. In another recent case, a British fraudster was arrested in the United States of America. This man, Mr. Gunter, and his daughter, had an estimated 15,000 British victims. He stole about £16 million.
Whom do boiler rooms target? Boiler room fraud is causing untold harm to ordinary people trying hard to save money for their retirement or to put their children through university. People even borrow money to invest in some of these scams—and when they think that they are on to a good thing, they tell their friends about it, and their friends invest as well. The issue is not about reckless city traders gambling on the stock markets with other people’s money; the people involved are victims of professional, clever crooks.
It is important to emphasise that this is not a crime that happens to stupid, greedy people with more money than sense. I know that a lot of us find it rather hard to believe that someone can get cold-called and, in a matter of months, start to part with thousands of pounds. We think, “I wouldn’t do that, so why would anyone else?” We have not had the telephone call from those professional con men, so, fortunately, the vast majority do not know what it is like to be on the receiving end.
One of the biggest misconceptions about boiler room fraud, which needs to be dispelled, is that its victims are stupid and greedy. The criminals play sophisticated tricks to steal people’s money. Even when money has been stolen—when people find that the shares that they bought were worthless or when they do not do as well as expected—the fraudsters come back. People think, “I can make up my losses.” It is just like the old casino stuff. People will part with even more money to try to get their money back.
Victims who have recently come forward to tell their stories are intelligent, educated people. They include university professors, architects and lawyers. I even know of one case where an independent financial adviser lost £20,000. Part of the problem is that people are embarrassed, and that is why we have not scratched the surface of the problem. Not everyone tells their wife or husband what they are doing with the money. I know of one case where the victim kept it secret and lied about how much money they were investing. Victims are embarrassed when they find out that they have lost all the money. In some cases, they will not even go to the police and report the crime. I say to anyone who has been a victim of boiler room fraud, “Please go to the police and ensure that they know about it.” It should not be kept secret.
The criminals tend to pick on elderly people, although they do not do so exclusively. Sons, daughters and relatives should advise parents and grandparents about the scam. They should tell them what is going on and ensure that they have not been taking any cold calls whatsoever, let alone starting to invest their money with so-called brokers who are only out to steal it. It goes the other way, too. Parents should ensure that their sons, daughters and other younger relatives know about these scams. Everybody should tell everybody else about the scams, or else they could find that their relatives are soon victims.
My hon. Friend is making an excellent speech on a serious issue. Does he agree that as many of these crimes are perpetrated by those involved in organised crime and are often transborder crimes, they might be an issue for the Serious Organised Crime Agency?
Organised crime is certainly involved. There are no two ways about it. The police have broken up boiler rooms before, but others have sprung up. The real problem is that the pickings are so rich that the criminals are preying on people’s entire life savings. They are callous, cruel people without an ounce of compassion. Their only intention is to try to steal people’s money. They drive around in flash cars, such as Ferraris, and flash their money all over the place, but it is not their money. They have stolen it. Later, I shall say a little more about what I believe that all sorts of organisations, including SOCA, ought to be doing.
I mentioned elderly victims and the fact that the criminals are trying to steal their life savings. That is what it is all about. Let me give some examples. The first, sadly, led to a suicide, as the consequences of this crime can be devastating. I spoke this week to the widow of a man who committed suicide in October last year as a direct result of his losses.
The story of how the victim was conned is fairly typical. He had made some investments previously so his name appeared in several places as a share owner. The crooks obtained his details from a publicly available register of shareholders, which is a common tactic. The fake brokers were in touch with him for some time before they got him to part with his cash. They build confidence by saying, “Something may be happening. We’ve heard that there may be an investment opportunity but we don’t want you to send any money yet. Are you interested if it comes off?” They learn dialogues to build up people’s confidence and persuade them that they will get a share of something big.
After the fraudsters build up people’s confidence, they go in for the kill. In the case I am describing, at first it was only a few thousand pounds, then a few thousand more and so on. The largest cheque the victim signed was for £38,000. It was two years before he admitted to his wife—in October 2007—the scale of his losses. The crooks had stolen more than £200,000 from him. The shame of having been conned and losing so much money, which was meant to support his wife and his young daughter, caused him to commit suicide.
Astonishingly, within weeks of his death his wife was contacted by another group of fraudsters—perhaps related to the first group, or even the same people. They told her that her husband had bought as an investment 36 bottles of Chateau Lafite worth almost £13,000. They threatened the widow and her young daughter with losing her home if she did not pay the money. How callous. How could they stoop so low? The fraudsters are clever. They sent flowers to one of their victims when he was in hospital. They wished him well, but they were still trying to sell him shares while he was in hospital.
This morning I visited Operation Archway, which is run by the City of London police to combat boiler room fraud. The police showed me piles of mail, much of it handwritten by elderly people—their evidence on lavender writing paper. I saw a letter from a man aged 83 who had lost £95,000. I saw a letter from a couple in their 80s who had lost £50,000. I was shown their e-mail inbox, which contained almost 1,600 e-mails sent over recent months.
I have been contacted directly by a lady whose parents lost more than £100,000. Her father contacted the largest firm of stockbrokers in Liverpool for advice because he had suspicions about the company. Not one person mentioned boiler room fraud. Only after several phone calls did a junior member of staff suggest that he should contact the police.
The House can imagine the outcry if £500 million a year had been stolen from people’s houses in burglaries. I pay tribute to the BBC programme “Working Lunch”, which today featured Mr. and Mrs. Fudge from Bournemouth who had £20,000 stolen from them. Mrs. Fudge said:
“It’s like having your house broken into. They’ve stolen everything we’ve ever worked for.”
The Financial Services Authority has made a poor response. The authority is supposed to be the UK regulator responsible for protecting consumers, including shareholders. I put a question to the Treasury earlier this month and received the following answer:
“The Treasury does not undertake consumer protection activity or raise awareness of boiler room frauds directly. The Financial Services Authority has a specific statutory objective to protect consumers, which includes advising and protecting investors against boiler room frauds.”—[Official Report, 12 May 2008; Vol. 475, c. 1427W.]
The FSA has gone on record as saying:
“Boiler rooms are not authorised by the FSA, and are based abroad outside our reach, so victims are not protected by the financial services compensation and complaints schemes. Our strongest tool is to make people aware of the scam”.
I would argue that it is utterly failing in its remit to protect consumers and to help them to get a fair deal, and failing in the objective that it has set itself:
“to make people aware of the scam”.
The FSA says that it has been proactive, so what has it done? First, it has a page on its website about boiler room fraud. However, when I went online I found it incredibly difficult to get to that page. There is nothing on the front page of the website to warn people about boiler room fraud; one has to know what one is looking for. Several different pages refer to boiler rooms and investment scams, but they do not all link to each other. Unbelievably, there is no reference at all to Operation Archway on the boiler room fraud page.
Secondly, the FSA claims that most existing shareholders should have received warnings from their legitimate brokers. In fact, it has given brokers a form of words to use and asked them to fund their own publicity. As a result, many people have never seen a warning. That is astonishing complacency from the FSA and from legitimate brokers who risk having their reputations tarnished by the criminals who imitate them. I received from my hon. Friend the Member for Croydon, South (Richard Ottaway) a letter from one of his constituents who had heard me on the radio and written to Mr. Phelan of the FSA, who was on the same programme. The constituent—I will not name him—says:
“In the programme you say that Registrars have been sending out FSA advertisements about boiler rooms for the last two years and that the vast majority of investors should know about boiler room fraud as a result. I fear you may be out of touch with reality.”
I concur. He continues:
“It is precisely because I had never ever received any boiler room fraud warning…that I wrote to you on 27 March 2008 with some suggestions. One of those suggestions was ‘Have you enclosed information leaflets with, for example, Tax Returns or pension advices, or contacted registrars so that something can be sent with company Annual Reports?’. I was quite surprised to hear you claim this had been going on for 2 years.”
He therefore asked some of his friends, most of whom—apart from one, who is involved in the finance industry—had never seen anything about boiler room frauds and knew nothing about them. He went on:
“There are three major Registrars, Capita, Computershare and Equiniti. Capita tell me they do not send out any FSA advertisement or warning about boiler rooms. They do have an advice line though if people telephone about boiler rooms. Computershare will only enclose a warning if requested to do so by the company concerned. Computershare look after about 1000 UK companies. I have asked how many of those 1000 agree to the boiler room warning being included. The compliance department at Equiniti are still due to contact me.”
I think that speaks for itself. The FSA believes that these warnings are going out, but they are not. People are totally ignorant about what boiler room fraud is, and there is astonishing complacency on the part of the FSA.
So what can we do? A publicity campaign is vital. There is a strong case for a national awareness-raising campaign, which should be led by the FSA—that is its job, and it should be getting on and doing it. All legitimate brokers, banks and financial institutions should be giving out leaflets to customers, shareholders, and people who bank with them. Credit card companies should also be involved. We could even consider asking telephone companies and other companies that regularly send out statements to warn their customers about boiler room fraud. Many victims and potential victims do not use the internet, so just putting something up on the internet is not good enough. As I said, the FSA is not doing enough in that regard.
The City of London police are trying hard to raise awareness in innovative ways. For example, they are reaching out to older victims by putting articles in Saga magazine; publicising the scam through the Caravan Club and its members; and producing a DVD to show on holiday cruise ships. That is clever. They are thinking outside the box to try to reach as many people as they can.
The FSA should take the lead on awareness-raising. It should work closely with trading standards and the UK Consumer Protection Agency to conduct a national campaign. It should spearhead an advertising campaign to raise people’s awareness of boiler room fraud. The FSA also needs to work more closely with the police. It is not good enough that it does not even have a link to Operation Archway on its website. It should correct that immediately.
The national police need more resources. I welcome the creation of the National Fraud Strategic Authority, which will co-ordinate national counter-fraud efforts. I also welcome the Government’s announcement of the creation of a national fraud reporting centre.
Will the Solicitor-General assure me that those new initiatives will mean more officers and resources to tackle boiler room fraud, not just a rebranding of existing assets? What recent talks has the Solicitor-General held with her counterparts in the Home Office, officers in the Serious Fraud Office and in the Serious Organised Crime Agency, which my hon. Friend the Member for The Wrekin (Mark Pritchard) mentioned, and the City of London police about a co-ordinated approach to tackling boiler room fraud?
Spain is a favourite destination for the boiler room fraudsters and it took the City of London police some time to get any co-operation from the Spanish authorities. They are getting it, but it is belated. They say that United States of America is fantastic and co-operates brilliantly. One would think that an EU country might be a little more proactive in trying to help protect the citizens of the so-called union. It was suggested to me today that the lack of co-operation was because the victims were British, not Spanish, so perhaps the Spanish authorities did not perceive the fraud as important to them whereas, of course, if such fraud takes off here, it will happen everywhere. Police authorities throughout the EU should consider a co-ordinated approach to the matter.
Local police need more guidance. People currently report cases of suspected boiler room fraud to their local police station. They should be directed to their local fraud squad and Operation Archway. However, I know of a case in north Wales in which a victim was left in limbo after discovering that the local police force did not have fraud officers. Not all the police stations in the country know about boiler room scams and they should be brought up to speed.
Does the Solicitor-General believe that trying to combat international organised crime through local police forces is the most effective approach? Perhaps we should think out of the box
As I said, the City of London police told me this morning that their co-operation with counterparts outside the EU is much better than with those in it. Clearly, that should not be the case. Will the Solicitor-General assure me that she will speak to her Cabinet colleagues to ensure that all relevant Departments work together to get maximum co-operation at European Commission level and with our European and international partners?
I want to send a message to anybody out there who may be on the receiving end of such calls and who may think that the so-called brokers are legitimate. Of course people may think that they are legitimate—it is their job to con. I say to those on the receiving end, “Be aware.” If they have an envelope on the mantelpiece with a cheque in it already, they should not send it. Indeed, if they have sent a cheque in the past 24 hours, they should take speedy financial advice about whether to allow it to clear. They need to protect themselves.
We are considering a seismic scam, which leaves a trail of misery, despair, tears and, sadly, in one case that was brought to our attention, suicide. If people do not know about the scam, they cannot protect themselves against it. They cannot protect their money or financial security. If they are left ignorant, they could lose everything, including their lives. That is not good enough. We must all do more.
I congratulate the hon. Member for Ribble Valley (Mr. Evans) on securing this debate and on bringing this extremely serious issue before the House. I also congratulate him on his pursuit of the issue in his speech and through the all-party parliamentary group that he leads with the vigour that he has shown today. I thank him further for the unusual step, which should be taken more frequently, of kindly letting me have a summary of what he wanted to say, so that I knew in advance the points he wanted me to tackle. That is a better way of ensuring that we have a good debate than leaving things a mystery and providing the questions all at the last minute.
I agree entirely with what the hon. Gentleman said about the misleading nature of the name boiler room fraud, which does tend to make one think of central heating or ballcocks although it concerns things that are much more venal than that. The cost of fraud is devastating and affects us all. Fraud against business does not just drive up costs for consumers; the cases of Enron, the Bank of Credit and Commerce International and Barlow Clowes show that it puts whole communities at risk. The Government, too, are a regular victim of fraud, and when they are, fraudsters are robbing taxpayers of the modern public services that they have paid for. As the hon. Gentleman has shown, the fraudster’s victim of choice will often come from among our most vulnerable citizens, who are targeted for their life savings and their livelihoods.
Boiler room fraud shows that although fraudsters’ methods may be complex, internationally organised and highly sophisticated, their motive is just simple criminal profit—deliberate, cruel and totally unchecked by any compassion for victims. Numbers are very hard to determine, as the hon. Gentleman said. We get about 100 new victims of boiler room fraud contacting the police each week. Losses range from £3,000 to more than £1 million—a very substantial amount for an individual. The Financial Services Authority estimates that about 2,000 victims contact it each year, with average losses of about £20,000.
The human cost, as well as the financial cost, is often appalling, as the hon. Gentleman’s examples showed. I am glad to hear that he has visited the City of London police; the Attorney-General and I went there a month ago, and indeed, we found them impressive, as the hon. Gentleman clearly did. The appalling story he was told of the lady whose husband was driven to suicide—he lost his life savings of about £200,000 and was obviously completely unable to live with that fact—is a human tragedy of matchless proportions. Another caller to the City of London just sobbed on the telephone and could not explain to the officer at that time any detail of what had happened; she was clearly devastated. One man in his 80s had lost more than £400,000 and was about to buy some more worthless shares when the City of London police were apprised of the scam and arranged for an officer in his local force, which was in Scotland, to explain to him what was happening and head it off.
Those are the depths to which the fraudsters sink. Amazingly, it is not generally seen as evil crime, like violent crime, rape or armed robbery, but it does massive damage to people’s lives. For people to lose the cash that they and their family were depending on for the future produces shame and guilt, and there will be massive under-reporting because such feelings are an ordinary human reaction. People suffer a loss of faith in their own judgment and a loss of self-esteem, all of which is massively more injurious to health than a punch on the nose in the street.
It is a very serious crime that the Government take very seriously, and the risks are rising fast for the perpetrators of such crimes. In recent months, a multi-agency taskforce, co-ordinated by the City of London police, joining with key agencies such as the Serious Organised Crime Agency, the Serious Fraud Office and the FSA, has become increasingly public in its work. That is Operation Archway, about which the hon. Gentleman has spoken. It provides a contact point for victims and a concentrated pool of expertise that turns national intelligence about boiler room fraudsters into action against them.
I acknowledge the hon. Gentleman’s concerns about whether local police are the appropriate people to tackle the issue internationally. However, Operation Archway has worked fluidly across borders, with operations, supporting action and arrests by international partners in the US, Ireland, Hong Kong, Singapore and Gibraltar so far. In the example that he mentioned, the father and daughter who were suspected of boiler room fraud totalling £35 million to £50 million were indeed arrested in the US, but that was with the critical assistance of the City of London police who were safeguarding British victims. Numerous people have been detained in this country and abroad over the past year, as part of seven major multi-agency operations against boiler rooms. For instance, last week, an arrest operation across five English counties produced a series of arrests of both men and women who were engaged in boiler room fraud.
Although such operations are vital in increasing the risks for fraudsters, parallel efforts are helping to remove their rewards, by tracing, freezing and seizing their stolen assets around the world. Letting fraudsters know that they will not be able to keep their ill-gotten gains is the way to get to the heart of the problem. Anti-money laundering specialists in the City of London police—I will come to more police forces in a moment—found assets in the US, Canada, Belize, Nevis, Cyprus, Tanzania, Lebanon, Latvia and, despite what the hon. Gentleman said, Spain.
The Government’s major reforms have in recent years put criminal assets at risk in a major way, as they never have been before. We have introduced tough asset recovery powers. They were not universally supported as they went through the House, because they appeared at first sight to be quite draconian, but they are working. Those powers are popular and are becoming increasingly tough in their implementation. Financial investigation is becoming an increasingly mainstream part of police work. We are aiming to make the UK a tougher target for boiler room fraud.
Contrary to the hon. Gentleman’s concerns about local police forces and the absence of fraud officers in some places, I am pleased to say that every police force in the country has contacted Operation Archway for advice and support. Those forces will be referring to Archway complainants in inquiries that Archway is taking on. However, local forces are simultaneously taking away advice and support to build up their own capacity, so that they can better tackle such crimes nationwide. There is, I am fairly sure, an element of regionalisation in the location of fraud officers, so that that expertise builds up in bodies that deal with such issues regularly.
We are, however, taking the challenge to boiler room fraudsters beyond the operational front line. We will use all the tools in our power to protect the public and will acquire new ones where necessary. The fairly recent Fraud Act 2006 has brought about a major simplification of legislation on fraud, which is helping to get boiler room fraudsters to justice more quickly. Over-complex law is a recipe for criminals who are used to scheming in the first instance to try to play the system and extend trials. Fraud law is “relatively straightforward”, or at least much more so than it used to be, so that people can see where it is going and jurors can better understand it. As the hon. Gentleman will know, we are holding a public consultation on the implementation of a plea negotiation framework, to enhance the ability of prosecutors to get an early settlement in what might otherwise be complex and lengthy trials.
The Financial Services Authority is not a part of the Government for me to defend or criticise. Essentially, it is an independent authority. However, the hon. Gentleman has put what he wanted to say about the FSA very courteously in this debate. I have read a press releases by him in which he said that it was time that the FSA got its finger out. I am never one to avoid mixing my metaphors, but the FSA would say that it was “all hands on deck”. The FSA regards itself as being tough in supervising the UK framework of financial regulations and has used its powers to shut down any firm in the UK that has helped boiler rooms, closing seven firms last year, with two people subsequently reported to the police for arrest. A solicitor who had authorised adverts promoting boiler rooms was fined £150,000 and is, I hope, currently in the middle of disciplinary proceedings.
The FSA would say that it is building coalitions against the fraudster with its sister agencies overseas. Co-operation between the FSA and its counterparts in Ontario and British Columbia has helped to recover £1 million of UK victims’ funds. We have to do things all ways. It is fine to simplify prosecutions and to make arrests, but that is after the event, and the money is often a long way away by the time we get to that stage. It is therefore important to think not only about prevention but about earlier intervention, when the money will not be so far away from concealment and might be easier to recover. It would save people who have suffered from that fraud from being demoralised if they realised that they were not alone. It helps them to realise that the fraud is happening across the board, and that they are not so foolish as they think when they self-stigmatise.
We are trying to take action across the board to hold fraudsters who prey on British victims to account, wherever they try to hide. We have to look at prevention, deterrents and detection, as well as disruption. The key agencies with responsibility have taken new steps to make boiler room fraud harder to commit. The FSA shares its intelligence by listing suspected boiler rooms, and its website is much visited, so I think that the hon. Gentleman must have found only one or two pages that were relevant. About 18 new firms are listed each month on the website, which appears to have received a substantial number of hits. The FSA has also shut down sites that are run by suspected boiler rooms.
The hon. Gentleman talked about working with share registrar companies. We understand, from the FSA, that it works with such companies to include preventive advice as part of the annual reports of legitimate companies, because—we agree on this much at least—people who are already shareholders are commonly the victims of this fraud. The FSA informs us that it is doing that, but, in view of the hon. Gentleman’s comments and the correspondence that he has had, we will go back to it to ask about this. I will write to him to ascertain that I am not in danger of misleading anyone by saying that the FSA is confident that it is spreading information to the people who are most commonly victims.
The FSA takes an up-front role in media activities, working with local and regional radio, TV news programmes and features, and print media. The list gets longer every week. It has not excluded the national press, but people take note of what happened to Mrs. Smith up the street, so they are more likely to be put on notice by something local than by something that they read about nationally.
The FSA also runs a website called “Money made clear”, which is intended to be a public awareness site that rolls out material to raise public awareness about all kinds of scams and swindles, including boiler room frauds. It has a contact centre for people who respond to what they see on the site and who might, as the hon. Gentleman said, appreciate for the first time that they are in the middle of something and so not write the cheque that someone has been trying to get them to write.
We will build on such progress more centrally in the months ahead. The hon. Gentleman mentioned the new institutions that we are setting up. Fraud has never been higher on the agenda, and the major reforms that he mentioned are under way to make the UK a tougher target for all kinds of fraud, including boiler room fraud. Concerted action is needed to tackle the threat, and not just from the Government. Action is also needed from criminal justice practitioners, charities, business, all the regulators and all the public. They each have a vital role to play and a stake in each others’ success.
As the hon. Gentleman knows, the Government have carried out a fraud review, consulting widely and getting a substantial response. They are driving forward with major changes that are backed by new funding. He asked for reassurance about that: £28 million was allocated for the new institutions in the comprehensive spending review. That funding must be added to the money that already goes to the Serious Fraud Office, which receives both core funding and what is known as blockbuster funding for individual cases. The Crown Prosecution Service has a fraud prosecutions division, which is accumulating a body of expertise. The Revenue and Customs prosecution office prosecutes fraud, as do the Departments for Work and Pensions and for Business, Enterprise and Regulatory Reform. The funding—which will go to different institutions, and also boost the investigation and prosecution arm—is in addition to all of that. The reform programme is not just about prosecuting; it is about concerted action.
The national fraud strategic authority will deliver on the core recommendations resulting from the responses to the consultation. It reports directly to Ministers. The hon. Gentleman asked me when I last had contact with—he was pleased to say—my Cabinet colleagues. There were important Ministers present at the time, and I am in the group. The Attorney-General, who does attend Cabinet, is also in the group, as are all the Ministers to whom the hon. Gentleman referred.
The strategic authority has a mandate to develop a national strategy on fraud that, interestingly, involves setting out a vision of success. This is not a straightforward process; it is important that there should be prosecutions and convictions, but they are after the event for the victims, and asset recovery is absolutely key. Perhaps we should judge the success at least partly by the increasing number of reports. People are often unwilling to report this kind of fraud, but an increase in reporting would make it look as though it was escalating. There will be elements of that, I am sure, and the incidence of fraud will look as though it has gone up when the proposals get on their feet. However, if the strategic authority can set out a vision of what success means, it will be able to develop a national strategy for fraud. There will be a programme of action that involves deterrence, prevention, detection, investigation, sanctions for perpetrators and redress for victims.
A further important component is the national fraud reporting centre, which will have to set up strong links with industry, business and other law enforcement agencies, so as to receive reports. It will need to have networks and tentacles everywhere, so that when Mr. Jones in Redcar makes a report, it will know that that is a problem not only in Redcar and that there have also been examples in Ribble Valley, for example, and elsewhere. It will then work with intelligence analysts, who will work out, from the individual reports, a better picture of the networks involved, their techniques and the opportunities to bring them to book. It will then send back to the institutions involved—the banks, businesses or whatever—the recipe to deal with the problem.
I understand that we can go on until half-past 6, so we are not under a great deal of time pressure.
On financial institutions, why does the Solicitor-General think that the banks and the credit card companies—they are often interlinked—are not taking this matter more seriously? I was given an example recently. If a customer does something that is “out of profile” with their credit card, even if only a small amount of money is involved, the credit card company might intervene and stop the transaction until it can be assured that it is legitimate. The company is afraid that it, or the bank, might lose money. However, if a person who regularly spends small sums of money suddenly tries to wire £100,000 to the Dutch Antilles, the banks are not interested. Does the Solicitor-General not agree that these financial institutions should play a far greater role in trying to protect their customers?
That is absolutely imperative. The hon. Gentleman has put his finger on an important point. The strategic authority, although it will be responsible to Ministers, will have to work—and is working—with business on all levels and across the entire range of organisations that he has mentioned.
This is about focusing on a crime that has been very dispersed and diffuse in its effects, and for which no one has taken central responsibility. Once we embarked on the consultation and began to appreciate the task that faced us, it became imperative for us to involve all the organisations in the financial sector. That is what the strategic authority intends to do. We hope that the reporting centre will work in a preventive way, by sending back packages about how to deal with the fraud that people are experiencing. It will also deter, as well as helping with investigation. Although it will not necessarily give people their money back, we hope that it will stop them losing it in the first place.
I have a little more to say, for perhaps another three or four minutes, if that is a practical proposition, about the lead force, policing and prosecution. The hon. Gentleman asked me specifically about funding in that regard. Better intelligence and knowledge of fraud can, of course, be an end in itself up to a point, but part of its purpose is to increase the risk faced by fraudsters and to target their reward.
It being Six o’clock, the motion for the Adjournment of the House lapsed, without Question put.
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Khan.]
I am sure that the public are utterly baffled, but we are all pleased that we can go on a little bit longer—but let me reassure those people that it will only be a little bit longer.
We are investing up front—this is the important point I want to put to the hon. Gentleman to help him with his concerns—to build up the specialist skills we need to make action against fraud a mainstream part of British policing. We are expanding the highly successful role—he agrees that it has been successful—played by the City of London police as the lead force in the south-east. It has £8 million of new ring-fenced funding, which is separate from the £28 million in the spending review, to which I have already referred, and it will become the national lead force as well. Apart from that money to boost its role in the south-east, it will have additional moneys of £28 million from the comprehensive spending review to enable it to boost investigations around the country and, as a centre of excellence, to build investigative expertise around the country. Two quite separate pots of money are going to that excellent force, which works so well and with such commitment—and, indeed, with such excitement at the chase.
We will go further, because we will need to look at how the framework of performance management for the police can be adapted to strengthen incentives to chase such crime and recognition for delivering strong action against fraud. It is very important that fraud is dealt with and that people locally gain confidence that action will be taken.
I have mentioned in passing the Crown Prosecution Service, which is already funded to do fraud prosecutions. It has a fraud division and it is accumulating expertise from people who are doing the work in depth. Those involved did 117 cases last year—they are very new—and had an 80 per cent. conviction rate, while there are currently 250 active cases. The Serious Fraud Office had 67 cases last year with a conviction rate of 68 per cent. The Fraud Act 2006 is helping to ensure that those investigations are brought to fruitful prosecutions.
We are now determined and very committed to delivering an integrated response to fraud such as the plague of boiler room fraud that preys on the vulnerable, but also to fraud across the board. We must ensure that knowledge of fraud is managed effectively so that we can improve nationally in how we tackle it. We need activity across the system that is properly co-ordinated for maximum impact, and law makers and law enforcers must work together to change the balance of risk and reward against the fraudster. We must also earn public confidence by delivering justice and redress, not least so that more people will be relieved from the burdens that the hon. Gentleman spoke about and so that more people will report, enabling us to pre-empt more of this invidious crime. By focusing very hard on immediate key threats such as boiler room fraud, but also by addressing the longer-term challenges for the future, we will make this country—this is our mission and we intend to do it—the hardest target in the world for fraudsters.
Question put and agreed to.
Adjourned accordingly at three minutes past Six o’clock.