Tackling fraud in the public sector

Billions of pounds are written off by Government each year to fraud. Recent figures from the National Fraud Authority (NFA) show that fraud against the public sector is as high as £20.6 billion per annum representing losses to local and central government as well as the tax system. At a time of austerity, misappropriation of public funds is a sensitive issue and can significantly affect public confidence.
Members of the Credit Services Association (CSA), which represents the UK collections profession, have started working with the government to recover some of the significant sums of money being lost. But is there more that the Association, and agencies, could do to limit the impact of fraud?

Steve Mound, who sits on the governing committee of the Debt Buyers and Sellers Group (DBSG), says: “We are at the sharp end of collecting money and so have early access to knowledge about people who might go on to commit fraud. CSA Members are already working with the government on PAYE, VAT and NI debt collection as well as with the courts on the collection of fines. We see levels of correlation between what is occurring in our work and what is happening in the public sector, but we are often held back by access to or sharing the right data.
“Fraud is on the increase for a number of reasons; what is important is spotting the warning signs early, which is where CSA Members can help.  In our Members’ experience, customers who find themselves in debt can easily slide from tax avoidance, for example, into tax evasion, and other ways of defrauding the public purse. It becomes a vicious circle.”

What is fraud?
The Fraud Act 2006 provides legislation on the offence and defines three main ‘elements’: fraud by false representation; fraud by failing to disclose information; fraud by abuse of position.
In each case: the defendant’s conduct must be dishonest; his/her intention must be to make a gain; or to cause a loss or the risk of a loss to another person; no gain or loss needs actually to have been made; the maximum sentence is ten years’ imprisonment.
Mound says that it is important to differentiate between ‘fraud’ as a deliberate action, and a debt that has remained unpaid: “As we come out of a very difficult economic climate, we need to distinguish between those people who find it difficult to pay on time, and those people who commit fraud with the specific purpose of deliberately avoiding their debt and will continue to do so.
“There are people in difficulties who may have fallen into cash flow problems, who when made aware of the different options available, will survive and pay their bills. And then there are those who deliberately set out to deceive and it is in this area where CSA Members can play an important role in helping the government.”

Better access for data
At the heart of the CSA suggestions to improve the early identification of fraud is better access to data and better sharing of information. On a positive note, CSA Members have recently been given access to CIFAS, the UK database for confirming data fraud. This access enables CSA Members to combine their own knowledge, information and experience with the CIFAS data to help track down those who are being intentionally dishonest. It is also helping the government to understand and distinguish between a bad debt and a debt that has been fraudulently accrued.
“Currently, bad debt and fraud are confused and mixed into one area,” Mound continues. “Not all of the billions of pounds that the government is owed is down to fraud, and a clear line should be drawn between those people who seek to defraud and those who fail to pay their bills for a variety of reasons which can be as simple as bad administration and poor cash flow management.”

Proposed changes
Much of the good work that the industry can do to help the government in reducing fraud could, however, be undone by proposed changes within the new European Data Protection Regulation which is set to come into effect in 2015. It proposes that if an individual moves address, then their details cannot be accessed by a third party. Giving people the right to be effectively forgotten, through the proposed ‘right to erasure’ however, will allow fraudsters to go on committing their crimes without fear of being caught. A Regulation that has consumer protection at its heart could perversely damage the most vulnerable in society, by starving the public sector of cash.
So too is there concern over preventing CSA Members access to the electoral register. For many years, the CSA has campaigned for the right to access not just the edited register, but also the full register. As Mound explains: “The electoral register can be very useful, but the edited register is only approximately 50 per cent of the roll. It is no longer as helpful as it used to be. If someone has committed government fraud, then access to the full electoral register can help us to trace them.”
Fraud is a hidden crime and fraudsters, who may act as individuals or as part of an organised criminal gang, are incredibly inventive. Fraudsters will always be thinking of new ways of committing crime, and a range of actions is needed to beat them. However, one simple action that could be taken now, which would immediately bring down the fraud figures, is joined up thinking involving better access to data and better sharing of information.

About the CSA
The Credit Services Association Limited was formed in March 1988, when the Association of Trade Protection and Debt Recovery Agents Limited, which had been established since 1902, merged with the Collection Agencies Association.
Both of these former Associations had a strong and active membership with proud traditions. Their decision to merge created, in the Credit Services Association, one truly representative body dedicated to upholding the highest professional standards with the Trade Protection industry.
Trade Protections relates not only to those directly involved in debt collection, but also those individuals and organisations performing allied functions, so that membership of the Association is advantageous to those whose business activities encompass recovery of overdue accounts by investigative and reporting instructions.

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