Being part of the solution to fraud

Between 2020 & 2021, Action Fraud logged 875,622 reports of fraud, costing the UK £2.35billion in fraud-related crimes, a 24% increase that was led predominantly by COVID-19 related scams. This is just part of the wider £37billion of economic crimes in the UK, but is nonetheless an extremely serious problem. We explore how the newly launched Accountancy Sector Fraud Charter supports accountants to be part of the solution. The Economic Crime Plan 2019-2022 was produced by the government to tackle the overwhelming levels of economic crime losses that are reported in the UK each year. As well as boosting legitimate tax revenues and public trust, it is believed that the measures set out in the Economic Crime Plan (ECP) make the UK a better, fairer place to do business, at the same time protecting individuals and disrupting criminal activities. Delivering on the plans set out in the ECP, the government relaunched the Joint Fraud Taskforce at the end of October 2021, to develop public-private partnerships that directly counter fraud. The objective set out by the taskforce is to “commit industry leaders to work with government to deliver new, innovative projects with the ultimate aim of reducing the growing threat and protecting the public”. Their first order of business has been to release three brand new sector-specific fraud charters. The retail banking fraud charter and the telecommunications fraud charter provide guidance on how these sectors can specifically and directly tackle financial fraud in these industries, while the Accountancy Sector Fraud Charter takes a different approach. Respecting the ancillary role that accountants play in countering fraud, our sector’s charter recognises the unique and influential role that accountants have as trusted advisers on financial matters, making them an essential frontline defence in the prevention strategy. It begins: “Whilst the proportion of fraud that involves an accountant or the accountancy sector may be small, the role that an accountant plays can be important.” As well as highlighting their unique oversight position for detecting fraud, the charter identifies threats to accountants from impersonation and targeting, as fraudsters seek legitimacy for their activities. Accountants are known and respected for their skills, and their unique role in providing independent oversight of finances makes them a potential target for fraudulent activities to validate criminal gains. The charter therefore seeks to specifically address these vulnerabilities and at the same time capitalise on accountants’ unrivalled access to individual and business finances by setting out four initial actions to be taken: Action one - improve information: the lack of fraud assessment for the accountancy sector makes it difficult to quantify the current and emerging sector fraud. This will be addressed with a fraud intelligence brief by the National Economic Crime Centre to identify major risks and encourage sharing of information between the sector and law enforcement on an ongoing basis. Action two – develop a fraud awareness toolkit: providing a toolkit to support accountants to identify and combat fraud and fraud risk. This action will be led by the accountancy professional body signatories, including the Institute of Financial Accountants (IFA). Following the threat assessment set out in action one, which is expected for publication in early 2022, the fraud awareness toolkit will be developed and made available to all accountants in due course. Action three – enhancing Companies House: as part of the wider Companies House reforms, views will be invited from the sector to help enhance its role and improve the reliability and efficacy of data. Accountants engaged in public practice already play a role in improving data held in Companies House through the requirement in the Money Laundering Regulations 2017 (as amended 2019) to report a discrepancy about a beneficial owner on the People of Significant Control (PSC) register by an obliged entity held in Companies House. An essential part of Companies House improvements are the Companies House reforms. The reforms, if implemented in full, will ensure that Companies House has the legal powers and resources it needs to query and seek corroboration on information submitted to it, amend and update errors, and work closely with law enforcement and other partners to support investigations into fraudulent activities. Action 4 – changing customer behaviour: a government-sector partnership will seek to raise consumer awareness of key issues and therefore reduce vulnerability. The ambition is increased fraud awareness through existing and new communication strategies, which is viewed for its long-term gains in fraud prevention. Ultimately, what the charter means for the sector is increased governmental awareness of the risks and threats that we face, to be countered by improved information sharing, enhanced data accuracy, and sector and client education for improvement across the board. The IFA is one of the accountancy bodies contributing to the fraud charter, and will be supporting the development and distribution of the promised tools. The challenge for the sector and the partnership with government will be addressing what is a hugely diverse industry. Our sector incorporates both qualified and non-qualified accountants, 13 professional bodies for which membership is optional, and operations which span from sole traders to multi-national firms, not to mention those working within businesses. Each will potentially encounter a different type and scale of fraud, which means that the resources and training required to spot fraud will differ widely. The IFA nonetheless welcomes the launch of the Accountancy Sector Fraud Charter, has already contributed to stakeholders' meetings, and has submitted representations on Companies House Reforms. Anne Davis, director of Professional Standards for the IFA concludes: “The Accountancy Sector Fraud Charter has the potential to deliver progressive action on fraud, and to equip accountants as primary protectors for legitimate business activities. We welcome the charter and its supporting actions as a step in the right direction for the UK. The IFA, and its members and firms, are committed to preventing, detecting and reporting fraud to the proper authorities. We will be working with law enforcement, accountancy sector professional bodies and other stakeholders to gain a better understanding of fraud threats, increase fraud awareness and provide tools to help our members and the wider industry to combat fraud.”