The risk of a UK recession is nearing, and economic fraud could be on the rise too. To combat this, new government bills could change laws for the better
As a nation, we’ve had a tempestuous few months. A new monarch and a new Prime Minister all in the same week. It sounds like the plot of some modern re-telling of a Shakespearean classic. And now, instead of calm in the waters after weeks of change, greater uncertainty abounds with the veritable fiasco that is the British economy under the reins of this new leadership. The Institute of Fiscal Studies recently decried that the ‘UK is not on a sustainable fiscal path’. With the Pound plummeting, economic growth shrinking, inflation (at a whopping 9.9% in August) and interest rates on the rise, we appear to be on a collision course with another UK recession. And where there is a recession, there is fraud.
The last UK recession was at the peak of the COVID-19 pandemic in 2020. During that time, cases of fraud rose by 24% according to a recent Crime Survey for England and Wales. Now as we approach the next fiscal downturn, it is highly probable that fraud will be on the up. The Bard’s words in Venus & Adonis ring truer than ever before: it “shall be fickle, false and full of fraud.”
The government’s financial playbill
In light of this ever-changing landscape, the government has attempted to beef up its arsenal of fraud prevention tools through the unveiling of the Economic Crime and Corporate Transparency Bill, which had its second reading on 13 October 2022. The Bill comes in the wake of the Economic Crime (Transparency and Enforcement) Act 2022, which was introduced as a responsive measure to the Russian invasion of Ukraine. The Bill is touted as being able to tackle economic crime both at home and overseas by introducing a range of reforms that include new measures for challenging new forms of fraud. Take for instance, the ever-growing threat of crypto-frauds. The Bill specifically provides new powers for use in the hunt for illicitly gained cryptoassets, and the alteration of existing money laundering and terrorist financing provisions.
For example, clauses 141 and 142 of the Bill will amend the Proceeds of Crime Act 2002, altering criminal and civil recovery in relation to virtual currencies and their ilk. In terms of civil recovery, the Bill would enable (amongst other things) law enforcement to deploy additional search and seizure powers to retrieve cryptoassets and permit for their destruction in certain instances. Part 5 of the Bill will facilitate the sharing of information by businesses where the purpose of that information is to prevent, investigate, or detect economic crime. In sharing this information, Part 5 disapplies civil liabilities that the business may have been subjected to for any breaches of its confidentiality obligations in this context.
“Foul deeds will rise” (Hamlet, Act 1, Scene 2)
It remains yet to be seen whether the new Bill will provide any meaningful ways to weather the storm of fraud that may be on the horizon. Times of economic uncertainty present new methods of exploitation for criminal gain, and so it is imperative that the UK thoroughly prepares for what lies ahead. The Bill is a step in the right direction. However, these measures will only go so far without the appropriate fiscal backing to expand fraud prevention across the UK. The government has recently launched a new Public Sector Fraud Authority, plying it with £25 million in new funding. Yet this £25 million pales in comparison to the £1.3bn that was misappropriated by fraudsters in 2021. Lest we forget, last recession, the UK lost approximately £16bn to Covid-loan frauds alone.
Perhaps this time around fraudsters will attack emergency relief given to combat the cost-of-living crisis. The moral of the story – desperate times will generate desperate crimes, and the tide of criminal fraud is unlikely to be successfully resisted simply by more regulation and transparency alone, however well-articulated in His Majesty’s Government press releases. As we gear up for what the future holds, these authors recall the words of Henry V: “Once more unto the breach, dear friends, once more”.
By Keith Oliver, Head of International, and Amalia Neenan, Trainee Solicitor at Peters & Peters LLP
