Fiona Jackson analyses the NCA’s new National Strategic Assessment of Serious and Organised Crime and Annual Plan

Fiona Jackson analyses the facts and figures most relevant to Chambers’ areas of practice from the National Crime Agency’s National Strategic Assessment of Serious and Organised Crime 2020 and Annual Plan 2020-2021 published in April 2020

Fiona Jackson practises and provides strategic advice in domestic and international civil, commercial and criminal cases of fraud and money laundering, bribery and corruption, international mutual legal assistance and mutual recognition, international regulatory work, proceeds of crime and tracing, civil and criminal asset recovery, business crime and compliance issues.

The publication of the NCA’s National Strategic Assessment of Serious and Organised Crime and Plan provides legal professionals as well as law enforcement officials an annual opportunity to reflect on the headline facts and figures behind the Agency’s domestic and international work.  Doing so enables us to comprehend trends and threats from the impact of major crime in the UK and more widely, and prospects for potential work.

The government’s 2018 Serious and Organised Crime Strategy defines serious and organised crime as individuals planning, coordinating and committing serious offences, whether individually, in groups and/or as part of transnational networks.  Serious offence categories covered by the term include organised acquisitive crime, fraud, money laundering, bribery and corruption, cyber crime, and sanctions evasion.

The NCA’s Strategic Assessment aims to paint a single picture of the threat to the UK from serious and organised crime based on statistics and additional figures (some of which are a little historic), whereas the 2020-2021 Annual Plan has a more political feel with a foreword by the Home Secretary and sets out the NCA’s strategic priorities and themes for delivery in the coming year.  The documents do not always focus on precisely the same material year on year, sometimes making a direct comparison difficult.

This year’s Strategic Assessment estimates at least 350,000 individuals in the UK are engaged in serious and organised crime and diversifying into multiple crime types, and suggests that they are increasing their reliance on the services of corrupt insiders and continuing to use the UK’s financial systems to mask illicit finance and launder profits.  It is of particular note, moreover, that at least 300,000 of these individuals are estimated to be involved in child sexual abuse rather than any other crime category – this distinguishes the majority of these individuals from the traditional image of organised crime groups (OCGs), which have previously included fraudsters, gangsters and corrupt officials.    

The NCA has mapped 4,772 OCGs in the UK, with the majority of their members being British nationals.  Approximately two-fifths of OCGS are suggested to be non-British, and OCGs often have a presence in multiple countries.

The NCA estimates that the social and economic cost of serious and organised crime to the UK is approximately £37 billion, but this is acknowledged to be a significant underestimate of the true cost because the calculation uses a baseline of 2015/16 and, crucially, does not include threats such as money laundering, fraud against the individual, or bribery and corruption.

Perhaps unsurprisingly given the figures involved, the Strategic Assessment suggests that criminal motivations continue to be mainly financial, with illicit financial flows remaining an important enabler.  Trends identified by the NCA in its 2018 publications have become more prevalent during 2019, including the increased criminal use of encryption tools, the dark web and virtual assets.

Distilling the Strategic Assessment into specific topics highlights the following key figures:

Fraud

Victims reported losses from fraud of £2.2 billion to the National Fraud Intelligence Bureau in the year ending March 2019, an increase of 38% on the previous year.  The Strategic Assessment notes that fraud remains significantly underreported, which is perhaps not surprising given its advice to victims of fraud to report it to the maligned Action Fraud helpline – this reporting tool has been the recent subject of heavy media criticism for its apparent inability to handle calls appropriately from members of the public.

Nevertheless, the Strategic Assessment states that fraud is the most common crime type in England and Wales, comprising a third of all estimated crime with an estimated 3.8 million incidents of fraud in the year ending September 2019, which represents an increase of 9% on the previous year.

Cyber crime is said to be a major enabler of fraud because data obtained via data breaches, phishing and malware is used directly to commit fraud or is sold online to other fraudsters. The NCA notes that the Office of National Statistics’ Crime Survey for England and Wales (ending December 2018) estimates that the internet plays a role in at least 54% of all fraud.

Investment fraud resulted in the highest total losses from victim reported fraud, with reported losses of £338 million in the 2018/19 financial year. The NCA suggests that a potential driver of this figure is victims (many of whom consider themselves financially savvy) being enticed by the high returns offered by fraudsters.

In other trends, the NCA notes that cryptocurrency investment fraud is an emerging area of concern, and romance, courier and computer software service fraud are also increasing significantly. Romance, courier and computer software service fraud victims reported losses of more than £90 million in the year ending February 2020, and of course typically those targeted are more vulnerable to becoming victims by virtue of age, technological knowledge or emotional state, leaving a profound effect on the overall health, wellbeing and confidence of victims.

Money laundering and cash

The Strategic Assessment notes the difficulty in quantifying the scale of money laundering impacting on the UK, but in light of the UN estimate that 2-5% of global GDP is laundered and London’s position as one of the world’s largest financial centres, it acknowledges there is a realistic possibility that the annual impact is in the hundreds of billions of pounds. The NCA suggests that, while it is likely that the majority of this is corrupt money from outside the UK, it also includes the proceeds of crime generated within the UK. For example, research by Transparency International suggests 929 UK companies were involved in cases of corruption and money laundering in 2019, amounting to £137 billion in economic damage.

The NCA asserts that cash-based money laundering continues to be a major method of laundering funds in the UK, both through physical movement of cash, with seizures at the UK border remaining high in 2019, and through money service businesses and informal value transfer systems. The latter are prevalent in the UK, and the NCA suggests that their use by Chinese OCGs remains a significant threat.  It notes that an NCA project aimed at tackling money laundering has seized £115 million in cash since its inception, including £21 million in 2019.

Use of money mules (individuals who transfer criminal proceeds on behalf of others into, through and out of retail banks) increased by 26% between 2017 and 2018, with more than 40,000 cases of suspected money mule account activity reported in 2018.

Corruption and Bribery

The Strategic Assessment suggests it is likely that domestic and international bribery and corruption are becoming more closely linked, meaning the threat to the UK from both is also likely to increase but notes that it remains difficult to establish an accurate picture of the scale and nature of domestic bribery and corruption.  It asserts that bribery and corruption originating from the UK continue to present a significant reputational risk to the UK, and highlights that the NCA has obtained 15 Unexplained Wealth Orders to date relating to property worth an estimated £143 million and aimed at tackling PEP-related bribery and corruption.

It is interesting to note, however, that this year, the NCA has focused in this report on corruption of domestic public officials. The Strategic Assessment suggests that OCGs remain the most significant external corruption threat to UK law enforcement and may seek to exploit officials from across law enforcement, including police officers, border officials and personnel in the wider criminal justice system. A quarter of all OCGs are assessed to have the intent and capability to infiltrate, bribe or corrupt private and/or public sector employees, with just over half over these OCGs seeking to corrupt public officials and law enforcement officers. The number of police recorded corruption offences in England and Wales increased slightly in the year to June 2019, from 122 in the previous year to 138, although the NCA notes that it is almost certain such offences are significantly under-reported.  Notwithstanding this acknowledgment of significant under-reporting, the NCA claims it is highly likely that levels of corruption in UK law enforcement are low.  It observes that the impact of corruption when it does occur is disproportionately high, undermining public trust and confidence in law enforcement and weakening its ability to investigate and prevent criminality. To combat this, it proposes that continued robust background checks of employees is essential to managing the threat.

Sanctions evasion

In the 2018/19 financial year, 162 targets were added to the Office of Financial Sanctions Implementation’ consolidated list of financial sanctions targets, up from 122 the previous year. Around a quarter of these targets were in the Democratic People’s Republic of Korea, while just under a fifth were added for undermining the sovereignty and territorial integrity in Ukraine.

The Strategic Assessment reveals that there were 99 reports of suspected breaches of financial sanctions in the 2018/19 financial year, reportedly worth £262 million.  Checking back to the NCA’s Annual Plan 2019/20, however, this represents a downward trend in reports and value: the NCA claimed then that during 2017/18, 122 reports of suspected financial sanctions breaches had a value of £1.35 billion.

The NCA asserts in the Strategic Assessment that financial sanctions contravention directly impacts the UK by undermining the integrity of the financial system, while potentially helping to fund terrorism and the proliferation of weapons of mass destruction.  It is of significant note though that elsewhere in this Assessment, the NCA observes that there remains no indication that OCGs active in the UK are cooperating with terrorist groups.

Virtual assets

The NCA suggests that the increasing value of virtual assets, such as Bitcoin, is driving the increase in their popularity and use by criminals to buy and sell commodities on illicit online marketplaces and to launder criminal profits. It observes that, whilst the Fifth Money Laundering Directive (implemented into UK law in January 2020) would bring all relevant virtual asset businesses into anti-money laundering and counter terrorist finance and should make the sector less attractive and vulnerable to some criminals, it may also increase the perceived legitimacy and use of virtual assets.

Restraint, freezing and recovery of assets

The Annual Plan reveals that between April 2019-March 2020 the NCA:

·         froze over £275 million assets, including by use of the account freezing order powers introduced in 2017;

·         forfeited over £7 million in cash;

·         restraining over £110 million;

·         received over £8 million from civil recovery.

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