Sarah Pritchard Director National Economic Crime Centre (NECC) at the National Crime Agency (NCA) invited us in to talk about Fraud. In what has been an unprecedented year for law enforcement we wanted to understand how the NECC had risen to the challenge of Covid-19.
Sarah has an MA in History from Cambridge, she worked in government for several years before moving to Dechert where she specialised in dispute resolution, after three years in private practice she moved back into government as an investigations lawyer. In 2013 she joined HSBC and was the Global Head of Anti-Bribery/Corruption & Global Head Reputation Risk/Client selection. In 2015 she moved to the National Crime Agency first as the Deputy Legal Director before becoming the General Counsel and led on the Transformational People Programme. In June 2019 Sarah became the Director of the National Economic Crime Centre.
Part 1) About the National Economic Crime Centre
What is the National Economic Crime Centre?
The National Economic Crime Centre (NECC) is a relatively new entity launched Oct 2018 and is part of the National Crime Agency (NCA). It is a multi-agency partnership housed within the NCA.
‘Our main responsibility is to deliver a step change in the response to economic crime. What is unique is it brings together regulators, prosecutors, law enforcement agencies and the private sector.’
The core partners are the NCA, Financial Crime Authority (FCA), HM Revenue & Customs (HMRC), Serious Fraud Office (SFO), Crown Prosecution Service and the City of London Police (who have the policing responsibility for fraud). The private sector engagement comes via the Joint Money Laundering Intelligence Task Force which is house within the NECC. The NECC is made up of just over 100 people.
In addition to her duties as a Director at the NECC, Sarah is also responsible for the UK financial intelligence unit which is run alongside the NECC. The reason being that the NECC learns a lot about the emerging risks through Suspicious Activity Reports (SAR’s) and part of the ongoing approach to tackling Economic Crime is ongoing intelligence gathering and SARs.
What is the current Strategy for tackling Economic Crime?
‘The NECC was set up in response to a recognition that the system in the UK was overly complex which resulted in poor co-ordination and a limited understanding of the threats. The multi-partnership approach to addressing economic crime represents a step change in the approach to tackling Economic Crime in the UK.’
‘It was recognised that we are not as well known yet as we would like to be. We are building really good relationships in order to raise the profile of the organisation.’
The four priorities that underpin the NECC are:
- To understand the threat of economic crime
- Ensure that there is an effective
and proportional response to the threat, the four key areas to this holistic
approach are:
- Prevent
- Pursue
- Protect
- Prepare
- The NECC is also there to act as the collective voice of the operational community into the government in order to help tackle economic crime. Home office and the Treasury have the primary policy responsibility on economic crime, the NECC operates independently but works closely with Government partners to ensure an effective response.
‘An example is supporting the companies house consultation which was published recently and focused on issues of transparency and risks attributed to newly incorporated companies.’ The NECC contributed to the consultation on behalf of its operational partners.
- Understanding the capabilities that exist across the whole of the community. This includes drawing in a range of resources from those ‘partners’ that the NECC is working with.
July 2019, the Economic Crime Plan 2019-2022 was launched by government, which is relatively unique. A public private action plan including 52 actions signed by the Chancellor, Home Secretary, CEOs of the Banking community and other sectors such as Legal and Accountancy. The key is to work collaboratively across this range of partners and industry as well as public sector players.
The NECC features in a number of the 52 primary action points. Progress is tracked which has introduced a significant layer of accountability across both the Public and Private sector.
‘We have worked on public / private threat assessments in order to understand the scale of the threat. We have developed more specific threat areas and we have looked collectively at the threats from money service bureaus and trust and company service providers. These assessments are then shared out across the partners.’
What is the scale of the threat and how well are we doing?
‘The scale of the threat is significant, 3.8 million instances of fraud per year, we estimate that £100s of billions are laundered in the UK per year. Per family serious and organised crime is estimated to cost £2,000 per year. Economic Crime is viewed by some as a victimless crime but when you consider the cost of serious and organised crime on a per family basis that really brings it home.’
Between July 2015 and June 2020 the Joint Money Laundering Intelligence Taskforce (JMLIT) shared information on 750 cases; resulting in £56m in asset seizure or restraint; 210 arrests and over 5,000 suspect accounts linked to money laundering activity identified by JMLIT members that were not previously known to law enforcement (leading to closures of 3400 accounts by financial institutions).
How hard has it been to establish a working public / private partnership?
Multi agency partnerships are difficult to set up because of the mechanics owing to information access. The NECC was set up at a phenomenal speed as there was a recognition that there was a drive across government to get this going. It has worked really well in terms of the multi-agency partnership, there is buy-in from all of the partners which manifests itself on a number of levels both government and at a people level.
Most of the people within the NECC are from the NCA but we also have people from all of our partners – CPS, FCA, HMRC, City of London Police, SFO which shows the level of collaboration. Importantly we have a wide range of team leaders sourced from the various partners that make up the NECC.
Through people, you can establish a partnership and you can create relationships which enables you to learn. It is however really important that you understand what you can most effectively do and what you cannot do with the resources you have. This is fundamental in law enforcement.
Part 2) the impact of the Covid-19 pandemic in relation to economic crime and the challenges it presented.
Moving forward there is a recognition that there needs to be an effective law enforcement outcome, as well as an opportunity for partners to manage these risks effectively. This draws us back to our strategy which is to Prevent, Pursue, Protect, Prepare.
If you cast your mind back to March 2020, the UK civil servants were sent home about two weeks after the private sector. There was a two-week period where government carried on but adapted to interacting with the private sector remotely. This has kickstarted a period of transformational change and has laid the foundations for a more Agile and Real Time approach to tackling Economic Crime.
What did you do to combat the potential risks associated with Economic Crime in the wake of the Covid-19 pandemic?
We had to make sure that we were agile enough and that we could understand how threats were changing. Criminals will adapt to any scenario. Often the private sector will see changes in activity before law enforcement, that is why having an agile and real time relationship with the private sector is so important.
We set up what is known as the ‘Otello Covid-19 Fusion Cell’, which brought together a range of public and private sector members.
The Covid-19 Fusion Cell is chaired by Sarah, it includes representatives from financial institutions, money transfer business, insurance companies and trade bodies. It was set up with over 30 attendees meeting weekly by the 2nd week of the UK lockdown, which was a significant achievement. Fusion cell met with a view to sharing information between the public and private sector. Key to this was a focus on how the threat of economic crime was changing and looking at what could be done to tackle that threat. They also used that as an opportunity to agree what should be put out in terms of wider communications to support that effort.
What was special about the Fusion Cell?
What was different was that we were much more responsive, meeting weekly and virtually. Joint Money Laundering Intelligence Taskforce (JMLIT) is in person and a smaller group. This was larger and more responsive and there was an expectation of two-way information sharing. For it to work it needed to deliver. We brought together fraud, money laundering and looked at the cyber aspects of both.
What is important to understand is that criminals don’t operate in niche environments they commit fraud and then use complex structures to launder that money.
What did you do to identify and tackle risks as they emerged?
Each week had a dashboard which included threats and SARs coming in on a weekly basis. Risk indicators were shared across the cells to help organisations manage their own risk. Case work was then managed on a referral basis to tackle wrongdoing.
What were the key trends?
Initially we saw reports of fraud dropping by 18%, which was unexpected. Over the weeks, Fraud leveled off at usual levels but there was a shift in focus around the type of fraud, online fraud spiked. This was driven in part by where people were using their money. Reports of frauds where people were taking advantage of the Covid situation such as fake testing kits and poor-quality PPE also increased.
The private sector has been instrumental in identifying potential fraud through the Bounce Back Loan Scheme, both through SARs and other engagement. We have worked with the banks to highlight red flags to potential fraud, as well as working with wider law enforcement to identify cases for investigation, this has led to arrests in recent weeks specifically in relation to the Business Bounce Back Loan Scheme.
Has that led to arrests or has there been a ‘Covid gain’ from an enforcement perspective? In terms of money laundering, the initial lockdown was a useful tool in helping organisations to identify suspicious activity. Cash based money laundering in particular continued. Those depositing significant sums were easier to detect as there was little economic activity in certain sectors owing to the restrictions imposed by the government. Fusion Cell members reported this as a useful tool.
‘We saw a continuation in criminal activity throughout the Covid-19 pandemic.’
It has helped partners manage risk internally, where customers where involved in cash-based money laundering, they would have been easier to identify and a range of results can then take place. The key thing is that our partners know what to look for and this is where the fusion cell came in.
By sharing risk indicators from the NECC – there were 2 organisations that introduced enhanced monitoring of around 1000 customers based on the typologies that were shared. They were able to see risk where previously they might not have. It also helped the private sector discount risk. This was valuable because there was a criticism that law enforcement did not traditionally share the threat typology that they were concerned with. Our partners referenced that it is difficult to discount risk because you cannot see whether it breaches a threshold or not. ‘Real time’ information sharing meant that risk could be discounted where previously it might not have.
As a result of the fusion cell, there were 3 cases totaling almost £300m where, because of relationships that the NECC were able to facilitate, risk was discounted, and those frozen sums were freed up.
Were there any challenges with the model?
Information sharing is a challenge. Fusion Cell is meant to be agile and is most effective when we operate in real-time. ‘Real-time’ is still away from the real-time that we would want. There are issues around the culture of sharing and there are political hurdles.
There are challenges in sharing information that would lead to individuals being identified and then action being taken. This is an area that we are working on for the future. What it shows us is that there is real value of bringing together fraud and economic crime.
Within banking we found that banks are siloed, often fraud and anti-money laundering are separate functions. This impacts on the level of information that is shared across the two risk categories. Criminals do not work in silos. We saw significant advantages in bringing fraud and money laundering together in the cell.
It is great to hear about this agile approach to managing emerging risk, are there any key learnings?
There are 3 main learnings:
Firstly, we need to be more proactive in terms of case identification rather than reacting to cases that we are already aware of. Secondly balancing our resources between prevention as well as responding to threats through law enforcement outcomes, which is key to closing down vulnerabilities. Finally working in a closer too ‘real-time’ model, these are all significant learnings from the fusion cell.
The ambition is to create new governance that incapsulates fraud and money laundering that brings together learnings from the fusion cell and brings together a broader range of partners.
Over 7 months on is the Fusion Cell still going strong?
It was such a success that we have continued to host the meetings. Participation is now changing so we have new contributors including accountancy and legal in the fusion cell which brings a new dynamic.
You have to set the scale of ambition appropriately, Covid-19 has been a real time opportunity to test this form of public/private partnership. You could consider it a pilot. The question we need to ask ourselves now is:
Are we able to be more agile and responsive and can we operate differently to before, in order to create a ‘real-time’ solution?
Tell us about your ambitions for ‘real-time’
The big game changes that could be enabled are where we can harness the fusion cell partnership in ‘real-time’. This is dependent on technology and looking at improved systemic ways of managing data share through partnership and technology.
What could the game changers be:
Working with the private sector is really important. Not just how the threat is changing in terms of typology but also in identifying individuals so that we can facilitate arrests, facilitating arrests is really important. Looking at the quickest way to report that through is key. SARs are a significant contributor.
Last year we received just over 500,000 SARs, the next report will come out shortly, SARs are up to 573,685, an increase of around 73,000 from the previous year. That is a significant number of reports. They are also not all in real time! SARs are important as an intelligence tool and they enable actions to be taken but they are not the answer to real time Fusion that we are looking to drive.
Is that a sign that we have better reporting or has there been an increase in activity?
We do not yet know what the increase means, it would be interesting to get a view from the regulated sector. Others have previously queried whether there is fair representation from across the spectrum. 80% come from the banking sector, is this reflective of the banking sector holding more risk or is this a reflection that they are better at reporting? We don’t know.
What keeps you up at night?
Mainstreaming the money – from a law enforcement perspective I would like the money aspect to be at the forefront of everyone’s minds, looking at SARs is key if you can cut of the ability for criminals to profit it will act as a significant deterrent.
Serious and organized Crime is estimated to cost the UK £37bn per year, the ability for criminals to cash out is a contributing factor. If we can mainstream the money in terms of investigations. Disrupting people and disrupting their profits – that would be a great outcome.
The SARs system itself, namely the IT platform it is built on, is being updated, we need a first-class tool, we need the law enforcement response to be well resourced.
The second thing is how to drive a genuine partnership most effectively and at pace.
There is nothing like a pandemic to bring people together and ask whether we can do things differently. We can be more effective if we can bring across fraud and money laundering and draw in a range of partners. We then need to communicate what we have done. If we can communicate, we have facilitated X arrests that is key, we need to focus our message on outcomes.
Chief compliance officers within the Cell have commented that bringing together both sides of AML and Fraud has been helpful to them. Signaling via the fusion cell that these need to be brought together has helped organisations to drive activity in their own environment.
Where can people go for more information?
NCA National Strategic Assessment of Serious and Organised Crime, is published every year and has the whole of the serious and organized crime threat this also includes cyber. There are some good states and it is a useful tool.
For more information on SARs visit:
For more information on the Economic Crime Plan 2019-2022 visit:
https://www.gov.uk/government/publications/economic-crime-plan-2019-to-2022
For more information on global enforcement and public private partnerships, visit Royal United Services Institute Future of Financial Intelligence Sharing (FFIS):
https://www.future-fis.com/thought-leadership-in-partnership-development.html