An escalation in so-called European Distribution Fraud has become an increasing concern over the last three or four years, to such an extent that the National Fraud Intelligence Bureau has issued guidance to lawyers, industry and law enforcement agencies about the growing threat of this type of fraud to European suppliers and UK retailers.
Whilst members of the public can simply dial 999 to report a fraud and hope that the police would act quickly in order to catch criminals in the act, in all fraud cases, victims are now referred to Action Fraud with the result that investigations can become protracted and ‘best evidence’ lost.
Action Fraud was established in order to collate information, ascertain trends in offending, and forward complaints to the most relevant police departments to further investigate cases. It is part of a wider initiative the Home Office, National Fraud Authority, the National Crime Agency, the City of London Police and other police forces.
All reports of fraud are passed to the National Fraud Intelligence Bureau, which is run by the City of London Police, which disseminates and analyses information, looking for connections with other reports, considering the potential quality of the evidence and deciding if a complaint is worthy of further investigation before sending a package to a local police force.
However, it is becoming increasingly important for the right information to be forwarded to Action Fraud in order that investigations can be commenced as soon as possible. Action Fraud will take details over the telephone but will then ask for updates to be recorded to their website. Without accurate reporting which can potentially identify suspects, frequently Action Fraud are unable to investigate further.
It is clear that European Distribution Fraud has been ongoing for some several years. The usual modus operandi is for criminals to make contact with manufacturers, initially via email, purporting to come from well known UK retailers or manufacturers. The emails appear similar in detail to genuine companies. Goods are ordered on credit or by using fake bank transfer confirmation forms. Once ordered the goods are delivered to various UK locations and, in some cases, delivery drivers are asked to change the drop off address mid transit. The goods are then deposited, but not paid for, and when the supplier attempts to invoice the retailer it becomes obvious that the orders have not been placed by them. Many millions of pounds worth of fraud is undertaken in this way and it has affected countries from all over the EU and further afield.
There are several ways in which retailers can try to protect themselves. The following are suggested:
- Checks should be made to authenticate bank transfer documentation
- Individual order codes should be inserted
- Delivery drivers need to be made aware of the risks and ensure they do not change the drop off point without checking with their suppliers first
- When placing orders with companies businesses should check the authenticity of the correspondence
- Use the internet to ascertain whether or not the company’s details have been cloned previously and make their own enquiries with the retailers in question
The issue is particularly prevalent with European businesses placing orders in the UK. However there are many instances where UK companies have had their details cloned. I am aware of businesses being sued for not acting quickly enough to offset losses incurred by manufacturers. I am also aware of businesses resorting to lawyers and private investigators to kick start investigations since police response times are now so slow, and without sufficient information to hand, Action Fraud find it difficult to recommend cases for further investigation.
However care needs to be taken since the quality of private investigators varies widely and specialist criminal lawyers are required to lead and manage the investigations before passing them over to the police.
Therefore everyone in business, whether they be manufacturers, retailers, farmers or otherwise, need to be aware of the risks involved. When reporting crimes to Action Fraud a specific code should be used, XXXEDXXX, which will help flag up that the offences reported are designated as European Distribution Fraud.
The National Fraud Intelligence Bureau has had some success in starting effective prosecutions, although the system would work better. The key is to ensure that the right information is provided to Action Fraud and that initial investigations are carefully managed by victims from the outset.