Serious tax crime and fraud in general is becoming increasingly complex and global. Fraudsters are using virtual currencies, encrypted communications and the superfast movement of money to exploit financial systems globally.
How can we meet the challenges we face? How can we deliver lasting impact through a sophisticated investigative approach? How can we respond to new risks and threats as they unfold?
These questions are answered in Counter Fraud 2021’s keynote address, ‘Evolution: HMRC’s changing response to serious tax crime’. Simon York, the Director of Fraud Investigation Service (FIS) at HMRC, explained how the HMRC is evolving its investigative approach to make a “sustainable and long-lasting impact against tax crime.”
FIS is a team of around 5,000 people, focusing on tackling the most serious organised crime and any serious fraud related to HMRC responsibilities, done against an already very high tax collection rate - “almost 95% of the tax legally due is paid.”
“The missing 5% covers an extremely broad range of behaviours, from people who make genuine mistakes, right through to those individuals seeking to deliberately commit fraud and evasion.”
York noted the pandemic has highlighted a trend seen across organised crime and serious tax fraud, namely the ability of fraudsters to rapidly identify and exploit recently established products.
“For example,” he continued, “customs systems, withholding and repayment regimes, and currently, COVID-19 schemes. We’re up against sophisticated and determined international crime groups and individuals with huge resources which they use to execute complex schemes to evade tax and then frustrate our enforcement efforts.
“Our focus must be on reaching the right outcomes for the UK, rather than simply chasing arbitrary targets for arrests or prosecutions.”
York then provided an example: Missing trader VAT fraud, otherwise known as MTIC fraud, which was a significant threat to the UK exchequer. Organised crime groups had worked out they could ‘carousel’ mobile phones and computer chips to claim unlimited VAT repayments. Traditional law enforcement efforts weren’t having the desired impact.
HMRC reviewed and target hardened their payment processes, tightening VAT registration systems and introducing sophisticated risk rules. Specialist teams were deployed to closely monitor suspicious traders, checking the integrity of supply chains.
Increased effort in media use was used to change perceptions about fraud. Civil investigation powers were also used to target illicit parts of supply chains that enabled illegitimate trading.
Finally, criminal justice interventions were focused on the guiding minds behind the fraud, pursuing their ill-gotten gains. “All of this activity, this whole system approach, has reduced the threat from this type of fraud by up to £3 billion annually," explained York.
He states one of the main advantages for the FIS and by extension HMRC in general when tackling serious tax crime is its ability to blend its responses. But it’s not just about investigation and prosecution. York maintains it’s also about understanding.
“We’re no longer looking to simply take the next fraud case off the production line. Instead we’re devoting effort and energy into understanding the whole picture of risk and then focusing on what we need to achieve, putting together an end-to-end approach to tackle risk, reduce harm and deliver impact.”
To do this, the FIS is using a wide range of civil and criminal powers to crack down on serious financial crimes:
- The same law enforcement powers as the National Crime Agency.
- The combined powers of revenue and customs authorities.
- Proceeds of crime tools at their disposal.
- The FIS is also an anti-money laundering (AML) supervisor and has access to the sanctions that come as part of that.
As part of the fight against serious tax crime is the need to support cross-government objectives and understand the impact of law enforcement can be made more effective when working with others.
York reveals to truly create an end-to-end approach to tackling financial crime, efforts need to be relentless. This can be done by “Working with liquidators and financial institutions to identify, freeze and forfeit cash and other assets - and we’ll follow the money even further, targeting any income generated by those assets.”
Overall, York identifies several key methods that can be used to reduce the impact of tax crime on the UK public sector:
- Adopt a civil, criminal or blended approach.
- Bring the full range of powers to the fore.
- Collaborate with all partners.
If you’d like to learn more about HMRC’s changing response to serious tax crime and how the responses to COVID-19-driven financial crime were designed and implemented, watch the webinar.
For public sector professionals to understand and identify fraud, alongside working with preventative best practices, the webinars from Counter Fraud 2021 are available to watch on-demand.
In the talks, you will hear about collaborations and partnerships, how better use of data and intelligence make a real difference and how the government is working internationally in the COVID-19 counter fraud response.
Jessica Kimbell, GovNet