Fraud is a global phenomenon, creating untold misery for millions of people with losses close to $500 billion globally. It has also become detrimental to the prospects of many economies in several ways such as undermining trust in financial systems, increasing costs for businesses and consumers, and draining government and law enforcement resources.
Such is the concern that the United Kingdom (UK) has sought to classify fraud as a national security threat at the recent Global Fraud Summit in March 2024 and foster collective action by the governments of Australia, Canada, France, Germany, Italy, Japan, New Zealand, the Republic of Korea, Singapore and the United States. Following the summit, representatives from the countries issued a statement noting:
“Fraud against individuals and businesses, has grown rapidly to become one of the most prevalent crimes globally and is an organised transnational threat. In some countries, it is the most common crime type that citizens experience. Fraudsters operate at scale, exploiting telecommunications networks, cyberspace and a population that spends an increasing amount of time online.” - Global Fraud Summit Communiqué: 11 March 2024
To be blunt, it is a fraudster’s world.
While fraudsters can quickly adopt new techniques and expand their operations beyond borders, the global response to the fraud epidemic varies greatly across different countries.
In this post, we’ll reflect on the recent report from the Social Market Foundation (SMF) and Santander UK - exploring how fraud manifests differently across nations, the financial and social costs it imposes, and how various countries are responding to this complex challenge.
The scope of fraud across countries
One of the key questions the report sought to answer was how big the scope of the global fraud phenomenon is. Utilising a survey-based approach, the report identified striking differences in fraud victimisation rates among 15 countries surveyed, ranging from the highest in the United States to the lowest in Japan.
The survey revealed that between 2021 and 2023, 31% of adults in the U.S. fell victim to fraud, compared to just 8% in Japan, which had the lowest incidence of fraud. The UK ranked lower than most, with 18% of its population affected by fraud over the same period, showing a relatively moderate level of fraud risk compared to countries like Brazil and Singapore, which also had high rates.
The wide variance in victimisation rates can likely be attributed to multiple factors, including the prevalence of digital technologies, differing levels of consumer awareness, and the readiness of each country's infrastructure to combat fraud. For instance, Japan’s lower fraud rates might be explained by the willingness of consumers to engage with an English-speaking fraudster. In contrast, the U.S. likely faces high levels of consumer-targeted fraud because most citizens speak English. The prevalence of digital payment systems and high levels of engagement with online platforms are also likely to be a significant factor.
The financial impact: How much victims lose
Not only does fraud vary by the number of people affected, but the financial losses incurred also differ greatly from country to country. The report highlights that fraud victims worldwide suffer significant losses, with Singapore having the highest average individual loss at £2,113 ($2,767), while in Brazil, the average victim lost only £282 ($369).
In some regards the amount lost is not an absolute indicator of impact, with the level of real-terms detriment likely to depend on relative income levels. The UK, where fraud is prevalent, saw victims losing an average of £907 ($1,187) per fraud case, is also an outlier due to high levels of reimbursement, with 51% of victims receiving compensation for losses that arose following a bank payment (credit transfer), compared to just 9% in Portugal.
This reflects differing approaches to fraud, with significant variations in how victims report fraud, the resources dedicated to their support, and the approach taken to financial losses by different jurisdictions.
Types of fraud: Diverse threats across nations
The types of fraud experienced also vary widely between countries. Cardholder not present (CNP) fraud, where criminals use stolen credit card details to make purchases, remains a worldwide constant. The UK, Australia, and Brazil all report high levels of CNP.
However, the report also highlights the impact of Authorised Push Payment (APP) fraud, where victims are tricked into willingly transferring money to fraudsters, is also a significant problem across the surveyed countries. For example, Germany saw 38% of fraud victims fall prey to APP fraud, compared to 23% who experienced payment fraud.
Crucially the different regulatory approaches to CNP fraud versus APP fraud result in different outcomes for victims with the majority of CNP fraud victims swiftly reimbursed. The UK is a notable outlier following the mandatory reimbursement of APP fraud on October 7th, 2024.
The diverse nature of fraud means that while some countries are grappling with sophisticated phishing schemes or APP scams, others are dealing more frequently with older, yet still effective, forms of fraud like CNP fraud.
Repeat victimisation: Some countries fare worse
Fraudsters are often successful more than once, and repeat victimisation is a major concern in several countries. Singapore had the highest rate of repeat fraud victimisation, with 52% of victims being defrauded more than once over the three sample years. On the other end of the spectrum, Italy had the lowest rate, with just 27% of victims falling for fraud schemes multiple times. The UK fared better than many countries, with about 33% of its victims experiencing repeat fraud. These figures are aligned with another recent study on scam victims conducted by Javelin Strategy & Research which showed that 49% of respondents reported experiencing two or more incidents of fraud in the last two years.
This suggests that while fraud is still a serious issue, efforts to educate consumers and strengthen anti-fraud measures appear to be having a positive effect on the level of repeat victimisation. However, there is still more work to do.
The response: Governments and law enforcement falling short
One of the key findings in the report is the general inadequacy of law enforcement responses to fraud across all 15 surveyed countries. In every country, most fraud reports never make it to the investigation stage.
The UK had one of the higher attrition rates, with around 77% of fraud reports to law enforcement never being investigated, a significant concern given fraud is the jurisdiction's most common form of criminality. Germany, by contrast, had the best rate, with around 33% of fraud cases receiving further investigation.
This suggests that while governments are increasingly aware of the scale of the fraud problem, law enforcement agencies often lack the resources or capability to address the volume of fraud reports.
The UK, despite having one of the better records in tackling fraud, still has to close significant gaps in the enforcement of key laws such as the Online Safety Act. That, once fully in force, will require tech platforms to remove fraudulent content from their search and ad ecosystems.
The global nature of fraud: A collective challenge
One of the most significant points raised in the report is the global interconnectedness of fraud, with many fraud schemes proving to be transnational. For instance, over 70% of frauds committed against UK consumers are believed to have an overseas element.
This highlights the need for international cooperation in combating fraud, as criminals can easily exploit differences in legal frameworks, enforcement capabilities, and technological standards between countries. The UK's recent Global Fraud Summit and the resulting communique demonstrate recognition of this fact but are yet to result in the type of collective action that will turn the tide.
Moving forward: What can be done?
While some countries, like the UK, are making headway with more effective anti-fraud policies and victim compensation schemes, the SMF report underscores the need for a more coordinated international effort. Solutions may include further commitments by key nations, to engage in collective action, such as those called for in the Communique that followed the UK-hosted global summit.
At a practical level, intelligence sharing between countries, and incentives across the ecosystem are essential. Such incentives provide banks, online platforms and telecom providers with the business case to invest time and resources in a more proactive role in preventing fraud.
Conclusion: Learning from each other
Fraud is a global problem that demands a global solution. However, the differences in how countries experience and address fraud reveal important lessons. Rather than “reinvent the wheel,” the US should seek to learn from the UK, Australia and Singapore.
The UK is leading the way in providing significant incentives for payment service providers to improve their response to financial crime. The lack of attrition within Germany's law enforcement practices demonstrates that it is possible to reduce attrition in the investigation space.
As fraud continues to evolve, so must our collective efforts to combat it.
