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3 April 2014
Has the Serious Fraud Office (SFO) been in touch with you recently? Hopefully not, but the use of stolen ID in serious frauds is on the rise, and if you've been the unfortunate victim of ID theft, the first hint you may get of it is a visit from the police.
The problem is not new, but the scale of it is. Research suggests that identity fraud is the fastest-growing fraud in the UK and represents around 35 per cent of all fraud in terms of value. Many frauds operate internationally and, because of the increased volume and level of sophistication, lawyers are increasingly involved in such cases.
Identity fraud is not an offence per se, but it enables other crimes, or repeat 'offences', to be committed. It is very rarely committed for its own sake. There are three main reasons for an individual to commit identity theft: to avoid being identified, to commit a fraud or to avoid a financial liability.
The recent case of Derek Bond, a 72-year-old retired civil engineer who was arrested while on holiday in South Africa, highlights the rise in ID theft. Bond, the victim of international identity theft, was mistaken for Derek Lloyd Sykes, who had stolen Bond's identity some 14 years previously by obtaining details of his passport. Sykes is said to have used the alias Derek Bond, travelling on a UK passport that carried the same number as the real Derek Bond and the same date of birth. Bond was arrested for Sykes' fraudulent investment scheme, which netted $4.8m (£2.9m) from 210 victims across the US.
ID theft is part of the flourishing money laundering 'industry'. Proceeds can be used to fund organised crime of all types. It has serious implications for the whole economy - and not just unfortunate victims such as Bond.
A Government report issued last July suggested ID fraud costs the UK economy at least £1.3bn a year. But that's not all: 1,484 fraudulent passport applications were detected (who knows how many escaped); the Benefits Agency's security service identified 564 cases of ID theft; and 3,231 driving tests terminated prematurely because of doubts over drivers' identities.
When a fraud such as Sykes' has been discovered, speed is essential to discover its extent and to trace the victim's cash or other stolen assets. By alerting a forensic accountant early in a fraud case, the chances of tracing the assets are far greater. As time passes it becomes more difficult and time-consuming to track down the true facts and the necessary evidence. Essential evidence such as receipts, invoices, bank statements and other financial records tend to disappear and memories fade.
Tracing assets is essentially a paper-tracing exercise. It entails fitting clues together to identify the movements of cash and ultimately to identify the assets purchased. In a recent case, I was required to trace the proceeds of a multimillion-pound investment scam. These painstaking investigations must be wide-reaching, searching for both the obvious and more obscure clues. This involved months of research, digging through thousands of documents to identify the labyrinth of bank accounts, overseas properties, associated companies and information leading to valuable artwork.
Among our discoveries was an old invoice for a year's advance rental on a safety deposit box. When located, this box contained documents showing that the individual under investigation controlled a company that appeared not to trade but nevertheless had substantial funds in its bank account. By unravelling layers of fraud extending across foreign jurisdictions, the truth was gradually unearthed.
The Government is considering making identity theft a criminal offence, allowing police to target suspected fraudsters even before a stolen identity has been used. Currently, the offences commonly used to prosecute identity fraud-related crimes do not sufficiently take into account the serious damage and harrowing experiences suffered by individual victims of identity theft. Such offences are often prosecuted as conspiracy under the Theft Act. This takes account only of the financial loss, not the personal injury involved, such as that suffered by Bond.
ID theft is becoming a major issue in the UK and it is increasingly linked with organised crime. What more evidence do you need than a 72-year-old pensioner on his holiday being arrested and imprisoned as a major international fraudster. Anybody - perhaps even you - could be next.