The Times reported last week that “a new generation of ‘boiler rooms is cropping up overseas, stretching the ability of law enforcement agencies to stop them ripping off British Investors”.(1)
The term ‘boiler room’, is used to describe frauds in which sales people are hired to call unsuspecting individuals and push investment opportunities. These high-pressure calls are often used to sell worthless or nonexistent securities. These operations typically consist only of a large number of telephones in a single room, giving rise to their name.(2)
Boiler rooms represent a huge cost to the UK consumer. The FSA estimate that they cost the UK consumer £200 million a year.(3) And much of that cost falls on the older consumer. Six in ten of those exposed boiler rooms are aged over 45 and one in three (35%) over 65.(4)
Of course, not all older people are vulnerable consumers – and many are in fact more confident and experienced consumers. But as we get older, we are more likely to find ourselves vulnerable to scams, mis-selling and other consumer crimes. Research dating back to the 1970s suggests that older people may be ‘more easily persuaded and deceived, be less aware of unfair business practices, and have reduced information processing capabilities. (5) As a result, the research suggests this group more likely than other ages to find themselves vulnerable to consumer crime.
Recent years have seen a welcome increased interest from Government and police authorities on the issue of fraud. In 2005, and following a Manifesto commitment, the previous Government commissioned an interdepartmental review into the detection, investigation and prosecution of fraud. A review team comprising representatives from across the criminal justice system began work in October 2005 and the Fraud review was published in 2006.
Amongst other proposals in the review, the Government committed to setting up a National Fraud Strategic Authority to devise a national strategy for dealing with fraud and ensure that it is implemented. The review also proposed a new National Fraud Reporting Centre to tackle the problem of under-reporting and help enforcement officers identify trends and provide information to support investigations.
The National Fraud Strategic Authority (Now National Fraud Authority) was established in October 2008. And the Government has subsequently set up Action Fraud, as a single national place for individuals to report scams and frauds.
Since then, the FSA has worked with enforcement authorities to undertake a number of high profile enforcement actions. Six men and a woman were arrested, for example, in May 2009 for running illegal ‘boiler room’ share selling operations. The Financial Services Authority (FSA) said victims of the alleged fraud appeared to have lost £28m (6).
But whilst fraud has attracted much more attention in recent years, the perpetrators still seem to be ahead of the authorities. And despite the good progress over the past five years, there is much more that Government can do to tackle this challenge.
Alongside more research, more could be done to support victims of these crimes, who find there is very little (if anything) they can do about the losses they have suffered.
The multitude of bodies (OFT, FSA, NFA, SFO etc) tasked with working on this issue could still work better together. Alison McHaffie of Cameron McKenna is quoted in the Times as saying “Questions remain as to whether the present hotchpotch of overlapping jurisdictions is the best way to ensure these crooks are brought to justice”.(1)
There is also a need for greater interventions at an international level. There is a significant role for foreign governments (e.g. in Spain and Canada) in terms of tackling these crimes. In some countries little enforcement action happens because the perception of national agencies is that the victims are based in Britain, and the perpetrators, whilst based in their country, are also British. The responsibility then falls back onto British authorities who often have limited jurisdiction and powers.
Whilst some international cooperation exists, much more should be done to ensure criminals cannot exploit the lack of international cooperation to undertake fraudulent activities.
David Sinclair
(First published at www.ilcuk.org.uk)
1) Forget Costa Del Crime, boiler room fraudsters have eyes on rest of the world. The Times, Thursday 25th August
2) http://www.investorwords.com/517/boiler_room.html
3) http://uk.reuters.com/article/2011/08/22/uk-britain-financial-crime-idUKTRE77L4F220110822
4) http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/055.shtml
5) Rosemary P. Ramsey, R; Marshall, G; Johnston, M; Deeter-Schmelz, D Ethical Ideologies and Older Consumer Perceptions of Unethical Sales Tactics Journal of Business Ethics (2007) 70:191–207
6) http://news.bbc.co.uk/1/hi/business/8035830.stm
No comments:
Post a Comment