Mark Smith: Private sector can help collar the fraudsters

Those behind a recent rise in a wide range of frauds typically fall into one of three categories: "the man or woman in the street", individuals with criminal intent, and organised fraudsters. Those with criminal intent set out to take advantage of systems. Organised fraudsters take it one step further by running fraud scams as "businesses".

Exaggerated claims and "innocent white lies" have in the past been labelled "soft" fraud but in my mind there is no such thing. Fraud, white lies and deliberate deceit for financial gain is simply unacceptable.

The Government is right to send out a strong message that fraud of any kind will not be tolerated – drawing on the resources of the private sector will help ensure words are followed by action. The tools to prevent, investigate and recover benefit fraud losses already exist in the private sector and could prove genuine value for money. More importantly, using what is so far an untapped skills resource, private firms have the IT systems and infrastructures needed to change the mindset of potential fraudsters who now operate in a sphere where few consequences to perpetrating benefit fraud exist. The biggest deterrent of all is knowing that financial crime doesn't pay.

At Avertis, we adopt a five tier approach to fraud: intelligence, prevention, investigation, recovery and prosecution. "Intelligence" is one of the cornerstones of fraud prevention – helping to evaluate and gather data which helps build a picture of circumstances and events.

A wealth of data can be legitimately accessed by authorised bodies to aid the prevention and investigation of fraud but surprisingly previous governments have made little use of data already used by financial institutions to assess the genuineness of applications.

It is refreshing to hear David Cameron say the new strategy will include "more information sharing" – a move which would undoubtedly aid efforts to carry out lifestyle analyses of all benefit applicants.

In some circumstances, local inquiries to confirm or discredit an application may also be necessary. Although such use of existing data and local information could be criticised as another "big brother" exercise, benefit applications already include a clause which allows the Department for Work and Pensions access to information about the applicant to prevent or detect crime.

Unknown to some, the Data Protection Act allows specialists to obtain personal data in the name of fraud prevention. Having worked with a number of intelligence gathering specialists since the turn of the decade – all of whom operate strictly within the parameters of Data Protection and Human Rights legislation – I cannot stress enough how important legitimate information sharing is in the fight against financial crime. It does not prejudice the rights of genuine applicants.

Fraud can also be detected and prevented by harnessing intelligence received from "whistleblowers"; people who become aware of suspicious activity or hear the boasting of those who think they won't get caught. Legislation exists to protect whistleblowers from persecution but the thought still makes many feel uneasy. Contacting a private disclosure helpline as opposed to official Government departments could provide a less frightening prospect.

To be effective, the response to fraud once detected must be immediate. In my experience, one of the greatest deterrents to fraud is a robust policy of recovering losses – depriving fraudsters of their ill-gotten gains.

Prosecution in a civil court for recovery can run alongside a police prosecution and speed is of the essence: Early investigation means the whereabouts of fraudulent proceeds and other assets are easier to identify.

Another major deterrent to fraudsters is the fear of prosecution but a lack of funds means many private and public organisations shy away from this route. Fraudsters, including those who tell "innocent white lies", need to know that they will be penalised. If this doesn't happen then the fight against fraud is already lost. Of course, cases must be prioritised to avoid overwhelming the judicial system but perhaps now is the time to set up specialist fraud courts with a fast-track capacity for small cases, and the ability to deploy an expert jury in major fraud trials.

Experience shows that determined criminals don't hesitate to turn elsewhere for an easy income to maintain an inflated lifestyle after a benefit fraud clampdown has turned off the tap. This must not stop the Government from proceeding with its plans

Entitlement to claim does not mean entitlement to "get away with as much as you can"!

Mark Smith is chairman of Leeds-based Avertis Risk Solutions.