The hidden epidemic: unreported fraud in the UK

Fraud is a growing concern in the UK, yet the true scale of the problem remains unknown. This has long been the case, but never more so than the last few years when data suggests victims are reporting fraud even less frequently. Recent reports from the Office for National Statistics (ONS) and the All-Party Parliamentary Group (APPG) on Fair Banking, for example, highlight the alarming prevalence of fraud and the low rates of reporting and conclude that we may only be seeing the tip of the iceberg.

While technology has made our lives more convenient, it has also opened up new avenues for criminals. Online banking, digital payments, and the rise of remote communication have provided fertile ground for fraudsters who target individuals and businesses alike. This article explores the scope, causes, and consequences of unreported fraud and how it might be addressed.

The Statistics

According to the ONS report on Crime in England and Wales for the year 2024, fraud offences have increased substantially over recent years. They rose by 33% compared to 2023, reaching an estimated 4.1 million incidents.

Despite this, only 301,972 fraud incidents were reported last year to Action Fraud, the UK’s national reporting centre for fraud and cybercrime, a decrease of 2% on 2023. This discrepancy indicates that a significant portion of fraud cases are going unreported, and it seems that this trend is accelerating. The reasons behind this trend are multifaceted, including lack of awareness, scepticism about whether reporting will lead to justice, and even embarrassment on the part of victims.

The APPG on Fair Banking's report on Authorised Push Payment (APP) fraud, published in March, further corroborates these findings and underscores the seriousness of the issue. APP fraud involves tricking individuals into voluntarily transferring money to fraudsters posing as legitimate payees. These scams are becoming increasingly sophisticated, exploiting trust and urgency to manipulate victims.

The APPG’s report estimates that APP fraud costs the UK economy £1.4 billion each year. Alarmingly, only a fraction of those affected come forward. The group has recommended that payment service providers create more accessible and transparent mechanisms for fraud reporting, and that social media and tech companies take greater responsibility for identifying and removing scam content on their platforms.

The Growing Sophistication of Fraud

Fraudsters are adapting quickly, using advanced techniques to exploit vulnerabilities in both individuals and institutions. One notable example is payment diversion and email interception fraud, which often targets sectors such as law and finance. Here, criminals gain access to email communications and manipulate messages to redirect payments.

In recent years there have been some fairly high-profile incidents involving conveyancing firms that have lost client money after receiving doctored payment instructions. The firms had been unaware that their email system had been compromised. Such attacks can damage a business’s reputation, trigger legal battles, and erode client trust. 

Causes of Underreporting

Understanding why fraud often goes unreported is crucial to addressing the issue. Victims frequently feel ashamed or embarrassed, particularly in cases such as romance scams or investment fraud, where they may feel personally responsible or foolish. 

In some instances, victims might not even realise they’ve been defrauded, especially in cases involving small-scale or slow-burn schemes. Many also perceive reporting fraud as futile, believing that it won’t lead to any recovery or prosecution, especially given the low public confidence in authorities like Action Fraud. 

Additionally, the reporting process can seem too burdensome, particularly when the loss is minor, making victims hesitant to invest the time and effort required. For businesses, there may also be concerns about protecting their reputation or avoiding liability, leading some to avoid reporting fraud altogether.

These barriers collectively lead to underreporting, which in turn skews national statistics and weakens the ability of law enforcement and regulatory bodies to respond effectively, as limited resources are deployed elsewhere.

The APP Fraud Reimbursement Scheme: A Turning Point?

A major shift in the UK’s approach to fraud compensation came in October 2024, when the Payment Systems Regulator implemented a new mandatory reimbursement scheme for victims of APP fraud. Under the scheme, banks and other payment service providers are now required to reimburse victims up to £85,000, aligning the compensation limit with that of the Financial Services Compensation Scheme.

This move aims to remove the financial burden from individuals who fall prey to sophisticated scams, provided that the victim has not acted with gross negligence. The change followed years of criticism that banks were inconsistent in how they handled fraud claims, often leaving victims without recourse even in clear cases of deception.

The introduction of this scheme is expected to have two significant implications: it is likely to lead to increased reporting rates, as more victims may now feel encouraged to come forward with the potential for reimbursement, and it will provide improved data on fraud prevalence, giving authorities, researchers, and banks a clearer picture of the true scale of fraud. 

However, the scheme also raises concerns about potential moral hazard; the risk that guaranteed reimbursement might reduce individuals’ vigilance or lead to abuse. To counter this, financial institutions are still required to assess claims and may decline reimbursement in cases of clear recklessness.

Over the long term, this policy may bring about a shift in how fraud is perceived and addressed in the UK; from a private misfortune to a collective challenge requiring systemic protections.

Consequences of Underreporting

The implications of underreporting fraud are far-reaching. Inaccurate data creates policy blind spots, limiting the government’s ability to make informed decisions and allocate resources effectively. The lack of reporting also emboldens fraudsters, allowing them to continue targeting new victims without facing consequences. 

Beyond personal losses, fraud has a significant economic impact, draining billions from the UK economy, which in turn affects public services and undermines business confidence. Additionally, the failure to act decisively on fraud can erode trust in both digital and financial systems, further exacerbating the issue.

Victims who do not report fraud also miss out on potential redress, such as bank reimbursement schemes or legal remedies. Many remain isolated, unaware that support networks exist.

Addressing the Problem: A Multi-Stakeholder Approach

Combating fraud, particularly the unreported kind, requires a coordinated effort across various sectors. Some potential strategies include running public awareness campaigns by the government, charities, banks, and payment service providers to educate the public on how to spot and report fraud.

Providing better victim support is also crucial, ensuring clearer, more empathetic pathways for individuals to seek help and compensation. Improving reporting systems by simplifying the process and offering follow-ups would reassure victims that their cases are being taken seriously. 

A greater enforcement effort, with more resources dedicated to tackling fraud in the criminal justice system, is also necessary. Additionally, private sector collaboration among banks, telecoms, and tech firms should be encouraged to share intelligence and flag suspicious activity in real time. Finally, regulatory updates are needed, with laws evolving to reflect the modern fraud landscape, including stronger oversight for digital platforms.

Law enforcement, and in particular Action Fraud in the UK, have large and current databases of information available to them on reported frauds and scams but typically lack the resources to use that information effectively.

Collaboration with the private sector could facilitate better interrogation of that data to identify trends and to identify groups of victims who could join forces on asset recovery efforts. This could enable targeted campaigns to recover and prevent further losses through civil claims brought by the victims and utilising powerful remedies including freezing injunction, Norwich Pharmacal relief and search and seizure orders to identify, preserve and recover stolen assets.

The current lack of transparency only assists fraudsters as by the time statistics are published and trends established often the stolen funds have exited the jurisdiction or the type of scams being implemented have evolved or changed targets.

The UK could also look to how other countries are combatting the rise in fraud. For example, Australia and Singapore have implemented integrated national fraud registers and real-time transaction monitoring, with Singapore going even further and providing a free smart phone application to individuals which helps identity fraud in real-time.

The statistics provided by Australian Governments National Anti-Scam Centre, show that the reported losses from fraud in Australia went from AUS$506m in 2022 to AUS$318m in 2024, a drop of 37%; suggesting that these systems may be having an impact.

Conclusion

Fraud is no longer just an economic crime, it is a societal challenge that requires urgent and sustained attention. While official figures are rising, the reality is likely far worse. Unreported fraud represents a hidden epidemic in the UK, one that silently affects millions while remaining largely invisible in policy debates.

Tackling this issue means not just catching fraudsters, but also empowering victims, modernising systems, and building trust between the public and institutions. By facing the problem head-on and encouraging a culture of transparency and support, the UK can begin to turn the tide against this insidious threat.