With modern advances in technology, economic crime has become a serious issue for governments and corporations across the globe. Financial crimes affect everyone, from businesses to customers, and can have devastating effects, but what is economic crime exactly?

This blog delves into the different types of economic crime and how to protect yourself and your business against potential scams and fraud. 

At SmartSearch, we offer comprehensive anti-money laundering (AML) software that helps you stay safe and compliant against the threat of economic crime. 

Our award-winning service will protect your business, customers and keep your transactions safe. 

What is Economic Crime?

Economic crime refers to illegal acts committed by individuals or institutions to gain financial profit. These crimes are not to be underestimated and can cause “serious harm to society and individuals”, according to the UK government. 

Unlike violent or physical crimes like robbery that result in financial profit, economic crimes are conducted through more subtle means, like deception and manipulation.

Financial crimes are:

• Non-violent crimes that can still cause serious harm
• Difficult to detect, prevent and prosecute due to a lack of physical evidence
• Committed by professionals and professional-looking individuals
• Dangerous to the UK economy and national security
• Harmful to real businesses and their interests
• Extremely common all around the world

Laws and Regulations on Economic Crime in the UK

The UK has a sophisticated and vast network of professionals that respond to economic crime, including government officials and private sector companies. The Home Office and HM Treasury are the main enforcers of economic crime policies. These government departments oversee the response and management of financial crimes in England, Scotland, Wales and Northern Ireland. 

UK Legislations

Economic crime is taken very seriously in the UK, and there are a number of laws in place to punish offenders.

Understanding the Types of Economic Crime

You might think that financial crimes are easy to identify, but in the modern electronic world, economic crimes have become hard to detect and incredibly sophisticated. 

When you think of financial crimes, you might only consider scams like Ponzi or pyramid schemes, or outdated crimes like cheque fraud. Economic crimes come in a number of forms, with 73% of UK adults being the target of some form of financial scam. 

Below are the main examples of economic crime and what to look for in each situation. 

1. Fraud

Fraud is defined as using deceptive tactics for financial gain and is by far the biggest economic crime in the UK. There are many different forms of fraud, each using a different tactic to deceive individuals. Many criminals are also able to avoid detection, making fraud prevention tactics all the more important. 

Identity Fraud

Using someone else’s personal information, including name, address and financial details, without their consent or knowledge. This could involve a criminal stealing your personal data to open up a bank account and take out a loan or credit card. 

If you’re a business taking on new customers, Know Your Customer checks will help to prove the authenticity of an individual. These checks will verify the identity of a customer and help to prevent economic crimes by checking a user's details and liveness against photo identification. 

Bank and Credit Card Fraud

Gaining unlawful access to an individual's bank or building society to make purchases or money transfers. This type of fraud often includes fake “urgent messages” from a criminal posing as your bank, asking for personal details to gain access to your account. 

Investment Fraud

Scammers or criminal organisations persuade individuals to invest in fictional opportunities or businesses with false promises of future profit. 

The two biggest examples of this are pyramid and Ponzi schemes. Made infamous by Charles Ponzi, this scheme involves using new investors' money to return previous investors' money. This creates an endless chain where no profit is actually made. 

Insurance Fraud

Making false claims to insurance companies to receive a payout. This can involve staging a home invasion to claim money from your home contents insurance. Faking an accident or an injury during a collision to claim money on your health or car insurance is a common example of insurance fraud. 

Tax Fraud or Evasion

Falsifying information, including income and salary, to reduce the amount you’re taxed. Knowingly avoiding tax payments altogether also falls under this category of economic fraud. 

Benefit Fraud

Claiming government benefits or financial support you’re not entitled to. This can involve claiming someone else's benefits or receiving Universal Credit when you’re employed and paid cash-in-hand. 

2. Cybercrime or Online Fraud

A subsection of fraud, but with enough variety to be classed as its own category. Cybercrime is increasingly prevalent due to the advances in modern technology. Examples of this include phishing, malware and ransomware.

Phishing is by far the biggest financial cybercrime, with a common example being fake phone calls from scammers trying to trick you into giving personal and financial information. This includes calls from organisations claiming to be your utilities provider or a cybersecurity company requesting access to your computer. Once access is given, they will steal data and personal information like passwords and bank details. 

These scams can also come as emails and text messages asking you to “verify your information”.

3. Terrorism Financing 

Terrorism financing is the third-largest type of financial crime in the UK and involves the procurement of illegitimate funds to support terrorist activity. These types of crimes are often similar to money laundering, and any illegal funds are concealed under the guise of legitimate means.

4. Bribery 

Bribery includes a wide spectrum of crimes and usually involves corrupt officials making payments or soliciting individuals. One example is bribing legal officials, like police or victims, to drop charges or stop criminals from being prosecuted. 

5. Money Laundering

This is a prime example of a white collar crime where funds are disguised as legally obtained profits or investments. One well-known tactic is shell companies, fictional businesses that are created to hide the origin and actual ownership of funds. 

If you’re working with another business and want to protect yourself from money laundering schemes, Know Your Business checks are essential. These AML checks are a legal requirement and verify the authenticity of a company, registered address, account funds and annual returns. 

For a more detailed exploration of this financial crime, we have a blog on the three main stages of money laundering.

6. Embezzlement

Embezzlement is another one of the main types of white-collar crimes and involves the theft or misuse of company funds. This crime includes a wide range of offenses, like secretly transferring funds from your employer into your own bank account for personal use. 

7. Cryptocurrency Scams

The rise of e-currency and cryptocurrency has led to a surge in scams and economic crimes. These scams involve encouraging users to invest their Bitcoin and high-value cryptocurrency into platforms that then suddenly disappear.  

With the increase in more complex attacks, it’s all the more important to stay aware of how to avoid cryptocurrency scams.

8. New Trends in Economic Crime

Alongside the classic white collar crimes and organised crime, many individual criminals are now using technological advances and social issues to commit fraud. 

Artificial Intelligence (AI) Scams

Although AI is used in many AML checks as a preventative fraud measure, it is also used across the globe to commit financial crimes. Many phishing emails and text scams are generated by AI programming, and deep fake images and videos are commonly used to falsely impersonate individuals for financial gain. 

A recent example that has gathered global attention is the story of a French woman scammed out of £700,000 by AI Brad Pitt. The scammer used AI to generate images and videos to trick their victim into believing they were the real actor and in need of medical funds. 

COVID-19 Related Scams

The damage caused by the COVID-19 pandemic left many people in need of medical products, support and advice. Scammers will create phishing messages related to COVID testing to encourage individuals to hand over personal information. There are also false support and compensation schemes that encourage users to pay for legal or medical support. 

How to Protect Yourself from Risk

Both consumers and companies in all sectors need to put procedures in place to protect against financial crime, and many of these are legal requirements.

Education 

The first line of defence is to ensure your company and all of its employees are educated on identifying and preventing crime. Every company needs to have an AML compliance officer who can train other staff and remain up to date on new regulations. 

Preventative Technology 

When it comes to cyber attacks, the best way to prevent economic crime is with reliable technology. Always ensure your work or home electronics have sophisticated antivirus and security software. 

For companies that need to authenticate individuals, sanctions and PEP screenings will flag any vulnerabilities or concerns regarding the potential for economic crimes. 

Verification and Caution

If you find yourself receiving urgent or potentially threatening messages, it’s important to remain calm. Assess all the information before you make any payments or hand over any personal information.

• If a message or email is from a company claiming to be authentic, always verify the source and contact the company yourself. 
• If you receive a request for a payment, check with the individual or business who has claimed to make this request. 
• Two-factor authentication should also be used to ensure no one can make transactions without your permission.
• Always report any suspicious activity, spam messages, or fraud to your local authorities. 

Stay Smart and Protected Against Economic Crime

Economic crime can affect everyone, from business owners to everyday consumers. Even the smartest corporations can fall victim to the increasingly sophisticated range of financial scams and crimes. This makes it all the more important to invest in education and advanced preventative software and services.

At SmartSearch, we offer personalised AML solutions to fit the needs of every business. Each of our packages is designed to enhance your security and AML checks.

To find out how SmartSearch can benefit your organisation, speak to an AML and compliance expert or book a free demo today.