15 March 2007
Opening remarks by Economic Secretary to the Treasury, Ed Balls MP, at the Fighting Fraud Together Conference, London
It is a pleasure to be here today and to share a platform with the Attorney General - Lord Goldsmith - who I know has done so much to advance the Government's approach to tackling fraud.
I would like to start by saying how pleased I am to welcome you to the Treasury for today's conference. And it is right that Lord Goldsmith and I - as a Treasury minister - share a platform to welcome you here this morning, not just so that I can welcome you to the Treasury, but because the challenge posed by fraud is a challenge not just for the criminal justice system, but for the economy as a whole and in particular for the financial services sector, for which I have Ministerial responsibility.
It is now 10 months since I was appointed as Minister for the financial sector. Over that period I have seen and discussed what makes the UK a global leader in financial services: our shared commitment to openness; the great pool of talent gathered from across the world working in the City and our proportionate and risk-based regulatory approach.
In the same way that the financial system provides a mechanism for legitimate trade and investment, it can also be abused by organised criminals and terrorists for their own purposes. And just as globalisation has created new opportunities for legitimate business, it has created potential new risks.
Criminals and terrorists can move funds internationally more easily and it is estimated that £3 billion pounds of criminal profits are moved out of the UK annually. The UK - and British interests overseas - face an enduring terrorist menace that is historically unique in terms of its scale and international dimensions. And while the financial sector in the UK relies on its international reputation for integrity and fair-dealing, it has itself become a target for organised crime - including fraud.
So, as we said in our recent document on the Government's long-term strategy for tackling money laundering and terrorist financing, published a fortnight ago, it is our duty to do all that we can to protect our international reputation. And we do so knowing that finance is the lifeblood of both organised crime and terrorism. Organised criminals need to use the financial system to move money, to launder and disguise it in other types of assets. Terrorists use the financial system to move funds to promote militant ideologies, train new members, pay operatives, acquire weapons, stage attacks and sometimes also to carry out ostensibly legitimate activities to provide a veil of legitimacy for essentially terrorist organisations.
And it is because of the seriousness of these threats that tackling organised crime and terrorism is such an important part of my job as Minister for financial services.
Everyday - every second in fact - the UK's financial services industry drives global growth by linking the owners of capital, to the businesses that need that capital to invest and provide jobs and growth. But it is precisely this success that the perpetrators of fraud seek to subvert through calculated deception - often directed against some of our most vulnerable citizens.
And I know from my discussions with the UK's major banks that they are having to work harder than ever before to keep up with a criminal threat - including from fraud - that is historic in its scale, sophistication and in its international reach.
Last week, the Association of Chief Police Officers published the most authoritative account yet of the cost of fraud to the UK - finding direct costs of 13 billion pounds per year, 1 billion of which fell to the financial services industry.
Ordinary citizens foot the bill for this. The economy suffers and tax revenues are lost. The taxpayer pays again for increased police and from the costs of crime against business that are passed on to consumers. The human cost of raided pensions or of life-savings embezzled can be beyond calculation.
So it is vital that we work together to do all we can to tackle fraud - and I would like to thank all of you here today for your contributions - and fully endorse the response to the Fraud Review that has been published today.
Our efforts to combat financial threats like fraud, money laundering and terrorist finance exemplify our determination that the opportunities provided by the financial system to promote saving, investment and fairness must be protected from criminal exploitation.
Our approach in these areas also demonstrates a principled approach based on effectiveness; proportionality and engagement with stakeholders across the system.
A commitment to effectiveness means that our approach to pursuing the perpetrators of fraud maximises the chances of them being held to account - a key theme of Lord Goldsmith's reforms to the criminal justice system. And it underpins proposals for an enhanced role of the City police in providing specialist expertise in their capacity as the UK's lead force on fraud. But it also means that our efforts are sufficiently comprehensive to prevent gaps in one part of our approach undermining progress in others.
Being proportionate means that those areas that are especially vulnerable to fraud are identified and tackled in a targeted way. Both the Fraud Review and our work on money laundering put the need to build knowledge of the threat - in order to direct action to tackle it - centre stage. Indeed, ACPO's research published last week is a concrete example of this principle in action.
Turning to the principle of engagement, the fact is that government and industry alike are not only are the victims of fraud - but sometimes they are the victims of the same fraudsters. As we know from our work on money laundering - opportunistic criminals will exploit any weakness in our ability to work collaboratively.
In promoting this principle, our recent money laundering strategy highlighted how criminals capitalise on the lack of routine data sharing within Government and how this is being addressed. For example, the National Fraud Initiative, operated by the Audit Commission identified fraud and overpayments of over £111 million pounds in 2005.
But just as important is our collaboration with the private sector. Today's event is itself a response to a substantial public consultation on the next steps in this area. This happens at a time in which new ground is being broken in bringing law makers together with law enforcers and with industry and regulators to help equip all sides with a stronger sense of how the threat from crime can best be met.
The Fraud Review therefore takes its place in a wider Government approach that puts the integrity of the financial system at the heart of its strategy for promoting fairness and growth.
So once again, I would like to welcome you to the Treasury this morning and wish you a very stimulating and fruitful event today.