Mark Kobayashi-Hillary, Global Research Director of Commonwealth Business Council Technologies lays out a strong case for public sector IT teams to play a proactive role in combating economic crimes that cost the UK economy an estimated £100m per day.
Economic crime has come of age in a digital society where we now entrust our identity and finances on a daily basis to organisations across the world. Once considered to be a victimless nuisance and glossed over or relegated to the latter pages of the business press it has come to the fore in recent years with high-profile prosecutions and a post-7/7 focus on terrorist financing.
Public sector IT staff might ask how their day-to-day responsibilities are connected to crime fighting; economic crime is perceived to be more in the realm of crooked investment bankers or shady consultants. However a glance at the Westminster Council budget shows that this one local authority spent more than half a billion pounds on delivering services last year. With such vast budgets across the entire UK public sector, the potential for fraud or corruption is clearly an issue.
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The IT team is crucial in this war on economic crime
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Consider the key areas where economic crime impacts the UK economy; embezzlement, cheque fraud and money laundering along with employee perpetrated crimes such as bribery, corruption and procurement fraud. Access to the heart of a corporate information system is usually the key to criminal success, so the IT team is crucial in this war on economic crime, especially where large-scale procurement or collection is managed.
The rise in offshore outsourcing as a tool for organisations to deliver IT services is another area where organisations can create weak leaks in their internal security structures. A reporter for The Sun newspaper recently found it was possible to purchase personal data on 1,000 British consumers from a call centre employee in India. The strategic use of offshore outsourcing is yet to be embraced by the public sector, but tactical outsourcing of defined tasks can only be on the increase as a direct result of the efficiency review by Sir Peter Gershon last year.
In response to the sting operation in The Sun, the Indian National Association of Software and Service Companies (NASSCOM) leapt to the defence of their Business Process Outsourcing (BPO) industry: "We need to get some perspective on this. This, after all, is an industry that employs some 400,000 employees and it is at present growing at the rate of 30 per cent. Given this, some stray incidents of this kind are bound to occur. The point is that they are very rare."
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The true cost of economic crime is certainly higher than figures would suggest
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The scale of economic crime and its cost to organisations in the UK is vast. UK organisations lost more than £40 billion last year because of this form of crime[1] - equivalent to £100m a day – and spent £8 billion fighting the problem. The true cost of economic crime in the UK is certainly higher as these figures only represent the private sector and only record known incidents – more is likely to be swept under the carpet for fear of a PR disaster, even more so where taxpayers money has been misdirected through fraud.
A key area of investigation for the law enforcement agencies is the counterfeiting of IT products. This industry has spread beyond the realm of the back-bedroom software pirate to the large-scale production of counterfeit hardware, complete with familiar brands such as Hewlett Packard or 3Com. The professional services group KPMG recently reported that one in ten IT products sold worldwide is counterfeit, costing global technology companies as much as £55bn in lost revenue annually.
To tackle the problem, the Specialist Crime Directorate of the Metropolitan Police and the Commonwealth Business Council have created a formal partnership where law-enforcement experts from across the 53-nation Commonwealth region will work on connecting the corporate victims of economic crime with the international government policy-makers and agenda-setters. The Scotland Yard economic crime working group addresses cyber crime, data and identity theft, counterfeiting and Intellectual Property Rights, and money laundering.
Metropolitan Police Assistant Commissioner Tarique Ghaffur said: "This partnership marks a significant sea change in the way we address this increasing problem. This kind of crime must be tackled from a global perspective and we therefore need to form partnerships between various stakeholders. The partnership with the CBC is an unprecedented initiative and will enable us to gain a wider intelligence picture."
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'Economic crime is a global issue'
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Dr Mohan Kaul, Director General of the Commonwealth Business Council, said: "Economic crime is a global issue which requires a multi-stakeholder and multi-jurisdictional approach and this partnership will facilitate public and private sector engagement with governments across the Commonwealth, and beyond."
Economic crime in the public sector is a growing threat for the same reasons that allow us to work more efficiently, cheaper telecommunications and the Internet. The law enforcement agencies are taking the threat seriously and directing resource at the problem, but the security officers at every public organisation need to be ever more vigilant to avoid the next wave of negative headlines on data and identity theft being directed at them.
1: Data supplied by RSM Robson Rhodes
For more about the work of Commonwealth Business Council Technologies, visit its website at www.cbctechnologies.com
Mark Kobayashi-Hillary is the Global Research Director of Commonwealth Business Council Technologies and author of 'Outsourcing to India: The Offshore Advantage' (Springer 2004, 2005) and ‘Beyond BPO: Outsourcing and the Global Services Revolution’ (BCS 2006).
