Fraudweb District Council Principles of Fraud Investigation

Introduction

In 2000 the Fraudweb District Council was inspected by the Department of Social Security Benefit Fraud Inspectorate In their inspection of the benefits service and the council generally the Benefit Fraud Inspectorate made the following recommendation:

Prosecution policy

3.235 FWDC has never independently prosecuted a fraudulent HB/CTB case and at the time of the on-site inspection had no plans to do so. In January 2000, FWDC elected members adopted a policy where FWDC, on the grounds of cost, will not prosecute cases itself but will pass cases to the police or BA to investigate and prosecute on its behalf.

3.236 Although this step towards the prosecution of fraudulent claimants is welcome as an improvement on the previous situation, when there was an absence of any policy at all, it does not go far enough. The decision not to prosecute its own cases may raise doubts in the minds of both staff and the public about FWDC’s commitment to a full prosecution policy. Indeed in our discussions staff told us that they are not convinced that there is a will within the LA to operate a prosecution policy.

3.237 We are concerned that no agreement has been reached with BA or the police about the number of cases that they are able to deal with. Although these organisations are keen to foster this relationship they may be unable to progress all the cases passed to them within the time limits. There is no contingency plan to deal with this and current FWDC investigation procedures would not sustain the LA taking forward prosecutions on its own.

3.238 Section 115A of the Social Security Administration Act 1992, inserted by the Social Security Administration (Fraud) Act 1997, introduced a new power to offer an administrative penalty as an alternative to prosecution. The effective use of this power depends on being able to prosecute if the offer is declined.

3.239 In effect this means that before offering a penalty, the LA must prepare the fraud file up to the level required for prosecution. The administrative penalty is not an alternative to rigorous investigation and proper preparation of files for prosecution, in fact it depends on them. By using these powers there are savings to be made. No actual prosecution costs are incurred and some additional income of 33% of the fraud overpayment in each case can be generated as a financial penalty.

3.240 FWDC has not made use of the provisions for administrative penalties and will not be able to do so because it does not have any established procedures for the required level of investigation of fraudulent claimants.

This revised policy has been created to accommodate the Benefit Fraud Inspectorate's recommendation as well as to reflect government policy in the areas of best value, active modern service, modernisation of local government and ethical government. The policy has taken consideration of the updated Data Protection Act and the forth coming Freedom of Information Act.

What is Fraud?
Social Security Administration Act (1992) AMENDED
  • 111A(1) If a person dishonestly -

a) makes false statement or representation;

b) produces or furnishes, or causes or allows to be produced or furnished, any document or information which is false in a material particular;

c) fails to notify a change of circumstances which regulations under this Act require him to notify; or

d) causes or allows another person to fail to notify a change of circumstances which such regulations require the other person to notify;  with a view to obtaining any benefit or other payment or advantage under the social security legislation (whether for himself or for some other person), he shall be guilty of an offence.

  • 111A(2) In this section, "the social security legislation" means the Acts to which section 110 above applies and the Jobseeker's Act 1995.
  • 111A(3) A person guilty of an offence under this section shall be liable -

a) on summary conviction, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum or to both; or

b) on conviction on indictment, to imprisonment for a term not exceeding seven years, or to a fine, or to both.

  • 111A(4) In the application of the section to Scotland in subsection (1) for "dishonestly", substitute "knowingly".

 

 
    Social Security Administration Act (1992) AMENDED
  • 112(1) If a person for the purpose of obtaining any benefit or other payment under the legislation to which section 110 above applies whether for himself or some other person, or for any other purpose connected with that legislation -

a) makes a statement or representation which he knows to be false; or

b) produces or furnishes, or knowingly causes or knowingly allows to be produced or furnished, any document or information which he knows to be false in a material particular,

    He shall be guilty of an offence.
  • 112(1a) If a person without reasonable excuse -

a) fails to notify a of circumstances which regulations under this act require him to notify; or

b) knowingly causes or knowingly allows another person to fail to notify a change of circumstances which regulations require the other person to notify,

    And he knows that he, or the other person, is required to notify the change of circumstances, he shall be guilty of an offence.
  • 112(2) A person guilty of an offence under subsection (1) above shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale, or imprisonment for a term not exceeding 3 months, or to both.

It should be noted that the Theft Act is still favoured by the police.

However, 111a and 112 are criminal offences.

Because these offences are criminal — 111a is an indictable offence while 112 is a reportable offence — before prosecution can be carried out the crime has to be proven beyond reasonable doubt.

The offence 112(1a) should be noted as ,unlike most fraud offences, this particular offence requires only a failure by the claimant to report a change in circumstance, which they know is required to be informed to the authorities. For instance a failure to report that they had started work or had received an increase in their salary. This type of offence is rare and is known as a strict liability crime (it lack the need to prove the mens rea)

In order for a prosecution to take place it is important that the investigators or inspectors work within the Police and Criminal Evidence Act 1984. This ensures that the integrity of the evidence is maintained and not collected by using duress or illegal methods. In addition to following the PACE the investigator should use the powers of inspection which is granted under section 110 of the Social Security Administration Act 1992, as amended by the Social Security Administration (Fraud) Act 1997.

In addition to following this legalisation the investigators must also work within the rules of the Human Rights Act 1998 and, once passed by Parliament, the Regulations of Investigatory Procedures bill.

The Levels of Fraud

The levels of fraud nationally within the benefits system remain high According to the Social Security Minister with responsibility for anti-fraud measures, Jeff Rooker, in the Western Daily Press 3/12/1999 Benefit Fraud is running as high as £7bn per year. This level has not really dropped over the last four years. According to the Audit Commission in their 1999 update to Protecting The Public Purse, Housing Benefit fraud nationally is running at about £108m.

Fraudweb District Council has a baseline set by the government. In the past year this has performed well against that target. However the rules for scoring fraud, in the form of Weekly Benefits Savings (WBS), have been affected by changes in the rules.

Duties and Expectation

There is an expectation on the council, in the Local Government Finance Act, that places a responsibility upon the council to protect the public purse (section 151). In addition the government places an additional expectation on the council through its administration of the Housing Benefit and Council Tax Benefit schemes. It does this in a number of ways. The first is through setting WBS baselines and the application of financial penalties against councils that fail to perform in this area. The second is through the subsidy order that provides a definition of a fraudulent overpayment. Thirdly through the Social Security Administration (Fraud) Act, by giving councils the power of inspection. Fourthly through the creation of the Benefit Fraud Inspectorate to ensure that fraud is being investigated and appropriate action is being taken. Finally through an annual audit by district audit of the WBS subsidy claim. In addition to this the government has made funding available for councils, to ensure that fraud does not enter they system in the first instance and funding for training for Local Authority fraud officers through the PINS project. There is also additional funding available for joint fraud operations with the Benefits Agency.

In the case of the Fraudweb District Council the Benefit Agency has agree to take on all benefit fraud prosecutions for the council.

Whistle blowing

As part of the process of identifying fraud the council promotes a Fraud Hotline which provides members of the public with the facility to report concerns of benefit fraud. Whilst whistle blowing by the public, in this arena, is treated with some suspicion as the motives of the whistleblower are not always noble, it is however an essential method of obtaining intelligence.

The Benefit Fraud Inspectorate made the following observation:

5.20 FWDC should undertake to improve the success of the Fraud Hotline service by properly training staff to deal with these calls and to use the prompt on the reverse of the referral form.

5.21 We recommend FWDC review the operational processes of the Fraud Hotline to ensure that it is ready to deal effectively with referrals resulting from an advertising campaign. FWDC can publicise results as part of future counter fraud publicity.

Therefore as part of the council's policy the hotline will be advertised and the resulting calls will be properly investigated.

In order to protect the council from the threat of internal fraud, Internal Audit will maintain an internal whistle blowing hotline in accordance with the Public Disclosure Act 1999 and promote its use and availability to all employees of the council. This will enable staff, who may have information about abuse of the benefits system by other members of staff, to be able to report their concerns.

Staff will also be encouraged to report suspicions of benefit fraud — identified in the course of their council duties — to the Benefit Inspectors through referral forms.

Referrals

All referrals regardless of their source will be checked to see if there are grounds for an investigation. For example: An accusation that a claimant is working while claiming benefit. On checking we may discover that the object of the call is not claiming any benefits or has already given that information him or herself.

All investigations will be recorded and the investigation will take place in line with the Police and Criminal Evidence Act 1984 and all other legislation that ensures that the investigation is fair, legal and protects the rights and civil liberties of the accused.

Investigation

Throughout investigation the following legislation will apply:

        The investigation process will require:

Quality Checking

At the conclusion of an investigation the case will be forwarded for quality checking. This will involve

  1. Where the quality checking identifies that, on the balance of probabilities, a breach of section 111a or 112(1)a has occurred then the case is referred for the recovery of the fraudulent overpayment and the claiming of WBS.
  2. Where the quality checking identifies that a criminal offence has occurred beyond reasonable doubt then the case is to be referred to the litigation Officer for adjudication. The case should be marked for the claiming of WBS.
  3. If successful prosecution results in a judgement by the courts then the council can claim either a further 200% or 500% - dependent on the size of the fraudulent overpayment – Weekly benefits savings.