Internet fraud accounts for eight percent of all fraud in the UK, according to the Attorney General's office, which says that fraud costs the UK billions of pounds every year.
The Attorney General, Lord Goldsmith, has published the final report of his fraud review and has found that internet fraud can sometimes slip through current policing procedures and cost users and businesses dearly.
"It is often confusing for victims to know who to report the fraud to, particularly if it crosses geographical or sectoral boundaries," said the report. "Fraudsters benefit from this lack of continuity of response. Internet fraud is a particularly good example of how a fraud can become difficult to report."
Goldsmith has proposed the formation of a National Fraud Strategic Authority and a lead police force to tackle fraud on a national scale. He also proposes setting up a National Fraud Reporting Centre.
"Fraud is not a victimless crime," said Goldsmith in his introduction to the report. "Work by the Home Office suggests that fraud may be second only to Class A drug trafficking as a source of harm from crime; and there is evidence that fraud funds terrorism, drugs and people trafficking."
Goldsmith found that several other countries, most notably the US, have adopted more co-ordinated approaches to detecting and preventing internet fraud.
The Internet Crime Complaints Centre (IC3W), a partnership between the US Federal Bureau of Investigation and the National White Collar Crime Centre, is one organisation the report held up as an example of good practice.
"It is specifically designed to accept reports of people who have been defrauded over the internet, a problem which is particularly difficult to solve with geographical reporting arrangements," said the report. "IC3W provides an analytical function and informs FBI work, and is linked to the National Cyber-Forensics & Training Alliance which tackles internet and high-tech crime."
"The internet has provided new opportunities for fraud to be committed and it is now a significant problem for both businesses and individuals," said David Woods, an associate and litigation expert with Pinsent Masons, the law firm behind OUT-LAW.COM. "The current system has made it difficult to co-ordinate efforts among the various law enforcement agencies to effectively tackle fraud, and it is a welcome development to see a renewed focus on seeking to deal with this problem."
Internet fraud is certainly affecting the UK. The 2002/2003 British Crime Survey analysed technology crime and found that three quarters of respondents were worried about using a credit card online. The Attorney General's report found that the costs of this kind of fraud were not always the obvious costs.
"Externalities are costs or benefits from activities which affect behaviour but are not fully reflected in prices," said the report. "The reluctance of some people to use the internet for financial transactions because of fear of fraud even though they would save money on the transaction by doing so is an example of an externality."
Goldsmith said that the best way to stop fraud was for consumers and businesses to act sensibly. "The review is clear that much fraud could be avoided if consumers, businesses, and public sector bodies took elementary precautions and, in appropriate circumstances, exercised sensible scepticism about offers that were obviously too good to be true," said Goldsmith.