2024 Regulator of Social Housing Sector Risk Profile: Fraud and Anti-Money Laundering (AML)

The Sector Risk Profile (SRP) released today continues to highlight fraud as a key risk for the social housing sector.  The SRP this year gives further detail on the types of fraud the sector is vulnerable to, including “embezzlement, bribery and corruption, procurement fraud, false invoicing, money laundering and cyber fraud”.  The SRP identifies that detecting fraud has become more challenging as fraud schemes have become more sophisticated. This aligns with our experience as specialists in this area and in a world where both individuals and businesses are facing increased financial pressures, there is a clear incentive for illegal activities.

Identifying a fraud is often a case of finding the tip of the iceberg, this could be one fraudulent tenancy, one false invoice, a whistleblower, a dishonest declaration of interest form, a round figure payment or something else. How effectively an investigation into any of these individual events is run is critical and must ensure that all potential sources of evidence are identified, secured, and reviewed.  This might involve use of specialist expertise including data retrieval experts and forensic accountants, all of which can be managed by Devonshires.

In our experience, fraud in the sector routinely involves employees colluding with third parties. A key factor in identifying and stopping these frauds is other employees feeling empowered to (1) ask challenging questions, (2) identify dishonest relationships, and (3) report those concerns internally. 

The foundation of fraud and money-laundering prevention is that policies and procedures are put in place, alongside appropriate training provision. The SRP specifically notes that boards must ensure that they have robust internal control procedures in place, and seek appropriate professional advice when fraud is identified. It adds that boards should also understand their responsibilities under anti-money laundering legislation. We are currently planning a conference on “Tackling Fraud in Social Housing” in early 2025.  The conference will be a 360-degree look at fraud in the social housing sector covering topics such as the range of frauds in the sector, policies and procedures, how to identify and investigate fraud, civil and criminal liability and engaging with third parties including the police, insurers and regulators. If this is of interest, please make sure you are signed up to our mailing list to receive further details.