The rules around food safety and labelling requirements are clear and robust. Problems arise, however, on both an EU and a UK scale when it comes to dealing with fraud in the food supply chain.
What is food fraud?
The regulation of food and drink products in the UK largely stems from EU legislation. The rules around food safety and labelling requirements are fairly clear and robust. Recent changes in sentencing guidelines in England and Wales mean that there is now scope for the authorities to come down hard on those who put consumers at risk of harm.
Problems arise, however, on both an EU and a UK scale when it comes to dealing with fraud in the food supply chain, particularly where there is no clear harm or risk of harm to consumers. Examples of food fraud include where ordinary honey is sold as the more expensive ‘Manuka’ honey, or run of the mill olive oil is traded as ‘extra virgin’. In these cases, the ability (and perhaps the willingness) of the authorities to pursue and prosecute fraudsters becomes more complicated.
There is no definition of 'food fraud' and some recent research conducted by food fraud expert Professor Chris Elliott has revealed that UK police forces don’t record crimes relating to food and drink as a category in their own right or share information on food crime across forces. So there is no data on the extent or types of food crime being perpetrated.
Professor Elliot is well known to many in the food sector as the author of the 'Elliott Report' which examined the integrity of the food supply chain in the wake of the horse-meat scandal which came to light in 2013. The scandal is a perfect example of large scale food fraud, perpetrated at an EU-wide level, which did not directly pose a health risk to the public.
The fraud involved the use of horse-meat in ready meals in place of beef. Eating horse-meat is not itself harmful and many countries outside the UK consume it. The crime here was duping the consumer (and indeed the retailer) into believing they were buying beef. This type of activity may also present a risk of harm, of course, as the fraudulent goods are by their very nature more likely to be handled in unsafe or unsuitable environments which are unregulated and unchecked. It might also involve the use of contaminated products or ones which are past their best or unsafe.
Professor Elliott’s report highlighted a number of shortcomings in the UK’s approach to understanding and tackling food fraud and made a number of recommendations on how to improve things, including the setting up a Food Fraud Unit.
How is food fraud currently tackled?
As a consequence of the Elliott Report we now have a Food Fraud Unit, which forms part of the Food Standards Agency. It is doing its best to investigate and tackle fraudulent activity in the sector but it is funded on something of a shoestring and, significantly, has not been given any specific or increased rights of enforcement. It is reliant upon individual police forces to take action and they do not necessarily have the resources or understand the scale or significance of criminal activity in this area.
One positive outcome of the horse-meat scandal has been improvements in the understanding at EU level of the scale and cross-border nature of these types of activity. As a result, organisations across the EU (including the Food Fraud Unit) have increased and improved their level of information sharing in a bid to combat criminal activity. This begs the question what will happen when the UK leaves the EU and we are no longer part of the club?
It is surely in both the EU's and the UK’s best interests to ensure that information continues to be shared post-Brexit as fraudsters don't generally respect political borders. Although some assurances have been given that this will continue to happen, anecdotal evidence suggests that the Brexit vote has already seen the UK slip to the bottom of the list when it comes to information sharing.
The recent scandal concerning unlawful levels of fipronil in eggs which were sourced from the Netherlands appeared to show that information sharing with the UK authorities was slower than in the past. This is concerning if both food businesses and consumers wish fraud to be tackled.
There is also a significant question about the impact of future border controls on fraudulent activity. Rotterdam is the largest port in the EU. It sees a huge number of food and drink products pass through it each year and 2017 saw the grand opening of a dedicated ‘Cool Port’ for trade in fresh food products. Over a third of all food entering from Africa, Asia and the Americas comes via Rotterdam for onward movement to the rest of Europe, including the UK.
As a member of the EU the UK currently receives the benefit of import checks as Rotterdam, meaning that goods which are moved onwards to the UK have already been ‘processed’ even if they originate from outside the EU. Once the UK leaves the EU it will no longer receive the benefit of those checks. Instead, goods coming in from Rotterdam, along with imports arriving direct from overseas and other imports coming in from the EU, will all have to be checked and processed once they arrive at the UK’s borders.
The UK currently imports around 52% (by value) of the food and drink consumed on home soil and currently only 19% of food and drink consumed in the UK comes from outside the EU. In other words, instead of only a proportion of the 19% of non-EU food products being processed at UK borders, UK ports will have to process the full 52% of food consumed in the UK. That seems likely to add up to a lot more time, resources, infrastructure and money being required at the UK’s borders. Without that additional investment, it seems inevitable that there will be greater scope for fraudulent products to slip through the net.
What else creates opportunities for fraud?
In addition to Brexit related issues, there are other factors which have the capacity to create opportunities for fraudsters. Indirectly related to Brexit is the effect of the falling value of the Pound. This has already increased the cost of imported food products and the cost of imported commodities for food manufacturers.
If the UK fails to agree a free trade deal with the EU this is also likely to result in an increase in the cost of imports. As the UK imports 29% of its food and drink from the EU, the impact on prices could be significant. Where there are price hikes there is always an opportunity for criminals to make money by substituting higher cost items for a lower cost equivalent.
Equally, however, price rises can lead to circumstances where legitimate businesses which are struggling to meet increased costs decide to substitute higher cost ingredients for lower cost ones without declaring the change. A recent extreme example of this resulted in the death of a consumer from anaphylactic shock due to the inclusion of undeclared allergens in a curry.
We have also recently seen scenarios, such as the alleged activity by the 2 Sisters meat processing business, where cost saving short cuts are taken such as relabelling products with revised sell by dates to extend shelf-life. Our own clients have been the victims of other businesses in the food supply chain passing off cheaper products for more expensive ones, including cheaper cuts of meat being sold as more expensive ones, eggs being given false quality assurance labels and potatoes being passed off as more expensive varieties.
How can food businesses combat fraud post-Brexit?
In an ideal post-Brexit world greater emphasis would be placed upon, and money would be invested in, policing fraud in the food supply chain at national level and at the UK’s borders. However, it seems likely that the UK government will be unable and unwilling to focus on this, particularly when it has a myriad of other issues to manage as we head into the uncharted waters of Brexit.
There are however, some areas that food businesses can explore and focus on in order to put themselves in the best position to combat fraud and deliver food quality and integrity to consumers. A key aspect of this is for businesses to ensure they truly understand their supply chain in both directions.
- Who are you buying from?
- Who do your suppliers buy from?
- Have you visited your suppliers?
- Do you know the businesses you sell to?
- Do you have robust and verifiable ordering systems in both directions and is it clear how orders should be placed by you and by those you supply to?
- Do you verify requests to change delivery addresses or bank details and do you verify who and where new orders come from?
We have advised a number of clients on their options once they have discovered that they have fulfilled fraudulent orders for which they will never be paid or have received goods which purport to be something they are not. Businesses which have robust systems for verifying and auditing their supply chain reduce the risk of these types of incidents.
Food fraud prevention
Supplier audits are an area which could also help to combat food fraud if there was a willingness to share information. Many processing and manufacturing businesses face numerous audits from a variety of customers in the supply chain which individually don’t necessarily identify enough issues on their own to raise a red flag. If technology was harnessed to enable audits to be shared, however, they might together paint a broader picture which would be enough to raise an alarm.
Including the Food Standards Agency in that information sharing would be another step on the road to a more joined up, more carefully and accurately monitored food supply chain in circumstances where the regulator (along with enforcement agencies in the guise of local authorities and/or the police) is increasingly strapped for cash.
The use of technology has the potential to facilitate huge advances in combatting fraudulent activity, as well as adding value to products by authenticating provenance. Businesses such as Happerley are already harnessing blockchain technology to help verify where ingredients have come from and thereby reduce the opportunities for fraud and add value to products.
Similarly, the use of ‘tracers' in food products can also help combat fraud. By adding harmless vitamins to foods in which those vitamins would not normally appear, for example, businesses can later verify whether products on the shelves still contain those vitamins or whether those ingredients have been substituted for something else. Simple scanning apps are being developed to enable checks to be easily carried out on smartphones. Businesses in the USA have already used tracers and seen a huge reduction in fraudulent activity.
With the prospect of significant changes in UK trade arrangements on the horizon, along with ever greater pressures on public resources, food and drink businesses will have to become increasingly smart and creative if they wish to avoid becoming victims of fraud. It is not all doom and gloom, however. Creative solutions to the problem also bring opportunities to add value to products and to increase levels of consumer trust through verification of the authenticity and integrity of products. And if businesses can also use that information to work with the authorities to help combat crime then we could all be on to a winner.