The shoestring force fighting big-money theft

Ken Farrow talks about chasing the City's fraudsters on a £365,000 budget

He's the man charged with fighting fraud in the heart of the financial sector, the City of London. But Detective Superintendent Ken Farrow has just a £365,000 budget with which to do it. This is for all expenses except basic staff wages. It includes payments for accountants, staff overtime and travel costs.

"It's a perpetual juggling act to try and stretch the money as thin as we can," he says, in deep London tones. His irritation at the "parlous state of police resources" is evident, despite his unflustered style and the pride he has in his cops.

The budget this year is being eaten up by the travel costs in one case, the alleged corruption of the head of Wessex Water, Colin Skellett. He is suspected of taking a £1m bribe to ease the takeover of the group by YTL, a Malaysian company. Mr Skellett has denied the allegation. In the course of their investigation, police officers have had to travel to Houston to interview company executives and will probably go to the Far East as well.

Last year the force took on 185 new fraud cases and ran 33 trials that led to the conviction of 36 people. A total of £29m was misappropriated and crooks tried to get a further £656m – but were foiled by either the targets' defences or action by the City's fraud squad. The force also works for other government agencies and in international investigations.

Farrow has 65 officers to do all this and has faced extra demands since 11 September. "At times I've had only half the staff," he says. "Because of terrorism, my police officers are having to put down their work, put on their uniforms and get out on the streets."

In addition, staff experienced in fraud are often the most senior officers, and can get seconded to investigations of other serious crimes such as murder and rape. "There are so many things that, no matter how many staff we get, they will be absorbed by urgent, critical issues," he says. "Let's face it, chief constables are not examined on their response to fraud, they are measured on their response to drugs, violent crime, burglary."

However, Farrow says fraud is a growing industry. The Home Office estimates that it costs the UK economy £14bn a year.

Increasingly, the organised criminals usually associated with drugs and armed robbery are acquiring a "diversified portfolio of interests", dabbling in the less risky business of fraud. "The money from a credit card racket will go to buy a consignment of drugs," says Farrow.

In a fraud where investors are duped, he says, the effects can be underestimated. "There's often an attitude to the victims: 'So what, they were stupid and greedy.' Sometimes people are foolish, but they're still victims. It's worse than having your house burgled; people commit suicide because of it. In a burglary you are insured, but you can't get your life savings back from an insurance policy."

In the 1980s and 1990s there was an explosion in high-profile financial crime – from the pilfering of pension funds in Robert Maxwell's media empire, which Farrow investigated, to the corruption of BCCI. The Conservative government's response to the scandals was to create the Serious Fraud Office to investigate cases that were in the public interest, complicated and high in value.

The SFO's lawyers and accountants are expert prosecutors. But its boss, Ros Wright, still needs police officers to do the legwork for an SFO investigation, and she has long complained about the lack of resources that the police dedicate to fraud. "The SFO is in dire straits; it can't get enough police officers to work on cases," admits Farrow. "It does need police input and police know-how."

The hope was that a National Fraud Squad would be created. Small teams like Farrow's would be amalgamated into a specialised force. However, the Government and the police have now gone cold on the idea, though Farrow says in an "ideal world" it would be the solution.

The new plan, which has yet to get government funding, is to merge the City of London's fraud squad with the SFO. The police would still deal with cases in its jurisdiction, but the SFO would be able to call on its support when needed, rather than relying on local police forces.

Farrow says he needs £3m a year and £5m start-up to do this, to double the number of officers to 130 and get new premises for both organisations.

But he has another problem: experienced officers are in short supply. "None of us are getting any younger. Cops retire early; we do our 30 years and we're out." He is 52 next week, two and a half years away from the eligible age, though he has not decided whether he will retire.

There is a shortage of officers generally in the South-east, and there is currently a big recruitment drive. But they have to do two years on the beat first, and Farrow says it can take five years to train an officer in financial and criminal investigations.

Once trained, the fraud cops can be very attractive to the private sector. "Our people are in big demand now. They get lured away by companies that want financial investigators, people who can do money-laundering inquiries.

"I'm having to look at experienced detectives, with no background in fraud but with sufficient criminal investigation experience, who we hope will make the quantum leap."

Those who work with the fraud squad say that knowledge is variable. "There are some excellent officers but there are others who really struggle with basic financial concepts," says Raj Bairoliya, managing director of financial crime specialist Forensic Accounting. "Because fraud has never been a priority, it is not often they have a great deal of knowledge of the financial aspects ... such as reading a balance sheet and understanding the financial products available."

Farrow says that having officers who are fully trained accountants or lawyers would be "entirely valid", but that brings in another common police complaint.

"How can we attract a young person, qualified as an accountant, with an occupation where rewards are nowhere near what you get as an accountant?" asks Farrow, who joined the police at the age of 21. He says officers don't do it for the money but for a "fascinating career".

"There's always going to be crime, so we're never going to be out of a job, sadly. There is nothing like it, the esprit de corps, working in a close-knit team. It's fabulous; there's a great deal of job satisfaction. That's why we stay."