Out-Law Analysis | 21 Feb 2014 | 9:00 am | 2 min. read
Banks and big businesses in particular should be on their guard. As shown in this case, with the ever increasing availability of new technologies, determined fraudsters can get around even the most extensive fraud prevention systems.
One of the defendants in this case was a bank employee. This serves to highlight the importance of a crucial part of fraud prevention being effective pre-employment screening. Employee screening should be completed before a member of staff becomes permanent and should include verification of identity, reference checks and verification of qualifications. Employee screening is not a solution in itself. As demonstrated in this case, ongoing monitoring of employees to ensure they are complying with an organisations' anti-fraud policy is also essential.
But if your organisation is attacked, would you even know about it? And would you know what to do?
The most important thing to do is to make sure that you have an effective – and enforced – anti-fraud policy. A crucial part of this is fraud detection - finding out early that you are being attacked can save money and protect a business.
It is important to plan for the worst, and that means working out a fraud response plan to make sure your organisation knows how to deal with fraud once it has happened. This helps to make sure that any response is quick and targeted and that any dissipated assets are effectively preserved.
But if your organisation does become a victim of fraud, what action can you take? Though fraud is a crime, for organisations the most important issue is the retrieval of assets and gaining compensation for those that can't be retrieved.
The emphasis in civil law is compensation for the victim whereas in criminal law it is punishment for the fraudster. The best way a business can seek to recover any losses which it has suffered as a result of fraud remains through civil proceedings. The police in this case have so far managed to recover £543,000, which is very far short of the full amount taken. Given that these were bank transfers, and therefore easily traced, one of the explanations could be how quickly the police were able to move and obtain restraint orders. The civil orders, which can be obtained on a very urgent basis, are:
Freezing Injunctions: these prevent a fraudster from removing his assets from the jurisdiction and restrain him from dealing with assets whether or not those assets are based in England and Wales. Freezing injunctions are a vital tool in preventing the dissipation of assets, and are usually obtained without notice to the fraudster.
Disclosure Orders: these can be sought against a fraudster to enable the victim of fraud to trace dissipated assets. The court order forces the defendant to disclose where their assets are, and where the money, as in this case, belonged to others and there was therefore a "proprietary claim", the fraudsters can be compelled to disclose what has become of the money.
Norwich Pharmacal/Bankers Trust Orders: these are a specific type of disclosure order which enable a victim to obtain evidence and information from an innocent third party that has become mixed up in the fraud, such as a bank or an accountant. This is a powerful tool which allows a victim to trace assets using third party information, and could have been used in this case to follow the money transferred into the fraudster's accounts with a view to freezing them. These orders are usually coupled with a gagging order to prevent the bank tipping the fraudster off.
Search Orders: these enable the victim to discover and preserve evidence against the fraudster which are in his possession and are likely to be destroyed or concealed by him.
William Christopher is a civil fraud expert at Pinsent Masons, the law firm behind Out-Law.com, and specialises in civil fraud and commercial litigation