'Invoice hijacking' fraud a near epidemic, says lawyer

Out-Law News | 05 Apr 2019 | 4:49 pm | 2 min. read

Fraud stemming from 'invoice hijacking' is at a near epidemic level, but businesses can rely on the courts to support their efforts to recover stolen funds if they act fast in light of incidents, experts in civil fraud and asset recovery have said.

Alan Sheeley and Jennifer Craven of Pinsent Masons, the law firm behind Out-Law.com, said a recent case before the High Court in London provides proof of the support businesses can obtain from the courts where they have fallen victim to invoice hijacking.

Invoice hijacking is a term typically used to describe cases where a fraudster has been able to serve a false invoice on a business after positioning themselves in the middle of correspondence between the company and one of its suppliers. This is often achieved through email hacking and observing patterns of behaviour and correspondence.

On Tuesday the High Court granted cheese maker Worldproteins KFT a continuation of an earlier interim freezing injunction against an individual who has defrauded the company of €500,000 through invoice hijacking. A freezing injunction is a court order preventing a party from disposing or dealing with its assets. 

According to a Lawtel report of the ruling, €350,000 of the €500,000 stolen from Worldproteins has been frozen as a result of the injunction in place. The remaining funds have been transferred to three other bank accounts in Dubai, it said.

Worldproteins had, though, earlier been able to recall a separate €1.5m payment it had made to the fraudster following a false invoice it was emailed and was able to identify the account holder and their UK address through the disclosure of bank records.

"This type of fraud is becoming so common that it is now almost at an epidemic stage," Alan Sheeley of Pinsent Masons said. "Victims have to act quickly and effectively if they are to be in any position to recover their money. This case demonstrates that the courts are alive to the situation and will be sympathetic to the victim."

Jennifer Craven, also of Pinsent Masons, said the case is "a first rate example of what a victim can do if it does not procrastinate" 

She said: "In these types of cases, the immediate step is to contact the bank to freeze the monies. But if that’s not possible, urgent recovery by civil means must be at the forefront of the victim’s mind: the courts are very familiar with this type of fraud and are willing to be flexible. The strategy usually involves two stages: firstly, obtain an urgent freezing injunction to secure monies and secondly, obtain a disclosure order to identify the fraudster. In the right type of case such as this one, such a strategy can be overwhelmingly effective."

Sheeley said that there are issues of legal liability and contract to consider where businesses fall victim to invoice hijacking.

He said: "In the invoice hijacking scenario, it is important to understand whether the hacked party is the customer or the supplier as this will likely determine who is at fault. This, along with a close consideration of the contractual position, will ultimately determine whether the customer still needs to pay the supplier or whether the customer has extinguished his debt obligation by making the payment even though the customer has paid the fraudster."

"It is important that victims, whether the customer or supplier, turn to civil fraud solicitors for expert advice as soon as possible on discovery of the fraud. Failure to do so will likely result in never recovering the stolen monies and could lead to having to pay twice," he said.