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Police action against City fraudsters starts to show results, but civil action remains best for victims, says expert

Out-Law News | 26 Aug 2015 | 11:17 am | 2 min. read

A multi-agency anti-fraud operation led by City of London Police is beginning to show results, with "dozens of people arrested" and two providers of serviced office space fined in relation to investment frauds based out of addresses in the financial district, according to press reports.

The Financial Times reported that regulators and law enforcement authorities had "begun a campaign of disruption" against an increasing number of suspected fraudsters using addresses in "most of the City's big skyscrapers", including Tower 42 on Old Broad Street and Heron Tower. Operation Broadway, which conducted its first high-profile raids in March 2015, was set up specifically to tackle so-called 'boiler room' scams operating out of these buildings.

Civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, said that these scams tended to target vulnerable individuals and businesses with high-pressure cold calls and the promise of "fantastic returns" from investments in overseas property, wine, gemstones or antiques.

"However, returns which appear 'too good to be true' should be treated with caution," he said.

"It is promising to see that the authorities are taking action to disrupt and prevent the activities of fraudsters operating in the City. However, in the event that a member of the public finds themselves having fallen victim to a fraud, they should contact a specialist civil fraud solicitor and seek to recover their losses without delay. The authorities are often unable to recover losses due to the time taken to investigate the fraud and bring the matter to court," he said.

According to the Financial Times report, police have made dozens of arrests and disrupted "at least 14 suspected criminal groups" during unannounced office visits as part of Operation Broadway. The taskforce, which includes trading standards officials, HM Revenue and Customs (HMRC) and the Financial Conduct Authority (FCA) as well as the police, have been targeting scammers using false addresses, as well as those that have set up "virtual" headquarters by leasing serviced accommodation or mail and telephone forwarding services as part of Operation Bloom.

Over the past month, office space providers Servcorp and Regus have been fined for failing to keep adequate client records, while Regus also gave false information about whether an investment company had a physical presence at one of its sites, the Financial Times reported. Operation Broadway is also focusing on disruption and awareness-raising, including by setting up a stall at an alternative investments fair in May for the first time, according to the report.

Asset recovery expert Alan Sheeley of Pinsent Masons said that it was often possible to assess the credentials of suspected fraudsters using "some basic searches on the internet", even if they presented themselves as operating from an "impressive" address.

"It is a relatively straightforward process to check the details of a company on Companies House to identify its directors and shareholders," he said. "The year of incorporation and registered address will also be available for review."

"For a small fee, it will also be possible to identify other connected individuals and companies which may have a history of being dissolved or liquidated and which are likely to raise questions about those promoting the investment opportunity. A review of their financial records will help ascertain their financial standing and to make an informed decision as to whether they really deal with the assets and funds they claim to," he said.

Individuals suspecting that they had been a victim of one of these frauds should get in contact with a civil fraud solicitor, who would be able to "act decisively and without delay to apply for freezing orders to freeze the assets of the fraudsters and companies they operate as well as obtaining disclosure orders to follow the trail of funds stolen", Sheeley said. It was also possible to obtain "search and seize" orders in order to preserve evidence, he said.

"This approach will give members of the public the best chance at recovering their losses and ensuring the fraudsters do not keep their ill-gotten gains," he said.

More than £1.73 billion was reported as being lost to fraudsters by 5,252 investors across the UK in the year to September 2014 according to Action Fraud, the centralised national fraud reporting service operated by City of London Police.