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Fraud on the Increase

bank fraudEconomic crimes such as fraud are on the rise, if recent reports are anything to go by. The first, by industry group Financial Fraud Action UK (FFA UK), looks at the levels of card and online banking fraud, while the second, by PwC, assesses economic crime, including fraud, against financial services organisations.

Card & Online Banking Fraud

The FFA UK figures reveal that:

  • Fraud losses on UK cards in 2013 increased by 16% on the previous year to £450.4 million, although this is still 26% lower than 2008’s peak fraud figure.
  • Total spending on all debit and credit cards increased by 6.1% over the year to £532 billion.
  • Losses on remote card purchases (those made online, over the telephone or by mail order) increased by 22% to £301.1 million in 2013, from £246.0 million in 2012.
  • Online fraud against UK retailers totalled an estimated £105.5 million in 2013 – up 4% on the previous year.
  • Fraud against online retailers based overseas increased by 48% to an estimated £57.8 million.
  • Online banking fraud has increased by 3% to £40.9 million from £39.6 million in 2012.
  • Telephone banking fraud has fallen 8% to £11.6 million from £12.6 million in 2012.
  • Cheque fraud losses fell 22% to £27.5 million from £35.1 million in 2012.

Crime Against the Financial Services Sector

According to PwC, economic crime as a whole is on the rise. The assurance, tax and advisory group recently published a report, based on its Global Economic Crime Survey 2014, looking at the impact of crime on businesses in general (see our earlier blog). It has now issued a further report looking specifically at the financial services sector.

This reveals that 45% of financial services respondents to the survey said they were victims of fraud, compared with 34% across all other industries. Of these, 21% had been affected by accounting fraud. The most common type of economic crime perpetrated against financial services firms was, however, theft, which was reported by 67% of respondents. Other reported crimes were:

  • Cybercrime (39%)
  • Money laundering (24%)
  • Bribery and corruption (20%)

Tackling EU Budget Fraud

Given the apparently increasing incidence of economic crime, it is not surprising that countries and organisations are taking coordinated action to tackle the problem.

In Europe, for example, plans are gathering pace to prevent fraud taking place against the EU budget. Action is needed, says the European Commission, because conviction rates for fraud offences against EU resources greatly vary across the EU. Only around 45.7% of cases transferred to Member States are apparently followed up by national judicial authorities and the conviction rate of of these is on average just 42.3%.

European Public Prosecutor’s Office

The European Commission has therefore proposed the creation of a European Public Prosecutor’s Office, which would have the exclusive task of investigating and prosecuting crimes affecting the EU budget.

The proposals were originally put forward in July last year, and have recently received the backing of the European Parliament. However, the UK, Denmark and Ireland have indicated that they will not be participating in the European Public Prosecutor's Office.

Contact Lewis Nedas’ Criminal Lawyers in London

For specialist legal advice in defending a charge of fraud please contact our solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.

This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.

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New Fraud Instructions Last Week

fraudMiles Herman has been instructed by two individuals in major fraud and money laundering case involving the mis-selling of diamonds to investors over a period of two years.

Unan Choudhury has been instructed in a multi-handed 'courier fraud' involving stolen and cloned credit cards.

Gary Conway is instructed in large-scale mortgage fraud.

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New Major Fraud Instruction for Gary Conway & LNL

fraudGary is representing an individual facing a serious fraud prosecution involving 12 defendants.

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The Bell Tolls for the SFO – by Siobhain Egan

This Thursday's Public Accounts Committee hearing should be an interesting one for all serious fraud defence lawyers. The SFO's former Director, Richard Alderman, and the Current Director David Green QC are likely to be "on the rack" and will face some tough questioning about a range of issues, not least the seemingly generous and the allegedly "unauthorised" severance payments to senior members of staff. Though I doubt that I am alone when I express some cynicism that these payments were as "unauthorised", as we have been led to believe.

The history of the SFO has been a sorry one; it began with so much promise. Those of us who have been defending SFO cases for some time will remember how the legal profession regarded a position at the SFO as a prestigious one. Things seemed to go wrong when they failed to recruit senior experienced criminal lawyers but rather preferred to attract corporate/commercial lawyers from the City, often on secondment. Most of the SFO directors, until the appointment of David Green QC, also hailed from City commercial backgrounds which meant that the SFO leadership knew very little of the cut and thrust of criminal law and how to deal with good, aggressive, successful defence lawyers (a breed apart).

It is this leadership weakness which is responsible for the problems that the SFO now face. I have heard many reports from those who have worked there of poor management, poor leadership, poor communication... there seemed to be very little team work. Various specialists such as the lawyers, accountants and financial investigators refused to speak to one another. Much of the decision making was "risk averse".

As a result there was a constant stream of talented experienced staff defecting from the SFO, which has to have contributed to the string of high profile prosecuting failures, not least the appalling treatment which the Tchenguiz brothers suffered.

The Tchenguiz brothers have comfortably and confidently launched a claim for damages in excess of £300 million, reportedly. This means that, it is likely that the failures of the SFO will be exposed, again, in a high profile trial, albeit a civil one.

Richard Alderman looked to our American cousins for a possible solution to the SFO's dismal prosecution record and he found that the US authorities have been experiencing great success with Deferred Prosecution Agreements. This meant that those deemed to be Corporate crime offenders could avoid an expensive criminal prosecution as long as they self reported, paid eye watering sums and promised to behave properly in the future after installing state of the art compliance systems. Mr Alderman was very keen on this, and we now find that DPAs are to be enshrined soon in statute (s32 sch 16) Crime and Courts bill, and will be used when the SFO, primarily, investigates corporate offending, including bribery/corruption, money laundering and fraud.

It is suggested that a large portion of any fines paid under DPAs will be used to support the SFO's work.

David Green QC, when appointed, decided to take a slightly different approach, stating in last Autumn that despite DPAs coming into force, criminal prosecutions for this type of offending were not off the table. He remained silent on the issue of self reporting.  Private Eye in January 2013, stated that they believed that there were 20 bribery investigations on the desks of the SFO, none of which have been deemed suitable for prosecution. It is suspected that these will be dealt with using DPAs.

The problem which the SFO will have is that they are no longer perceived as a real force amongst seasoned defence practitioners because essentially that their budget has been slashed to £33 million in 2013 and again in 2014 their budget will be further reduced to £29 million. These sums sound huge, but in reality go nowhere when dealing with allegations of offending by multinational companies across numerous jurisdictions.

So many of the large corporates will be asking themselves why bother self reporting if there is little to fear from a crippled prosecuting agency without the money to prosecute.

Adding further insult to injury, there have been various inquiries into whistle blowing complaints made by SFO staff, namely a Cabinet Office inquiry which did not find any wrong doing and a more recent inquiry by Treasury Solicitors (TSOL). The latter inquiry again focused on whistle blowing evidence, according to reports in the Financial Times (03/03/2013) alleging that the SFO's digital forensic unit was not fit for purpose, that the SFO management were aware of this and that information relating to the quality of this evidence should have been disclosed to the defence. It is suggested that this may open the door for appeals against conviction for the relatively few that have been convicted by the SFO or who pleaded guilty. It will certainly have an impact on any confiscation orders made in those cases. According to Caroline Binham's article in today's Financial Times, it is unlikely that the results of that internal inquiry will be published. I would strongly suggest that the defence profession will be clamouring to see that report in order to ascertain if it will affect their client’s case, and that it will probably see the light of day, eventually.

What lies ahead for the SFO? Very likely it will be absorbed into either the new National Crime Agency or the CPS, though I do not see many largescale corporate crime prosecutions in the future. More likely, these agencies will follow the DPA route should they find any corporates willing to engage with them.

For more information on SFO prosecutions & investigations contact our serious fraud solicitors in London now - click here.


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New senior addition to LNL team.

Lewis Nedas are absolutely delighted to announce that Paul Mason has agreed to join our team. He is a specialist in serious fraud, and regulatory law. Please click onto his profile for more information.

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