With the recent announcement of arrests by City of London Fraud Squad in connection with allegations of carbon credit frauds, it would appear that this sector is once again the subject of renewed focus by the authorities.
However there are important issues to note:
- The trading of carbon credits is NOT illegal per se. A carbon credit certificate is the equivalent of one tonne of CO2 or greenhouse gases, and are bought and sold by companies to encourage them to reduce their greenhouse emissions. Any ‘spare’ certificates earned as a result of reduced greenhouse gas emissions can be traded for profit. It is a rapidly increasing market, hailed by the environmental lobby and various international organisations.
- This is a highly specialised complex area in which a number of reputable companies trade. Investors can be sold either Voluntary Emission Reductions (VERs) and/or Certified Emission Reductions (CERs).
- There are also a number of firms authorised by the FCA that legitimately sell carbon credits and accounts can be opened with an authorised carbon credit registry to hold such credits on behalf of investors. The stumbling block, as far as the FCA is concerned, is that it does not control the sale of the carbon credits themselves.
The market has attracted the attention of Interpol, who value the market in the region of $176 billion annually, and the FCA (the Financial Conduct Authority) because the acquisitions of such credits are not capable of being supervised by them. They describe these as UCIS, i.e. Unregulated Collective Investment Schemes.
Interpol are convinced that the market is abused by organised criminals and are concerned about money laundering and online credit card fraud.
The FCA have now decided that from January 2014, it will not be possible to sell UCIS to the retail investment market, unless it involves ‘sophisticated investors’ and there will be strict criteria describing these type of investors.
The FCA used to concentrate its efforts using regulatory sanctions e.g. penalties for high pressure sales targeting vulnerable investors. More recently they have been working closely with City of London Fraud Squad in bringing prosecutions against individuals on the basis that carbon credit trading can be another version of a ‘boiler room fraud’.
They have prosecuted individuals for falsely asserting that they had carbon credits to sell, for over-valuing VERs, and for VAT (MTIC) frauds etc.
We are currently advising a number of individuals involved in four of these criminal prosecutions.
We are well positioned to defend these cases because of our specialist knowledge and experience. We have successfully defended these cases over recent years. If you or your company is facing such an investigation, it pays to instruct specialist fraud solicitors who have successfully defended such complex investigations and prosecutions.
Look for a firm with a real pedigree in fraud defence, who are membership of the relevant organisations, who are top ranked by all the leading legal ranking directories, who blog about current fraud issues, and who have a number of serious fraud supervisors and specialists. You will need a firm in which its directors and/or partners lead the preparation of your defence, who instruct leading barristers, forensic accountants and forensic experts.
Contact us either using our online enquiry form or call us on 020 7387 2032.