Fraud: asset recovery
A step guide to tackling an allegation of fraud
Philip Barden
Partner
020 7880 4280
Fay Birch
Associate
020 7880 4460
We are regularly retained by victims of fraud to recover their losses. This article sets out the methodology by which a recovery can be made.
First, ensure that all electronic and banking access to the organisations systems by anyone suspected of being involved is cut.
Preserve all electronic records by taking possession of laptops and mobile phones which belong to the organisation. Where these are held by an employee obtain the passwords so Whatsapp and other communications systems can be accessed.
Second, identify witnesses who are not involved and speak to them face to face and establish what they can tell you. Getting inside information is often essential to cracking a complex fraud. This should always be done by an experienced fraud investigator. Build the picture quickly.
Then, the insurance position must always be reviewed and where there is a crime or fidelity policy, a claim reported. These policies may not cover an organisation against fraud by a director, but that is a director who is part of the controlling mind of the organisation.
Following an insurance claim being made, you can expect a loss adjustor to be appointed who will seek to find reasons why the insurance company should not pay the claim or mitigate the amount. In this process it is important to ensure you have all records required by the policy. For example, the employment records of the individual concerned, the proof that references were taken, any past misconduct investigations and the circumstances in which the matter came to your attention and the detail of any investigation.
Where there is an insurance claim, until it is accepted, you must act as a prudent uninsured person would. This is the legal requirement and not to do so may void the policy cover.
Assets may need to be protected where there is a genuine risk of dissipation. This can involve the following:
1. Following the money trail by opening up bank accounts and seeing where the proceeds of a fraud have moved. This can be done in secret without the account holders knowing.
2. Issuing a claim in court and at the same time seeking a freezing order. The aim being that the claim is served at the same time freezing orders are served and are notified to banks etc.
3. A freezing order does not just freeze assets, it requires the persons subject to the order to give full details of their worldwide assets above a certain individual asset value, say £5,000, usually within 48 hours and then confirmed within a week in an affidavit.
4. It also limits the individual’s access to funds for legal and living expenditure.
It is often the case that having issued proceedings and obtaining an injunction, where there is good evidence of fraud, then a settlement can be quickly achieved.
Regulatory reports must be considered. These will be to an industry regulator, perhaps the regulator of social housing or the FCA.
A report will need to be made on Action Fraud albeit the commonly held perception, for a good reason, is that more often than not Action Fraud does not accept cases. A report is always necessary where there is insurance – it is usually a policy obligation.
You must consider whether or not a Suspicious Activity Report (‘SAR’) needs to be made to the National Crime Agency (NCA), which is a simple online process.
If there are ongoing transactions in a matter in which there is the possibility of criminal behaviour, for example where a contract has been procured by corruption, then it is necessary that a SAR is made, so that the individuals involved within the organisation that is subject to the fraud are protected, if they continue to transact.
For example, circumstances may arise in which an organisation becomes aware that a supplier is engaged in paying kickbacks. It may not be possible to immediately terminate the supplier and the services may be essential. In those circumstances in order to continue to pay for services that are genuinely being provided (not the kickbacks), a SARs report should be made and authority to transact received. This can take a month.
This is not a comprehensive guide to all steps that need to be taken in all matters, but these are the key steps that need to be considered in most fraud cases and the route by which an organisation can be protected and make a recovery.
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