AML: HMRC flexes enforcement muscle to the tune of £7.8 million
The City of London Police launched a two-year pilot scheme last month that aims to help individuals recover assets lost to fraudsters. Such initiative is to be welcomed, says Will Christopher
While the police have very effective investigative powers to fight against fraud, they lack resources to deal with all the cases passed their way from Action Fraud, the national fraud and cyber-crime reporting centre.
The new scheme will allow the police to analyse the information provided to Action Fraud by thousands of victims, to identify groups of victims who have been defrauded by the same person or organisation and utilise their investigative powers to try and identify assets. Where appropriate and with their consent, victims will then be introduced to an external panel law firm which will use the civil courts to freeze and recover assets.
Freezing assets in the civil courts is much quicker and more effective than under the criminal regime. How the cases will be funded is as yet unclear.
My proposal would be to utilise disbursement funding and agree with the victims to pursue the case on a Damages Based Agreement (DBA) or contingency fee. This means that the lawyers would only get paid if they win the case and would only get paid a percentage of what was recovered.
The problem for individual fraud victims is that losses are too small to justify the expense of locating, freezing and recovering assets, even if they represent the victim’s life savings.
This new initiative will rely on the police’s investigation powers to locate assets, overcoming the usual challenge of finding out where the money has gone via repeated court disclosure orders. Groups of victims will be identified, meaning their collective losses will make it more cost effective to bring proceedings.
One of the reasons why fraud is now so prevalent is that it is seen as a low risk and extremely profitable crime. It is very unlikely for victims to recover their money and for fraudsters to be prosecuted.
Bringing fraudsters to civil proceedings will make them think twice before committing fraud. It is also possible that the likelihood of criminal proceedings following a successful civil trial will increase. This provides an effective deterrent.
It is, however, extremely important that the panel is chosen carefully, and without simply trying to cut costs down. Civil fraud proceedings are more likely to be successful if conducted by specialist law firms. A cheaper service will be worthless if the victims do not win the case and recover assets.
Fraud victims are currently badly served by our criminal justice system, particularly when compared with victims rights in civil law jurisdictions.
Still, victims have usually a say during criminal proceedings about the direction of the criminal investigation and are also able to access information in the prosecutor’s file.
All too often in this country the prosecuting authorities act like they are not on the victims’ side. It is about time that this changes and although many fear the introduction of private-public partnership initiatives, a new scheme in this area may well be a step in the right direction.
This article was first published by Economia.
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