If your business falls victim to a fraud, your first responsibility is to your shareholders and investors, for whom you need to:
- Maximise the recoveries of losses, whether this is financial or data-oriented
- Minimise any reputational damage
- Deter similar actions by others
However, navigating your way through these processes can be a legal minefield. You will need to decide whether to opt for a civil or criminal response or a mixture of the two, and the best option in each case is not always clear.
At Nicholls Law, we offer professional legal advice from experienced lawyers to help you identify the best approach and navigate it, limiting further damage to your business and its reputation.
There are advantages and disadvantages to the possible legal responses to fraud, which we will help you weigh up and analyse. However, outlined below is some further detail about each and the possible advantages or disadvantages they may carry.
The Criminal Response
By contacting the police to commence a criminal investigation, the fraud may be investigated by a range of prosecuting authorities and a defendant brought to trial.
Advantages of criminal proceedings include:
- The offender may face retributive justice, which is appealing if they are not able to financially repay what they have taken through the fraud
- The financial costs will be significantly lower than those of a civil investigation and recovery proceedings
- The prosecution may result in compensation
- Law enforcement has wide powers to acquire information and documents that might not otherwise be recovered, and can arrest suspects, charge them and remand them in custody to ensure attendance at trial
- The Serious Fraud Office (SFO) can compel witnesses to answer questions and provide information
Disadvantages of criminal proceedings include:
- An investigation and prosecution do not automatically follow a fraud reported to the police, and it can be difficult to persuade the police or SFO to adopt a case for investigation
- There can be a long delay between the initial report and formal adoption of the case
- Corporate premises may be raided without notice and documentation seized, even when the company itself is a victim of the fraud
- The victim loses control over publicity of the investigation
- There must be a conviction before any recovery or retribution, which can take time, with an average length of an SFO case taking between four and six years
- Compensation orders are not always ordered in high-value or complex cases
- If the principal suspects are outside British jurisdiction, it can be difficult to persuade the police or SFO to take up the matter, and encouraging international co-operation between all law enforcements involved can be tricky and time-consuming
The Civil Response
Commenced directly by the victim without the involvement of a governmental body, they would only need to file the relevant documents at Court and pay a small court fee to start proceedings.
Advantages of civil proceedings include:
- Proceedings can be commenced very quickly
- The victim has more control over proceedings in terms of the claim and the timetable, as well as the information that is released into the public domain
- Civil fraud trials tend to be considerably shorter than criminal fraud cases, and there is a lower standard of proof needed (balance of probabilities vs. beyond all reasonable doubt)
- There is a greater focus on the recovery of, or compensation for, losses suffered by the victim
- Civil law is designed to resolve issues of financial loss
- There are few barriers in taking civil witness evidence abroad and there are effective cooperation regimes within the EU and elsewhere
- English judgments can be enforced in foreign jurisdictions, eliminating the need to re-litigate a case abroad
- There is a reduced chance of potentially disastrous raids by law enforcement agencies
Disadvantages of civil proceedings include:
- Civil proceedings can result in huge costs to the victim, due to the fact that they initially bear the costs of the investigation and proceedings, and there is no legal obligation for the defendant to satisfy the claimant’s costs in the case of a successful outcome Â which is why prevention is always better then cure in the case of fraud
- Law enforcement may believe that it is not in the public interest to spend public money on a criminal investigation if the victim of fraud has taken swift civil action to recover losses initially
The combined response
It can be the case that a victim of fraud may take a combined approach in recovering their losses, through parallel criminal and civil proceedings.
In this case, if a defendant is found guilty of a criminal offence, the conviction may be used as evidence in civil proceedings, and vice versa which can be powerful evidence for the prosecution or claimant.
However, in cases where criminal proceedings are taking place at the same time as liquidation proceedings, the criminal process is usually awarded priority, which can affect civil recovery claims.
It is clear that there is no straightforward legal approach when it comes to dealing with a fraud. However, with the assistance of Nicholls Law, you can be sure of the best advice for your situation and outstanding expertise to guide you through it.
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