In brief: You find yourself a victim of fraud – what should you do first? A victim of fraud's primary concern is to recover the assets that have been stolen. Civil remedies, rather than police intervention, are often the best method in maximising your recovery options.
What you need to know:
It's important to act quickly to prevent stolen assets and funds being shifted, laundered or sent overseas.
Civil remedies can be a powerful tool in recovering and protecting stolen assets before they are moved or sent outside Australia.
Recovery of assets does not prevent you from pressing charges later.
As is too often the case with fraud matters, assets and funds are often shifted, laundered or sent overseas in an attempt to hide any wrong doing and prevent the victim from recovering what was taken. To ensure you maximise your prospects of recovery, it is imperative you act quickly before this happens.
There are options available to you to trace fraudulent transactions and freeze assets before they can be dissipated. However, in order to maximise effectiveness you must act fast. Once you become aware of fraudulent transactions, you should consult a lawyer immediately to ensure that you are in the strongest position possible for recovery.
It's worth knowing that often you may be aware that fraud has taken place before the fraudster realises the gig is up!
Police involvement – more hindrance rather than help
Once a criminal investigation begins, any civil proceeding can potentially be stalled until the criminal matter is finalised...which may be years! During this time, your money may be halfway around the world and tracing it becomes virtually impossible.
Understandably, a victim's first instinct is to go to the police; however, their involvement can raise a number of issues, such as:
Your civil case can be stayed whilst the criminal case is afoot: If both a criminal and civil case is on foot at the same time, then often the civil case is prevented from going ahead whilst the criminal case is being heard.
The police can take a long time to investigate: Once you report the matter to the police, they then take over the investigation, with a primary objective to secure a conviction. In Victoria, an under-resourced fraud division results in matters taking well over 12 months to investigate, at which point the assets are long gone with very little prospect of recovery;
The evidence collected in the civil case can be given to the police: Pursuing civil action, at first instance, can assist and expedite any subsequent police investigation, as evidence and material is inevitably collected that can be used in criminal proceedings.
The burden of proof is less in a civil case: In a civil case you only need to show on the balance of probabilities that the fraud has been committed whereas in a criminal case the test is beyond a reasonable doubt. It is easier to be successful in a civil case.
No obligation to report to the police: Many victims of fraud are surprised to learn that there is no obligation for them to report to police. There is no statute of limitations on fraud offences and victims are able to first exhaust recovery options, and then report the matter to the police at a later stage. However, you should remain mindful that it is an offence to accept any benefit for not disclosing information that may be of material assistance in the prosecution or conviction of the perpetrator.
What are your options?
- Investigations: Where possible it is important to maintain the element of surprise. If they don't know that you know, you can work to investigate the fraud and protect assets before they have a chance of being hidden!
An independent and external investigator engaged by your lawyer will be covered by legal professional privilege and can help you assess the extent of the fraud that has been committed against you, thereby allowing you to make a well-informed decision as to your options going forward- no more surprises!
- Insurance: Depending on the type and level of your insurance coverage, you may be able to recoup compensation from your insurer.
- Civil remedies: There are a number of civil remedies that may be available to maximise recovery, such as:
- Freezing orders to restrain a perpetrator from dealing with specific assets, ensuring that they're able to satisfy any judgement you obtain against them. This further prevents them from removing or hiding the assets to avoid liability and can be obtained before or after any judgement.
- Search orders permit you to enter premises to inspect, remove or make copies of any documents or other items which may hold probative value in any case you may bring against them. An independent lawyer is engaged to supervise the execution of the order.
- Whilst this may be a costly option, it is invaluable in maximising recovery.
- Other ancillary orders:
- the Court can order a perpetrator to disclose assets and require them to submit to cross examination. If they are uncooperative, the Court can order their Bank/s to disclose information relating to assets held on their behalf.
- the Court also has the power to require a perpetrator to surrender their passport. This can be of particular importance if they are a foreign national or have significant ties or holdings overseas.
Given the breach of trust generally involved in fraud cases, our first reaction is to see justice being served, and rightly so! However, it is important to remember your primary objective: recovery and how best to achieve this.
The author would like to acknowledge and credit Andrew Tragardh from Victorian Bar for his seminar on "Maximising Recovery for Victims of Fraud" on which this article is based.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.