Financial fraud is yet again rising, in 2024 the annual Crime Survey for England and Wales reported 4.1 million occurrences of fraud, an enormous increase of a third compared with the previous report. The rapid growth in fraud is not being met with the same robustness as organised crime and terrorism by the authorities, according to the latest Police Foundation Report. Of the 1,214,639 fraud reports made to police in the year to March 2024, only 3,641 resulted in a fraudster being charged with a crime. However, this is even more concerning as The Crime Survey for England and Wales estimates that only 14% of fraud is actually ever reported to police or Action Fraud. Furthermore, only 6% of the frauds reported to Action Fraud were passed on to local police forces.
It is disturbing to note that three of the police forces in England and Wales have no officers dedicated to investigating fraud. In 2021 there were only 866 economic police officers working in England and Wales, which means that a type of crime that amounts to 40% of all crime is being dealt with by 0.64% of the available workforce.
Giambrone & Partners financial fraud and banking litigation lawyers recognise that only by taking the civil route through the courts that the victims of fraud have the chance of obtaining compensation.
Demetri Bezaintes, an associate in the financial fraud and banking litigation team, commented "many people that are targeted by fraudsters do not realise that they have been defrauded for some time, particularly in investment fraud where the perpetrators assure their victim, who are usually selected because they are less aware of how the financial markets operate, that they are accumulating wealth through the fake schemes. It's only when their victim seeks to access their newfound wealth that they discover that their money has not been invested but stolen." Demetri further commented "the fraudsters are agile and quick to see new opportunities, particularly with the use of technology. However, this works both ways as demonstrated by Giambrone & Partners' success in being the first law firm in Europe that successfully served a worldwide freezing order on anonymous fraudsters through the blockchain via an NFT, which is immutable, enabling the fraudsters, despite their anonymity to be called to account."
Various suggestions have been made to combat fraud including setting up a national police body to specifically to address fraud.
Michael Skidmore, head of serious crime research at the Police Foundation, said: "Fraud is a high-volume, harmful crime, often perpetrated online by sophisticated networks that operate across police force and international borders. In comparison, our policing response is under-resourced, under-skilled and locked into a reactive, geographically bounded policing model developed to tackle the local crime problems of the 1960s. He further stated We need a new national lead body with a ring fenced budget and local and regional tasking powers, greater private sector collaboration and an uplift in skills. The current model is simply unsustainable, given the scale, harm and sophistication of the fraud challenge we face today."
Below we outline the most commonly perpetrated frauds
Romance Fraud
This type of fraud preys on the most vulnerable section of society, by deluding the victims into believing that they are in a genuine romantic relationship where trust has been built up. This heartless type of fraud arises when the scammers draw their victim into an online relationship. Often approaching through an online dating site, building a web of lies to manipulate their target emotionally. Face-to-face contact is rare as the fraudsters avoid this with the pretence of working in a remote location or working as an undercover intelligence officer for a covert organisation.
Once the fraudster feels secure they may make a request for money for a sudden "emergency." Often, to create a sense of urgency, the emergency is of a serious medical nature such as the fraudster has fallen ill or a relative has had a serious car accident and requires urgently requires surgery to save their life. Another "emergency" is that they are stranded in a foreign country and cannot return home due to theft, lost documents, or legal issues and they urgently need money.
Alternatively, they may build a story of a wonderful life-changing business opportunity which suddenly is in jeopardy and a cash injection is urgently needed.
Investment Fraud
This type of fraud invariably involves a "too good to be true" investment opportunity with returns that ridiculously overblown. The Financial Conduct Agency ("FCA") has taken steps to tighten the rules relating to the investment sector in an attempt to limit the opportunity for fraud. The position is constantly being reviewed due to the new types of fraud that arise and the scammers modify their frauds to take advantage of new opportunities that develop. The volatile cryptocurrency market is particularly popular as there is very little regulation of this particular financial market.
As with many scams, initial contact is made through one of the social media platforms. The fraudsters quickly assess their victim's lack understanding of the financial markets and the fact that they have no knowledge of the safeguards in place to protect novice investors. They also take time to find out whether the victim has any knowledgeable friends or relatives that are aware of how the financial markets work who would likely to spot the scam.
Initially, the target is only persuaded to make small investments which appear to successfully make profitable returns on their investment. The target is led to believe that money is accruing in their account. In some instances, the fraudsters actually provide money leading the victim to think that their investments are successful. Many victims allow their account manager to take over their computer.
The victim learns that they have been defrauded when they wish to have access the "money" that has accrued due to their "investment". Usually, the account dramatically falls into loss, panicking the victim, who is then urged to invest more and more to "trade" out of their losses. The fraudsters repeatedly tell them they must continue to "invest" or lose everything. The pattern of gains and losses often can be maintained by the fraudsters until the victim has completely exhausted their funds. The fraudsters then disappear leaving the victim financially ruined with no idea who they can attempt to recover their lost funds.
Financial Professionals Investor fraud
There are strict rules overseen by the FCA to prevent novice investors losing their money due to a failure to understand the market which professional investment brokers and other financial advisors are governed by. They are obliged to identify their potential investors as novice investors and limit the types of financial trading they are allowed to conduct. The complex types of trading involving extensive experience of trading are not permitted for novice investors.
Unfortunately, untrustworthy investment brokers are known to contact individuals they have had limited dealings with who are novice investors and invite them to continue trading on a more lucrative basis. The brokers delude their target into believing that they can be elevated to the capacity of a professional trader.
The broker helps the novice investor to navigate the application form, thus avoiding the risk that the implications of the change of status and the perils of high-risk trading will be recognised. As well as hiding the fact that they then lose the safety net that they Regulators have provided for inexperienced investors.
When the inevitable happens and the target becomes aware that they have lost their money, they are told that it is due to their own decisions.
Misrepresenting the risk of investment products and failing to conduct proper client suitability assessments and then allowing high-risk trades to be placed by clients who had failed knowledge tests are all actions that carry heavy sanctions in the shape of fines, the withdrawal of licences and in some cases compensation is paid.
Giambrone & Partners banking and fraud litigation department has extensive experience in tracing the fraudsters and litigating against them to recover the lost funds of our clients. Taking legal action through the courts has, time and again proved to be the best opportunity for our clients to recover their funds lost to fraud.
Demetri Bezaintes is an associate based in the London office within the Financial Services and Crypto Litigation Department. He is a solicitor in England & Wales and also a qualified Greek Lawyer (dikigoros).
Demetri has a thorough knowledge of investment fraud and fund tracing. He works tenaciously for our clients, advising on cryptocurrency, Forex trading disputes and regulatory investigations. He draws his expertise in investment law from his experience in the banking sector and his experience in banking and financial services regulation. Prior to joining Giambrone & Partners Demetri worked at an international bank, where his main focus was the enforcement of freezing orders and third-party debt orders.
He approaches cross-border jurisdiction matters with a comprehensive view, based on his knowledge of both civil and common law. After qualifying as a lawyer in Greece, he obtained a Graduate Diploma in Law from the University of Westminster.
Demetri also has experience of assisting high net worth individuals (HNWI) with real estate transactions arising from the Golden Visa scheme.
Demetri was invited to speak at a prestigious global conference.
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.
