Financial fraud is the largest section of all crime and accounts for 40% of all crime. The Government proposes to invest £100 million and will create a National Fraud Squad (NFS) of 400 specialist investigators. There is the intention to use data collected from all sources to better understand how to tackle this huge problem. This can only be achieved with serious investment not just financial but technological professionals. Perpetrators of fraud are highly sophisticated and agile in their techniques, adapting to very swiftly if a scam has become too obvious and also adapting to new opportunities as they arise.
The unique abilities that Artificial Intelligence (AI) presents and its rapidly increasing capacities has been recognised and utilised by wrongdoers. However, AI is only mentioned in passing in the strategy the Government plans to roll out. Whilst there is no doubt that any initiative is better than no initiative, given the size of the problem the level of investment must be at a level that is capable of making a difference.
Joanna Bailey, head of the financial fraud litigation department, commented "recovering money defrauded in an investment scam can be time-consuming; often because the individual that has been defrauded does not recognise that they are being defrauded as, very often, they are unfamiliar with the investment market. Also, they have been persuaded and befriended by the fraudster" Joanna further commented "the wrongdoers are adept at concealing themselves once they have been discovered and to pursue them successfully takes, not just money but exceptionally talented technology specialists, highly efficient tracing agents that can interpret the intelligence they obtain as well as swift comprehensive legal action."
There are a number of types of fraud, the common forms of investment fraud are:
- Investment fraud where the victim is presented with a "not to be missed" investment opportunity with impossibly high returns on investment, frequently the fraudster suggests speed is of the essence before the opportunity is "lost".
- Foreign exchange investment fraud – Forex – a fast moving area of financial investment that is known to deliver high returns. It is a complex area of investment and not for a novice, it is known as a "negative sum game" where one party can only win if another party loses.
- Recovery fraud occurs when fraudsters contact a previous investment fraud victim, and offer to recover their lost investment – in exchange for an advance fee.
- Romance fraud where a victim is duped into believing that they are in a long-distance relationship, they never actually meet the object of their affection and over time they are offered investment opportunities that are fake. The wrongdoers take considerable time to develop the "relationship" which makes it harder for the victim to recognise the fraud. This type of fraud may now be perpetrated by the use of AI. There is a reducing requirement for human beings to be involved in this callous deception, an AI model can be developed very rapidly that chimes with the victim and their interests.
Giambrone & Partners financial fraud department monitors the trends observed in financial fraud and develops strategies and tactics to recover our clients' lost funds, a most significant success, for example, was the following innovative case:
Joanna Bailey led our financial fraud team to a notable global success, (the first in Europe, second worldwide) in the case of D'Aloia -v-. (1) Persons Unknown (2) Binance Holdings Limited and others a matter concerning cryptocurrency fraud where the stolen cryptocurrency was identified in and the court of England and Wales was persuaded to permit the service of legal papers (worldwide freezing order) as a non-fungible token (NFT) through the blockchain to persons unknown, thereby guaranteeing that the wrongdoers could not spirit our clients' cryptocurrency into another wallet.
The Financial Conduct Authority's (FCA) quantitative analysis of victims of investment crime revealed that men in the "Retired with Resources" sector, those individuals who are over the age 65 years with savings were 3.5 times more likely to be targeted. Another sector exposed as vulnerable is women in the "retired on a budget" who frequently succumbed to recovery fraud. Financial fraud impacts a vast number of individuals each year, it is estimated that as many as one in ten people in the United Kingdom have fallen victim to financial fraud.
Joanna Bailey frequently leads the litigation against financial institutions involved in cryptocurrency trading disputes, as well as Forex investment issues and regulatory investigations and has some considerable success in retrieving our clients' funds lost in fraud.
She has developed a range of strategies both to find the assets of the individuals perpetrating the fraudulent schemes and restore the funds to our clients. As well as recognising culpability in the organisations facilitating (but not associated with the fraud), by failing to undertake adequate due diligence.
Joanna led the first case in Europe where proceedings were served on Persons Unknown connected with two digital wallets over the blockchain by non-fungible token or 'NFT' in a cryptocurrency fraud. Following this ground-breaking case Joanna was named as Lawyer of the Week in the Financial Times.
Joanna is highly experienced in high-value out-of-court settlement negotiations and has in-depth knowledge of the Civil Procedure Rules as well as English common law.
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.