New Law to Protect against Financial Fraud

The National Crime Agency has reported that fraud accounts for over 40% of crime in England and Wales, with only 13% of cases reported to Action Fraud. Recently, new law has been introduced to address financial fraud which is aimed at placing more responsibility on financial institutions and banks, allowing them to monitor their customers’ dealings by enabling them to review transactions and where necessary, step in and act if there are any suspicions that fraud is involved. 

The Economic Crime and Corporate Transparency Act introduces a new offence of “failure to prevent fraud”. This applies to large companies and organisations who will be held accountable and criminally liable should an employee commit fraud for the purposes of benefitting the organisation or the perpetrator. Importantly, there is no requirement to demonstrate that directors or senior executives were aware of the offence. Organisations that already take seriously their responsibilities with regard to fraud prevention will benefit reputationally.

Demetri Bezaintes, an Associate in the banking and financial fraud litigation department commented “Part of the objective in creating this offence is to attempt to ensure that such large organisations develop an anti-fraud culture sooner rather than later and put in place robust practices to protect their customers.” Demetri further commented “the new law is wide and not only extends to employees but agents, subsidiaries or any other associated person of an organisation, including a person to whom services are provided on behalf of the organisation. The perpetrator can be prosecuted for undertaking the fraud and the organisation for failing to prevent it”

Large organisations that have conduct of their customers’ money, will have a greater level of responsibility to keep their customers safe from fraud and introduce reasonable fraud prevention procedures and also to act swiftly to compensate victims of fraud. The prevalence of financial fraud with its devastating consequences for individuals is growing year on year.

The Economic Crime and Corporate Transparency Act applies to organisations that have 250 employees or more and/or have assets of over £18 million or a turnover of £36 million. However, smaller businesses may also be caught by the Act if they can be deemed to be an “associated person” of a large organisation and they will also have to take the same measures. If an organisation has subsidiaries and if the total resources held by the group of companies meet the threshold for compliance, the entire group will fall within the scope of the Act. An “associated person” may also be a non-UK business. The Act is expected to come into force on 1 September 2025 which should provide organisations with adequate time to put in place the measures that are required. Economic Secretary to the Treasury, Tulip Siddiq commented “Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people.”

Giambrone & Partners’ banking and financial litigation lawyers can provide guidance as to whether the Act is applicable to a business or person and if so, we can outline the measures required. Our lawyers strongly advise that any anti-fraud procedures that an organisation puts in place should be demonstrably vigorous in order to be confident of compliance, particularly as the financial penalty for breaches is unlimited.

The battle against fraud continues and the Government is committed to making every effort to reduce fraud, Lord David Hanson, Minister with Responsibility for Fraud commented “Fraud is a pernicious crime, and we are determined to root it out wherever it takes place. This guidance marks the first steps towards a corporate culture shift around fraud prevention...” The government will draft guidance to allow organisations to understand what is expected in relation to reasonable procedures, this over-arching assistance should be available in early summer. However, Giambrone & Partners banking and financial fraud litigation lawyers point out that it has always been notoriously difficult to fight scams and fraud. Our lawyers note that there are still some loopholes that should be addressed.

Giambrone & Partners has had considerable success in recovering our clients’ money lost to fraud and have also instigated ground-breaking legal cases that have changed the way fraudsters can be pursued through the courts.

Demetri Bezaintes is an associate based in the London office within the Financial Services and Crypto Litigation Department. He is an SRA-regulated Registered Foreign Lawyer (RFL) in England & Wales and 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

Notable Cases

Tippawan Boonyaem v Persons Unknown Category A & Ors [2023] ewhc 3180 (Comm)

The High Court granted the first UK Summary Judgment to a foreign based victim against fraudsters in multi-jurisdictional cryptocurrency investment scam. 

Mannarino v Person Unknown & Ors [2023]

The High Court granted the first default Judgment in a claim relating to cryptocurrency fraud on behalf of the foreign Claimant demonstrating that the English Courts will act to protect foreign victims of fraud where there is sufficient connection to England and Wales.

D'Aloia v Person Unknown & Ors [2022] EWHC 1723 (Ch) (24 June 2022)

The High Court granted an order permitting service of proceedings on persons unknown via a non-fungible token (NFT) via the blockchain. This is the first instance of an English court allowing service by means of distributed ledger technology and paves the way for victims of crypto-asset fraud to use novel technology to bring claims against persons unknown.

https://www.nft.london/speakers/legal-and-accounting

Press

Article - UK: Thinking Of Investing In Cryptocurrency?

Would you like to know more about how to regain your funds lost to financial fraud? Please contact Demetri's clerk Joseph Crick on JC@giambronelaw.com or please click here