Member Article

Greater awareness of sanctions needed to combat fraud

Private prosecutions should be used to combat the UK’s £73bn fraud problem, experts at the University of Southampton have suggested.

The study, commissioned by law firm Eversheds, accountants and business advisers PKF, and the Midlands Fraud Forum, looked at how sanctions could be effectively used to deter fraud.

An estimated 98.5% of cases go unreported to the Police, and only 0.4% result in a criminal sanction, the report found.

It is suggested that civil litigation tools such as freezing orders and asset disclosure orders remain underused, and the authors have called for barriers to the use of these civil sanctions to be removed.

Mark Surguy, Partner at international law firm Eversheds and Chair of the Midlands Fraud Forum, said: “Responding to commercial fraud is much more complex than might be thought.

The need to take into account a variety of perspectives, commercial objectives and the workings of the different parts of the legal system creates an environment in which lack of knowledge and poor decision-making merely compound the problem.

The empirical evidence offered by this research only serves to highlight the need for a new and invigorated approach.

Its conclusions must not be ignored and organisations should take notice in order to be prepared to successfully prevent and respond to fraudulent activity.“

The report suggested establishing a not-for-profit organisation to specialise in investigating and imposing sanctions for fraud; enabling more private prosecution or civil suits; educating fraud investigators on the sanctions available; establishing clearer credentials to distinguish expertise in fraud to help victims; and creating a sanction and preventative tool from a fraudsters’ database.

David Liddell, a forensic services partner at PKF, said: “To minimise fraud, businesses need to develop a strong anti-fraud culture to create a meaningful deterrent effect.

“Effective use of criminal and civil sanctions forms an important part of this strategy because it demonstrates to everyone – both inside and outside the organisation - that the business is serious about tackling fraud.

“Removing the barriers to using civil sanctions therefore has the potential to dramatically reduce the cost of fraud across the economy, saving UK Plc tens of billions of pounds each year.”

Mark Button, Director of the Centre for Counter Fraud Studies at the University of Portsmouth added: “Attrition in the criminal justice system is a well known problem, but when we began to uncover the scale of attrition for fraud offences in this research we were shocked at the tiny proportion, which are dealt with by the criminal justice system.

“We were also surprised at the many alternatives to criminal prosecution which could be just as effective, but which are generally under-utilised by organisations.

“It is vital we do more to punish fraudsters and we hope this report helps to stimulate further action and debate.”

This was posted in Bdaily's Members' News section by Tom Keighley .