Fraud Response: Criminal vs Civil

Fraud is now the largest crime type in the UK, with individuals, organisations and businesses all potentially falling victim to scams, opportunistic fraudsters, or unscrupulous companies.

The exact value of fraud is hard to specify; it is estimated that this costs the UK GBP137bn per year, however it is likely to be substantially more, given many victims do not report this for a variety of reasons, such as concern around negative publicity.

Much of our investigation work involves criminal response to fraud and other crime, including private prosecutions. However, an increasing number of investigations are to support civil fraud, and other litigation, to assist clients through a crisis.

Criminal vs civil?

A question we are often asked is whether victims of fraud should conduct a criminal prosecution, or pursue civil litigation.

There is no hard and fast rule on the best decision, as every case and circumstance is different. However, in general victims conduct a criminal prosecution in order to seek justice and punishment against those who have wronged them, whereas civil litigation is largely to seek recompense and financial compensation.

Inevitably there is cross-over between the two, however this decision is often a useful starting point for clients.

There are other considerations on which is the best course of action. Some examples include:

• ‍What is the evidence in the case?
  ‍The burden of proof is much higher in criminal proceedings than in civil cases, and furthermore the evidence gathering process is subject to far greater scrutiny in a criminal case.

• ‍Is the intention of litigation to obtain a settlement?
  ‍If so, a criminal prosecution may not be suitable (and leveraging a financial settlement using the threat of criminal prosecution may be an abuse of process). If this is the case, a civil case may be more suitable.

• ‍Is the suspect known?
  ‍If they are known, or can be identified, then either a criminal or civil case may be appropriate. However, for a criminal prosecution a person must be tried - if the suspects are not known, or are highly unlikely to be identified (for example, funds stolen from a fictitious anonymous cryptocurrency scam), then civil options would be the best consideration.

• ‍Who is the defendant in the case?
  ‍If it is an organisation that is to be litigated against, then civil proceedings would be the best option. For a criminal case, an individual must be tried (rather than a company or organisation), and their knowledge of wrongdoing (mens rea) must be proved to obtain a criminal conviction.

• ‍If the intention is to recover stolen funds, what is the asset position of the defendant?
  ‍If all the stolen funds are dissipated, and the defendant has no material assets, then civil litigation may not result in funds being restored. A criminal prosecution may be more appropriate – provided the motivation for the prosecution is based on seeking justice.

• ‍What is the jurisdiction?
  ‍While many frauds involve international parties, for a private prosecution an element of the offences has to have been committed in the UK. Private criminal prosecutions are fairly unique to the UK (and a very small number of other jurisdictions, such as Hong Kong), whereas civil litigation can be considered in a wide range of jurisdictions (such as the US). Depending on the case, civil remedies may be more appropriate.

• ‍Speed and recovery
  ‍if the intention is to recover stolen funds quickly, then a civil remedy may be the best solution. This is particularly the case with frauds and scams, where stolen funds are transferred to accounts controlled by criminals. A swift investigation, and urgent court applications, can result in freezing orders being served on banks and cryptocurrency exchanges, resulting in stolen funds being frozen and recovered before it is dissipated. A criminal case can take longer to get before the courts, and so should be considered when seeking justice against a known individual is the intention.

In deciding to pursue a civil or criminal prosecution, a consideration should be made on the background to the offence, who is being litigated against, and the desired outcome.

It is possible to pursue both, but careful consideration should be taken when deciding on the best course of action.

The building blocks of a civil fraud case

When a fraud has been identified, it is important to respond in a calm and measured way, while ensuring evidence is captured swiftly and effectively. This will give the best chance of securing all the available evidence, responding before stolen assets and funds are dissipated, and giving the best chance of identifying and prosecuting those responsible.

Having the correct insurance policies in place will not only assist with preventing fraud taking place in the first place, it will also allow for a response team to respond and investigate immediately - in many cases, valuable time is spent on identifying investigators, specialists (such as forensic accountants), and scoping and instructing lawyers.

Every case is different, however in many cases the building blocks of a civil fraud are the same. These can involve:

• Witnesses – a key element in any investigation is interviewing witnesses – producing detailed witness statements provides key narrative, outlines the mechanics of the fraud, and puts key evidence into context for the courts.
• Documentary evidence – identifying, reviewing and analysis of key documents is vital, to corroborate witness testimony and provide proof of fraud. This often includes emails, communication, and physical documents.
• Forensic accountancy – in many cases, careful analysis of company records, and associated documentation, will be required to understand the nature and extent of the fraud, and the destination of stolen funds.
• Digital forensics – in some cases, it may be unclear who is involved in a complex fraud. Conducting data analysis on emails, computer databases and other data sources can greatly assist with identifying those responsible, and gathering compelling evidence of fraud.
• Open Source – a substantial amount of evidence and information is publicly available – providing you know where to look. We have access to a wide variety of datasets, and an international network, allowing us to gather key evidence on individuals and companies.
• Third party enquiries – in many cases, additional corroborating evidence will come from third parties – this can include independent witnesses, and companies holding relevant data. Our team can conduct enquiries with these third parties to gather crucial evidence.
• Covert investigations – in some cases, there may be limited tangible evidence, however covert investigation (such as surveillance) can be a valuable evidence gathering tool. Targeted and specific covert investigation can provide overwhelming evidence in a wide variety of crime types.
• Legal liaison – our team will produce a comprehensive evidential case file, and work alongside specialist lawyers. Using our evidence, court applications can be made – this can be to obtain additional evidence, identify suspects, or freeze stolen funds. Successful litigation will rely on the evidence produced, and our team have extensive experience in producing material for use in court.

Conducting litigation is never to be undertaken lightly; however a swift and decisive response to fraud will give the best chance of identifying those responsible, recovering stolen funds, and deterring future offending.

For more information on how we provide clients with litigation support, and the areas we cover, click here.