Serious fraud is exactly what it sounds like; fraud so serious that the government takes notice and decides to investigate it. But do you know how to avoid it? Find out, here.
Serious fraud is one of the worst sentences the government can hand down to an individual or corporation.
If you are accused of serious fraud, you could end up with a hefty fine and a lengthy prison sentence. Even if you’re not found guilty, an investigation could cripple your business before the prosecution even starts.
Today, we’re going to help you distinguish fraud from serious fraud, and give you the most common types of fraud cases that could be considered serious. Then, we’ll be sharing some examples to put the crime into perspective. So, if you want to know all there is to know about fraud, stay tuned.
What is Fraud and How is it Different From Serious Fraud?
Fraud is a broad term for the deliberate use of deception or dishonestly to disadvantage or cause financial loss to another person or party. In England and Wales, fraud cases can be dealt with by the civil justice system, criminal justice system, or both. Criminal fraud falls under the Fraud Act 2006 with the main offences being:
- Fraud by false representation
- Fraud by failing to disclose information
- Fraud by abuse of position
The Financial Times reported that the UK lost £2 billion to fraud in 2017. What’s more, a study by Crowe Clarke Whitehill, Experian and the Centre for Counter Fraud Studies in the same year showed that fraud was the most common criminal offence in the UK.
Criminal fraud only becomes serious fraud when the UK government’s Serious Fraud Office (SFO) gets involved. The SFO is a specialist prosecuting service that only deals with the top level of serious fraud, bribery and corruption.
The SFO only take on a small number of economic crime cases which the body’s director decides is serious enough. The director takes into account the actual or intended harm to:
- The public
- The reputation and integrity of the UK as an international financial centre
- The economy and prosperity of the UK
What Might be Classified as Serious Fraud?
Now that we have an idea of what serious fraud is and how it differs from regular criminal fraud, we’re going to delve into the kind of fraud the SFO might consider serious.
Investigations conducted by the Financial Conduct Authority, HMRC, the Office of Fair Trading, and the Serious Fraud Office make it really difficult for your company to trade, even before the prosecution begins. Usually, investigations begin with a police search of your home or business, where they can seize materials, freeze accounts and assets, and arrest you on the spot. Financial fraud covers:
- Money laundering
- HMRC tax investigations
If you commit any of these crimes, you might receive a fine or life imprisonment. If the case is bad enough, it might be passed on to the SFO who will decide whether it constitutes serious fraud.
Credit Card Fraud
This type is fast-evolving due to advancements in technology, and more people shopping on the internet. Because these cases are on the rise, and they’re quite complex to sort out, the police and courts take them very seriously to deter people from doing it. The five most common types of credit card fraud are:
- Card-not-present (CNP) fraud
- Counterfeit and skimming fraud
- Lost and stolen card fraud
- Card-never arrived-fraud
- False application fraud
Less serious cases will be tried at magistrate’s court, and more serious ones at crown court with a potential sentence of four to five years in prison.
Again, if this fraud takes place on a large scale that significantly harms the general public, the UK’s reputation, or its economy, it might be picked up as a serious crime by the SFO. This will result in a much harsher sentence.
Counterfeit and Pirated Goods
Counterfeit or pirated goods can lose the government money in profit and taxes. They also put consumers at risk from poor quality, unsafe goods. This type of fraud is particularly attractive to organised criminals as they get a high return on a very low investment.
Counterfeit currency tends to be the best investment, but it puts them in firing line of the Serious Fraud Office. This is because large amounts of fake money harms the public, makes the UK look foolish, and has a significant impact on the economy.
Thankfully, the problem has largely reduced since the new £1 coins and polymer £5 and £10 notes came in due to their increased security features.
This type of fraud occurs when criminals gain access to enough of an individual’s personal information that they can commit fraud. They accomplish this through various techniques, from outright theft and social engineering to harvesting data through cybercrime.
Once they have the information they need, the criminals can impersonate the victim to access bank accounts, claim benefits on their behalf, or obtain documents in the victim’s name. Identity data is largely stolen online these days, by convincing individuals to disclose personal information and passwords through ‘phishing’ emails and hacking.
For a case to be considered serious fraud, it would have to be done on a massive scale and damage a large proportion of the UK populace.
What are Some Famous Examples of Serious Fraud?
In case the information above hasn’t really put into perspective what serious fraud is, we’re going to share a few examples of cases undertaken by the SFO to give you a better picture.
Serious Corporate Fraud
This first example deals with largescale serious fraud within the corporate world that was resolved on 31 July 2020.
The SFO secured confiscation orders totalling £5.45 million against the former CEO and COO of Afren. This occurred after they deceived the board into a $300 million deal that would make the two men $17 million richer. Both men were found guilty of one count of fraud and two counts of money laundering.
The CEO and COO hatched the scheme when their request for a £6.6 million and £3.8 million salary package was rejected by the board. In an attempt to increase their salary, the two created a side deal with one of Afren’s Nigerian oil partners. This way, they could squirrel away 15 percent of the payment to a shell company that the CEO and COO owned.
Lisa Osofsky, director of the SFO, said:
“These men reacted to shareholder concerns about their high remuneration by defrauding the very company that paid them. Their selfish actions showed cynical disregard for the law, their colleagues and common decency.”
“Our pursuit of fraudsters does not stop at conviction, and I’m delighted that our Proceeds of Crime team have been able to identify considerable criminal gains from these men.”
Serious Fraud Against the Public
This case involves serious fraud against innocent members of the public that was resolved on 21 January 2020.
Two men who were part of a group that defrauded members of the public, many of whom were elderly or invested their life savings into the company, have been ordered by the SFO to pay back the £434,835 to the people they stole it from.
Kenneth Reid and Niall Hastie were ordered to pay back £18,869, and £2,759 within three months, or they’d have to serve another two years on top of the three and a half years they’re already serving. Their co-conspirators, Robert Ross and Stephen Wilson, were ordered to pay £193,206 and £220,000 in November 2019 which was to be paid in compensation to their victims.
These men ran the Manchester-based Solar Energy Savings Limited, which defrauded hundreds of victims over two years. In this time, they made £17 million, which was used to fund an extravagant lifestyle of expensive cars, and luxury holidays abroad.
Lisa Osofsky, director of the SFO, said:
“These men operated a sophisticated scheme to scam people out of money they had worked a lifetime to earn. The SFO is committed to stripping criminals like these fraudsters of their ill-gotten gains and securing compensation for aggrieved victims. We work tirelessly to ensure that crime doesn’t pay.”
So, What Does This Mean for You?
Here, we’ve discussed what serious fraud is, what types of fraud the SFO are likely to cover, and given you some examples of cases recently tried by them.
If you, or someone you know, is being prosecuted for serious fraud, your only option is to speak to a lawyer who specialises in that area. Not all prosecutions lead to convictions and you might be able to secure a DPA (deferred prosecution agreement) where you have to meet certain conditions or risk facing prosecution.
Hopefully none of you have been charged with serious fraud, and you’ve learnt something from this post. Thanks for reading and see you in the next one!