To catch a fraud

Money Launderers, mortgage fraudsters and smugglers have embraced the global economy, leaving lawyers to tackle complex cross-border issues. Alison Clarke reports on how the law is battling to keep up with the white collar crooks

Think Guinness, BCCI, Blue Arrow, Barings, Maxwell's millions and naughty Nick Leeson – white collar crime is never far from the headlines. Money laundering, mortgage fraud and smuggling rackets are the preserve of those lawyers who choose to specialise in this field.

But as legitimate businesses have entered the global economy so have the white collar crooks, leaving lawyers in their wake with complex cross-border issues to resolve even before they tackle the case itself.

And since the Serious Fraud Office (SFO) was launched 12 years ago, its increasing workload has offered a rich seam of work for firms willing to adapt and react as the nature of fraud changes. While the rash of high-profile cases that followed the 1980s has eased, there is still a wealth of work for barristers at the white collar bar, both on the civil and the criminal benches.

Colin Nicholls QC, a criminal fraud specialist at 3 Raymond Buildings, says that special procedural measures have now been introduced for serious commercial fraud, with the result that the conduct of fraud trials has, to a large extent, become a paper exercise.

He says: “An enormous amount of the preliminary arguments are now conducted on paper between the judge and counsel, even though these are jury trials.”

There is also a trend to move away from jury trials altogether. Lawson says that the prosecuting authorities – the SFO, Customs and Excise, the Department of Trade and Industry, Inland Revenue and the Crown Prosecution Service – want to try more cases as regulatory, rather than criminal, offences. “That means they are taken out of the jury system and I think that we will see more and more of that,” Lawson says.

Equally, more cases are being resolved through mediation and arbitration, both of which are quicker and cheaper than going to court.

Elizabeth Birch, a barrister specialising in commercial law at 3 Verulam Buildings and founding director of the commercial arbitration and mediation panel ACI, argues that almost any civil case is capable of being settled through mediation and arbitration, if there is a willingness from both parties to do so.

But not everyone is convinced. Monty Raphael, senior partner at Peters & Peters, says that although alternative dispute resolution is available for fraud cases, it is rarely used because it depends on the goodwill of both parties. “Given that fraud is usually so confrontational, its uses seem limited.”

But given the changing nature of fraud, can the law or the UK's fraud lawyers ever hope to keep up?

Michael Lawson QC, head of chambers at 23 Essex Street and leader of the south-eastern circuit, says the law needs to respond quickly to deal with fraud on an international basis.

“The law needs to be continually updated, although it can never keep up with the fraudsters, who just think up a new wheeze and get on with it. The law then has to respond accordingly.”

The introduction of legislation allowing ancillary proceedings for the recovery of assets to be issued in the UK, although the main action might be taking place in, say, the US, means fraud lawyers have to think more globally.

Jeremy Donne, a barrister at Queen Elizabeth Building, says: “As long as a significant part of the offence or agreement has taken place in this jurisdiction, it can now be pursued here. This should improve mutual cooperation between countries in the fight against fraud.”

According to Stephen Pollard, a partner in the criminal department at Kingsley Napley who specialises in City of London white collar fraud, more crime is crossing national boundaries. As a result, he is often faced with questions of foreign law. “When that happens, I go to a local lawyer for advice. Lawyers are generally not expert in the laws of other countries, so increasingly I find that I need a network of people in other jurisdictions that I know and trust.”

Donne also relies on the know-how of local firms. He says: “Barristers do not have to be familiar with the law of foreign jurisdictions and very few are. If we have a cross-border crime and someone is saying that this cannot be an offence in the UK because it is lawful in, say, Switzerland, then we would get an expert opinion from lawyers in the relevant country which would be considered along with all the other advice we have.”

There are, of course, exceptions to every rule. One senior QC who specialises in extradition is often thrown in at the deep end. He says: “Suppose I have to go to Malaysia, then in that event I get specially called to the bar in Malaysia. Although I would have Malaysian junior counsel, I do have to just dive in and get to know the local legislation.”

The SFO has also had to respond to the increasing amount of international fraud. Robert Wardle, assistant director and head of policy at the SFO says: “Given that frauds do not necessarily take place in one country, we work hard to mount relationships with overseas authorities and have a small unit at the SFO dedicated to mutual legal assistance. We need to develop relationships and understand how other authorities work.”

Law enforcement and judicial authorities in Europe already work together. Hans Nilsson, the head of division of judicial cooperation in the council of the European Union (EU), says that the EU is in the process of setting up a network of prosecutors, the European Judicial Network, which will, among other things, deal with protecting the financial interests of the community against fraud.

In addition, Nilsson says that a new convention will soon allow member states to set up joint fraud investigation teams. He says: “Under that convention, the member states can contact each other directly. Judges, prosecutors and the police can talk to each other rather than having to go through their respective ministries.”

However, there is a limit to the amount of harmonisation that can be reached in the UK and Europe, not least because the systems of the various countries are so different.

Nilsson says: “You can say that a fraud is always a fraud, but in some countries the legislation requires you to prove intentional deceit, whereas in others it requires intentional deceit and proven damage, whereas in yet other countries it requires intentional deceit, proven damage and wilful recklessness.”

Anthony Boswood QC, head of chambers at Fountain Court, says that although it would be helpful if there was more harmonisation of legislation between Europe and the UK, it would give rise to a lot of trouble.

“The law can become less clear because you end up with an amalgamation of different laws with different starting points,” he says.

Needless to say, not everyone agrees. Lawson says harmonisation would make life a lot easier. He points to the idea of Corpus Iuris – a proposal to have one European law to deal with fraud in the EU – as a possible way forward.

The European Parliament is pushing the idea, but according to Nilsson, it does not have the support of the Council Of Ministers.

Although there is always a need to update, and possibly even harmonise, legislation, Donne believes most people think that there is now a sufficient armoury of legislation in the UK to deal with fraud.

Raphael predicts that, in future, the emphasis in white collar fraud will be on cross-border investigations, money laundering and the corruption of public officials.

Presumably all that remains after that is to catch the fraudsters themselves.