New initiative in the fight against fraud

Partners against crime - a joint anti-fraud initiative by the CBI, the metropolitan and City police fraud squads

The CBI and the fraud squads of the City and Metropolitan Police announced on 24 March a novel initiative in the fight against corporate fraud. The announcement is against the background that corporate fraud is on the increase and police resources are limited. Initially the Scheme will enable the Big Five accountants and certain private investigators to work with the Police in carrying out an investigation in cases where there are "reasonable grounds to believe that significant fraud has been or may be committed". Full details as to how the Scheme will work are set out in a Statement of Intent ("SOI"), which does not in any way alter existing police powers.

Where a particular case is accepted by the Police to be dealt with under the SOI, the private investigator will be paid by the corporate victim and will work under the direction of a Police Officer to provide an evidential package for the Police to take forward to prosecution. It is envisaged that there will be a flow of information both ways between the Police and the investigator, but the investigator will be under a duty to use any information provided by the Police for the sole purpose of the criminal investigation. The Crown Prosecution Service will remain the body, which makes the final decision as to whether to prosecute.

The SOI will operate as a pilot for twelve months following which it may be extended to other parts of the country. It is proposed that a system of accreditation will be set up in due course to regulate the investigators who will be able to operate under the SOI.

The SOI represents an interesting move, which may lead to the increased reporting, detection and prosecution of fraud within companies. However, to be really successful in the fight against fraud, it will need to develop into a broader Scheme.

We see the SOI as being useful for medium-sized cases of fraud against companies, for instance, where the loss is less than £1 million. In the cases of larger frauds, these will continue to be investigated and dealt with in conjunction with the Serious Fraud Office and with the company's private investigators.

It is a shortcoming in the SOI in that it does not enable the defrauded company to make use of information passed to it to assist in the recovery of assets through the civil courts. Whilst the City of London Fraud Squad makes recovery of assets a priority, the SOI needs to address more clearly the needs of the victim to make a swift recovery of assets. However, all indications we have from the Police are that they do not intend to make any changes to take this point into account.

For further information contact Tony Marks, partner in CMS Cameron McKenna's Litigation and Dispute Resolution group, specialising in fraud.
Tel +44 (0)20 7367 2508 e-mail [email protected]

This article appeared in Solicitors' Journal on 31st March 2000.