Understand Your Rights. Solve Your Legal Problems
Are you excited about getting involved in online trading but worried about some of the scam operations that appear in news stories from time to time? Or perhaps you're already an active trader or investor who just wants to know the best ways to keep the baddies at bay and avoid scams, hustles, and entrapment ploys. Whichever category you are in, it's essential to stay up to date on not only the tech advancements boosting cybersecurity but also the freshest attempts by criminals, which is technically what scammers are, to separate honest people from their hard-earned money. As 2022 comes to a close, crooks are learning to become more subtle in their tactics. Still, some of the most blatant lies and schemes continue to lure unwitting people into the trickery. The most common scam of all is the promise of outsized profits for small initial investments.
For generations, long before online trading existed, thieves used the promise of huge rewards and payoffs as a way to convince everyday people that riches were close at hand. If only the unsuspecting consumer would fork over a deposit or upfront investment, he or she could get in on the ground floor of a can't-miss payoff. Of course, the proposition is 100% false, but enough people fell for it that the criminals enjoyed consistent success. The modern version of the exact same ploy is that their trading system is unique. It uses AI (artificial intelligence) to spot investments and trade setups that can yield more than 1,000% return on investments of any size. All you have to do to get involved is make a quick bank transfer to our investor's website. This opportunity won't last long, so act now.
There are several versions of the wording, but the central idea is that people need to act immediately and send a direct transfer from their bank or credit card to a location or account. The big profits now the game is one of the oldest for a reason as crooks know that it works on at least a few gullible people. 
Fortunately, if you work with a reliable, high-powered brokerage firm like AvaTrade, you can read blog articles and educational materials that deliver in-depth explanations about nefarious and potentially dishonest con games.
Beware of the app trick. It's a high-tech, relatively sophisticated way for hustlers to get victims to download off-market programs and applications to phones, laptops, and other devices. The problem is that, unless you get your trading apps from reliable sources, you're playing with fire. Off-market digital products can contain malware, spyware, and other pernicious components that can gain access to your personal information.
Never open an account with a brokerage company that isn't licensed in its jurisdiction. Additionally, do your due diligence and make sure whichever brokerage firm you choose has excellent customer reviews on verified websites. Though there are small, honest brokers out there, it's wise to stick with company names you know. Always check the fine print on trading websites to make sure that companies are licensed.
If you've been around the investing scene for a while, you probably have received spam emails that include statements about stocks and other securities that are ready to explode in value and to get in now. These scamming operations have been around for decades. The goals of the operators vary, but most are related to the old pump-and-dump schemes of ages past. The way it works is ingenious. Promoters convince as many people as possible, via mass emails and social media posts, to purchase low-cost shares that are getting ready to take off. Often, thousands of people purchase these inexpensive stocks, which sends prices upward, at least temporarily. Then, the ones who did the enticing sell the large numbers of shares they already owned, earn huge profits and get out before the inevitable fall in value.
Email trickery comes in all shapes and sizes. However, one of the most common versions asks you, the reader of the spam message, to click an in-message link for more information or to sign up for a free newsletter. In truth, when you click on links like those, there's a high probability that you're inviting malware or spyware onto your device. Even if the company name is one you know and trust, the message could be from anyone. Always contact companies directly via their main websites when you wish to ask about an offer, discount, or newsletter. Never click links you receive within email messages.
Follow on: How Scammers Steal from Older Adults - Ways to Combat Fraud.
The scale of the problem has made it hard to ignore, with an estimated £10 billion having been lost to fraud. The political impact has also been significant. Former Chancellor turned Prime Ministerial hopeful Rishi Sunak has been criticised by colleagues during the Conservative leadership contest for the Treasury’s approach to the fraud. Prior to that, the UK’s fraud minister Lord Theodore Agnew resigned, using the bluntest of language to outline his unhappiness with what he viewed as a lack of government action to tackle the problem.
Lord Agnew’s anger is understandable. With almost £6 billion lost to fraud via the government’s furlough, self-employment and Eat Out to Help Out schemes and a further £5 billion having been illegally obtained through the Bounce Back Loan scheme, there is no doubt that a heavy price has been paid for weaknesses in the government’s financial initiatives for tackling the effects of Covid.
It is no huge surprise that fraudsters have used the coronavirus pandemic as an opportunity to deploy new techniques to both defraud government bodies and callously exploit individuals. The very support mechanisms that were put in place to help those in need have been abused by those who identified the chance to use them for illegal gain.
The whole sorry tale is just further proof that those looking to make fraudulent gains will assess every possible opportunity to do so. And if they can do, they will do. The frustration that some have voiced about fraud relating to the Covid schemes could be boiled down to one question: if the fraudsters could immediately spot the potential for fraudulent gains, why couldn’t the architects of the schemes? A further question that also needs answering, I believe, is why were steps not taken to tackle the problem as soon as it became apparent?
It was as early as July 2020 that the Crown Prosecution Service warned the public to beware of fraudsters exploiting situations created by coronavirus. Such a warning indicates at least some awareness in the corridors of power of the risk of fraud taking root in the pandemic. This makes the fact that fraud on such a large scale was allowed to happen seem particularly shocking. What is arguably just as shocking, however, is the report that the Treasury expects to recover only £1 of every £4 stolen from the public purse by Covid fraudsters. A 25% recovery rate would rarely be viewed as adequate when it comes to regaining any stolen assets. The fact that the assets in this case amount to more than £10 billion makes the anticipated 1 in 4 success rate seem even more feeble.
Critics of the situation have, understandably, branded the situation an outrage. The National Audit Office report last year on the Bounce Back Loan scheme was critical of the limited efforts to regain the money lost to fraud. The NAO also attacked the government for prioritising payment speed over almost all other aspects of value for money in order to achieve its policy intention of supporting small businesses quickly during the pandemic.
Supporters of the government and advocates of the way it dealt with the unprecedented global pandemic will say that commerce dictated an urgent response to tackle the country’s fiscal needs. But confirmation of the amount the government is writing off is not easy reading, not least in a time of financial hardship.
The Taxpayer Protection Taskforce, which was provided for in the 2021 Budget, is leading to 1,250 HM Revenue and Customs (HMRC) staff attempting to identify those who have tried to make fraudulent gains from the government schemes. A total of £100 million is being spent on the Taskforce, with further investment in resources and technology. This can at least be seen as an indicator that the government is now fully aware of both the scale of the problem and the need to hold those responsible to account.
Yet we are now in a situation where the government seems to be throwing a vast sum at an attempt to close a stable door after a very expensive horse has bolted. This situation could have been avoided if the government had been less eager to hand out far bigger sums two years earlier.
About the author: Niall Hearty is Partner at Rahman Ravelli.
Mars Inc, which owns Skittles, has been sued by a consumer who claims that the sweets are unsafe to eat because they contain a known toxin that the company had pledged to phase out six years ago.
In a proposed class action, plaintiff Jenile Thames accused Mars of putting consumers at risk by using “heightened levels” of titanium dioxide (TiO2) as a food additive.
The lawsuit also highlighted that the European Union is set to ban titanium dioxide next month after a food safety regulator there deemed it unsafe due to "genotoxicity”.
"A reasonable consumer would expect that [Skittles] can be safely purchased and consumed as marketed and sold," the complaint said. "However, the products are not safe."
The lawsuit is seeking unspecified damages for fraud and violations of California consumer protection laws.
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To say that corporate criminal liability has been viewed as a thorny issue in recent years is to understate the situation. After all, if it had not been such a great cause for concern, the Law Commission would not have been asked to examine it and produce options for change.
Having grasped this particular thorn, the Commission has now presented the government with possible ways to reform the law around corporate criminal liability in England and Wales. The Commission’s findings were keenly awaited. Corporate criminal liability has been the issue that most white-collar crime commentators agree has needed change, in order to ensure that large corporations are held to account when wrongdoing is alleged.
The Commission’s much-anticipated report details 10 options for the UK government to consider. The Commission makes clear that its proposals are intended to make sure that corporations can be properly convicted of crimes without what it calls “an administrative burden’’ being placed on law-abiding businesses.
Its options include extending the attribution of liability to corporations for the conduct of senior management. This would involve reforming the established “identification doctrine”. This doctrine currently involves needing to prove that the most senior officers of the corporation – its “directing mind and will” - had the requisite criminal intent. Only if this is established can the corporation be held criminally liable.
Yet retaining the identification doctrine is another option put forward by the Commission.
The Commission also puts forward the idea of extending “failure to prevent” offences – such as what we have with the Bribery Act’s failure to prevent bribery offence or the offence of failure to prevent the facilitation of tax evasion in the 2017 Criminal Finances Act - so that they capture other economic crimes. Introducing an offence of failure to prevent fraud would be a possibility. This would cover a situation in which the company has failed to put measures in place to prevent its own employees or agents from committing fraud for the benefit of the company. New financial penalties and reporting requirements for corporations are also suggested as possible reform measures.
Taken as a whole, all the Commission’s suggestions are welcome. They are an understandable response to an issue that few would argue does not need to be addressed.
As it stands, the aforementioned “directing mind and will’’ requirement is a stumbling block to successful corporate prosecutions – at least that would be the view put forward by the Serious Fraud Office(SFO) and possibly other enforcement agencies. The difficulty arises from there being no precise legal definition of what constitutes a directing mind. It has long been held that in order to successfully prosecute such a case one would need to find a senior executive – or someone at an equivalent grade - guilty of the alleged criminality.
Critics of the identification doctrine argue that the make-up and organisational structure of most modern companies is designed to prevent any single individual from having full discretion to act without accountability to others. An example was the fraud charges brought against Barclays by the SFO in 2019 over the bank’s 2008 fundraising from Qatar. The case was eventually thrown out after the Criminal Court of Appeal ruled that Barclays’ ex-chief executive John Varley was not the directing mind of the bank. It found that ultimate authority for its fundraising rested with the bank’s board and that Barclays could not be prosecuted on the SFO’s evidence.
It was a case that highlighted the difficulties involved in holding a corporation to account. Since that ruling, prosecutors have pushed for a fresh look at the law and the protections that many large companies are believed to benefit from. But at the same time – and this was recognised by the Commission – care needs to be taken to make sure corporations are not saddled with a new and burdensome compliance regime.
It is important to remember that the Commission’s options are not recommendations. But the publication of the Commission’s report is only likely to make the calls for change regarding corporate criminal liability noticeably louder. It would not be going too far to suggest that there is a broad consensus that the law must go further to ensure that corporations – especially large companies – can be convicted of serious criminal offences, such as fraud.
The Commission has given the government a number of ways to reform a prickly issue that has long been viewed as needing change. It is now the government’s turn to grasp it.
About the author: Niall Hearty is Partner at Rahman Ravelli.
Niall Hearty of financial crime specialists Rahman Ravelli takes a look at whether the recently-announced Public Sector Fraud Authority will be effective.
Spring, as they say, has sprung. It is the season for new beginnings. So it is perhaps appropriate that the government chose its Spring Statement to announce its latest attempt to tackle fraud.
The government appears to be pinning its hopes on the creation of a Public Sector Fraud Authority. Almost £49 million is to be devoted over three years to tackling fraud, with around half of this being used to transform the Cabinet Office’s current counter-fraud activities into the new authority.
Supporters of the new body believe it will hold government departments to account when it comes to preventing and tackling fraud and will be a useful tool for identifying fraud and seizing money from those who perpetrate it.
On paper, this sounds like a worthwhile development. To use a spring metaphor, it could be viewed as one of the first shoots of the government’s growing awareness of the need to combat fraud involving taxpayers’ funds. The government has already announced that £100 million is being spent on a taxpayer protection task force to tackle fraud involving HM Revenue and Customs (HMRC) schemes. The Public Sector Fraud Authority, it is hoped, will grow and flourish alongside the task force.
But all is far from rosy in the garden. Two months ago, the Public Accounts Committee said that HMRC’s unambitious plans for recovering a total of £6 billion it estimates it spent incorrectly in COVID-19 support payments could lead to the government writing off at least £4 billion of taxpayers’ money. The new announcement of anti-fraud investment can certainly be seen as an attempt to tackle what is clearly a problem. But for all the understandable talk of the need to ensure efficiency and value for money for the taxpayer, the government has left it very late to commence its war on coronavirus-related fraud. And it appears to have come armed for the fight with the equivalent of a pea shooter.
The eye-watering amounts that have been both lost to COVID-related fraud and paid out on procurement of PPE (personal protective equipment) have cost the government dearly. The announcements of efforts to recoup at least some of this look, at first glance, to be impressive. But when the sums being invested in such activities are considered alongside the amounts that have been lost, the catch-up exercise appears, at best, to be limited.
The House of Commons’ Public Accounts Committee inquiry into fraud and error during the pandemic heard that the Bounce Back Loan Scheme alone accounted for £4.9 billion of losses due to fraudulent loan claims, as reported in the Department for Business, Energy and Industrial Strategy’s 2020-21 accounts. That is £4,900 million. And that is, give or take the odd penny, a hundred times more than the entire budget for the new anti-fraud activity. Bearing in mind we do not know at this stage whether the Public Sector Fraud Authority will be helping with anti-fraud activities administered by local authorities – who paid out an estimated £1 billion-plus to COVID fraudsters – any hopes of it being an effective antidote to fraud against the taxpayer should probably be kept in check.
Hindsight is a wonderful thing, and it is easy to pick holes in the government’s response to the sudden crisis that COVID brought about. The government spent, at current estimates, between £310 billion and £410 billion on coronavirus. Mistakes were made and would probably not be made again knowing what we know now. But it is hard to believe that apportioning tens of millions of pounds to investigating fraud that involves billions will prove to be an effective approach. If those in the corridors of power have genuine hopes of retrieving anything like a decent proportion of the funds that they were hoodwinked into paying out, they are likely to be severely disappointed by the results that they will see from their current initiatives.
Coronavirus – or more precisely, the government’s approach to coronavirus – has led to large amounts of money being obtained by people under false pretences. They will not be hanging around with this cash in their pockets and bank accounts, just waiting to be apprehended and have their ill-gotten gains seized. To trace them and/or have any chance of regaining even a fraction of what they took will take intense, detailed and time-consuming work. Given the numbers of people and the huge sums involved, there is little chance that throwing tens of millions at the problem is going to have any chance of resolving this.
The new measures may look attractive at first glance. But the seeds of COVID-related fraud were planted a long time ago. The current response is unlikely to remove such a deep-rooted problem.
Navigating customer relationships and maintaining a profit isn’t easy for modern businesses. Too often, bridges are burnt due to poor communication and misplaced expectations. If you’re falling short, chargebacks may become frequent, which could result in your processor dropping your account. Although banks tend to favour the consumer, merchants aren’t powerless. There are plenty of ways you can legally protect yourself against chargebacks and related fees.
Chargebacks, which occur when a cardholder requests their bank to reverse a credit charge, are a costly consequence of doing business. Most merchants know what a chargeback is, but they don’t know how to prevent them or protect themselves when they inevitably occur.
There are several reasons why a chargeback may happen:
While some chargebacks can be prevented by adopting better business practices, too many chargebacks occur due to “friendly fraud” or when a customer reverses a charge for no reason.
Chargebacks represent a growing financial threat for merchants, and when they occur too frequently, a business’s reputation could suffer. This makes it impossible for businesses to work with banks or credit card companies in the future, destroying their livelihood in the process.
Unfortunately, merchants won’t be able to completely avoid or prevent chargebacks, but there are ways you can reduce fraudulent claims. Take the following steps to reduce chargebacks:
If chargebacks are regularly occurring, it becomes essential to analyse chargeback incidents. This way, you can either fight these incidents or adjust your policies. Remember that you can file to reverse a chargeback, but the likelihood of you winning is, unfortunately, very slim.
Anytime a customer files a chargeback claim, the business has to pay a nonrefundable fee, ranging from $20-$100 per chargeback. Even if the merchant files a dispute and wins, they still have to pay this fee. Multiple claims put merchants into a costly monitoring programme.
While yes, reversing a chargeback is possible, the odds aren’t in the merchant's favour. Card issuers usually side with the cardholders automatically. If a merchant decides to respond to this dispute, they must provide accurate documentation and proof they provided satisfactory service. Oftentimes the issuer will reject the second dispute, even if the merchant was in the right. When this occurs, merchants have the right to request arbitration and help from an attorney.
When a merchant files for a second dispute and gets rejected by the issuing bank, they can still fight the charge. Typically, the issuer will review the documentation they receive and come to a formal decision. If the customer has a history of chargebacks, the merchant may win their case.
In instances where the merchant is rejected twice, they can request arbitration. It’s unwise to submit the same evidence that was denied during the first and second disputes unless you wish to add to the documents you sent. Either way, the issuer will weigh the aspects of the case.
Once a verdict is reached at the arbitration stage, it cannot be appealed. It’s vital that you understand the reason code and bring all evidence needed to support your case.
You have a right to an attorney at any point during the process. Companies can hire lawyers to represent them in chargeback fights. While you may feel that you’re at the mercy of a larger credit card company, you do have a say over the outcome if you have adequate representation.
Good chargeback management firms have teams of seasoned law professionals that know the ins and outs of dealing with card networks and banks. With the right legal team by your side, you’ll be able to win chargebacks and gain insight on how to prevent them in the future.
My name is Hong Guo. I am a member of the Law Society of Canada, Saskatchewan and British Columbia, and the founder of Guo Law Corporation (“GLC”) in Richmond, BC. During my career, I have had the good fortune to amass over two decades of experience in business law and, along with my team, provide a range of legal services, including corporate and commercial law, international transactions and investment, immigration law and real estate.
But life is not without its ups and downs, and good fortune does not always last. This may be especially true in a business that grew very quickly, creating opportunities for human error and the risk that comes along with needing to place trust in people who may prove to be undeserving.
On 2 April 2016, I discovered that GLC’s bookkeeper and my most trusted employee turned out to be a con artist. Orchestrating a grand theft of $7,500,000 from GLC’s trust funds, he forged cheques and fled to China while his accomplice laundered the money through a government-controlled casino before squirreling cash and casino chips off to China.
When the local police did not investigate the theft in a timely manner, I had no choice but to face the crisis head-on and, in the months that followed, flew to China countless times to catch the thieves, all the while dealing with a financial wildfire burning at home. I could have declared bankruptcy. Instead, I chose to protect the livelihood of my clients, personally bearing huge financial losses by selling my real estate assets. I managed to cover the trust funds shortfall of all GLC’s clients so that not one person suffered any loss but myself.
Life is not without its ups and downs, and good fortune does not always last.
While mistakes may have been made in doing so, as famously stated by US President Teddy Roosevelt, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing”.
It has been quite a journey. Notwithstanding the 2016 April Fools debacle, let me tell you about happier times in the nineties and my journey as a university student arriving in Canada.
I was born in Beijing to a mother who was a medical doctor specializing in pediatrics. As the oldest in a highly educated family, I was driven to excel in my studies. So, after earning a BA with a History major at Beijing University, I ended up leaving China with a scholarship to attend the University of Regina where I completed a master’s degree in Social Studies.
Coming from a metropolis of more than 20 million people, my first thought on arriving in Regina was: “Where are all the people?” The next day, my sponsor took me for a drive around his “city”. When we stopped at a garage sale, the burly proprietor greeted me kindly in that down-home Saskatchewan manner I will never forget, asking me: “Hey there, where are you from?”
I only knew enough English at the time to tell him that I just arrived from Beijing the day before and, recognising the puzzled look he gave me, quickly added, “China”. During this exchange the garage owner also noticed I had my eyes fixed on an old bicycle tucked away in the corner of the garage and asked: “So you like that bicycle?”. When I responded with an enthusiastic “Yes”, he said; “Well then, it’s yours – welcome to Canada.”
Coming from a metropolis of more than 20 million people, my first thought on arriving in Regina was: “Where are all the people?”
After completing my master’s in Sociology, I received a scholarship from the University of Pennsylvania to seek a Sociology PhD. However, my professors convinced me otherwise. Given my Chinese background, English language skills and contacts at home, combined with rapidly increasing Sino-Canadian investment and trade, they suggested it would be more helpful for my career development to stay in Canada and study law. I am glad I followed their advice.
After graduating with a Juris Doctor of Law from the University of Windsor, I was immediately hired by a large law firm in Regina. Regina is the Capital City of Saskatchewan, the Canadian Province which is a major exporter to China of mining products (potash), as well as food and agricultural products such as wheat.
With no practising lawyers who spoke Mandarin in Regina at that time, I soon became a treasure trove of information for my colleagues and their clients. In return, their connections throughout Saskatchewan provided me with a vast array of professional opportunities and the benefits of an entirely new business network.
As a result, I gained specialised legal expertise in corporate law, including a myriad of business and real estate transactions such as intellectual property, branding, M&A and export trade.
But despite many new friends and colleagues throughout Eastern Canada, I decided to move west. Combined with Chinese immigration opportunities facilitated by the BC Busines Immigration Program (“BCPNP”), the increasing trade between China and Canada began pulling me towards Canada’s Pacific Rim Province of British Columbia. It was time to take my career to another level in Vancouver.
Located on Canada’s west coast, I foresaw niche possibilities to build trans-Pacific links focused on the economic and cultural exchanges between Canada and China and opportunities to provide legal services which were not addressing the needs of many Chinese-Canadian clients.
With no practising lawyers who spoke Mandarin in Regina at that time, I soon became a treasure trove of information for my colleagues and their clients.
I was absolutely right about the need to develop cross-cultural understanding between Canada and China, because the moment I set up shop in the business center of the thriving South Vancouver suburb of Richmond – in the heart of one of the most concentrated Chinese diasporas in the world – clients began flocking to my modest storefront office.
Canada is a Common Law nation and the legislation which governs corporate investment in Canada comes under by the Corporations Act. However, as a result of our Chinese-Canadian clients’ lack of familiarity with local business laws and culture, the sectors of investment I ended up focusing on most tended to follow the most pressing investment concerns and interests of my clients – namely their risk comfort thresholds and their desire to make safe investments which were secure.
Consequently, investments in real estate were on top the list. However, their investment desires also varied across the board: i.e. investments in commodities. And thanks to the practical experience I gained in Saskatchewan, I was able to immediately begin handling the full gamut of legal matters so that word of mouth allowed me to gain the trust of many new clients throughout the community within weeks of my arrival on the west coast. By filling these needs efficiently, the growth for GLC continued and was so explosive that, while my first “storefront” office was no more than 500 square feet, I needed to expand to a larger office of more than a twice the size within a year.
But even then, with the number of my employees growing from five to more than 20, I could not resist acquiring a spacious 10,000 square foot second floor office in a building across the street in 2013 to make room for the future growth of GLC. Located in the most prosperous business centre of Richmond, with a move-in date of July 2016, GuoLaw was on its way to becoming one of the largest Chinese law firms in Canada.
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Life was good until the grand theft of April 2016 changed everything. But no matter the struggle, life goes on and, as a legal professional, I remain fully committed first and foremost to supporting my community and furthering worthy causes by contributing my legal expertise and volunteering as a counsel for many local and national organisations.
While my philosophy is to serve, serve, serve, my creed is best summarised according to the teachings of the political activist, social critic and moral philosopher Mencius (372–289 BC), as follows:
Human nature is righteous and humane – and has an innate tendency towards goodness – pending that human nature is nurtured in a positive environment. Conversely, bad environments tend to corrupt the human will.
Hong Guo, Director
6061 No. 3 Rd #200, Richmond, B.C. Canada V6Y 2B2
Tel: +1 778-297-6560
Hong Guo is the founder and director of Guo Law Corporation. She has gained extensive experience in working with the Sino-Canadian business community, predominantly on commercial transactions in mining, energy, IT, natural resources and real estate. Her achievements in advancing Sino-Canadian business relations were recognised in 2002 by the People's Republic of China.
Guo Law Corporation is based in Richmond, Canada. The firm’s staff comprise both native Mandarin and native English speakers, enabling the team to communicate effectively and precisely with all of their client group. Their services focus primarily on corporate and commercial transactions, particularly M&A and investment. In its vision statement, Guo Law Corporation states that it aspires to “become the region's most reputable Sino-Canadian focused corporate law firm”.
Authorised push payment fraud, or APP fraud as it is often known, is a common type of fraud that takes place when the fraudster deceives the unwitting victim into instructing their bank to transfer often large sums of money under false pretences into the account of the fraudster.
The fraudster will almost always try to impress upon the victim a sense of urgency whereby they convince the victim that funds must be transferred as soon as possible to protect the victim’s money. Payments are often transferred instantaneously via BACS or Faster Payments, meaning that the fraudster could be long gone before the victim even knows what has happened.
APP fraud is referred to as “authorised” because, from the bank’s perspective, the payment is authorised by the customer.
In March 2018 the appellant, Mrs Philipp, became a victim of APP fraud. Mrs Philipp, together with her husband Dr Philipp, were deceived by a fraudster known as JW. The result of the deception was that the couple moved over £700,000 of their savings into an account in Mrs Philipp’s name with Barclays Bank.
Mrs Philipp attended a branch of Barclays in person and instructed Barclays to transfer the money to bank accounts in the United Arab Emirates in the name of Lambi Petroleum Ltd. The couple had been convinced that they were moving money into safe accounts to protect it from fraud.
Having no recourse to the fraudster, Mrs Philipp brought a claim against Barclays for breach of its duty to exercise reasonable care and skill when executing her requests. It was argued on her behalf that the bank’s duty was derived from common law tort or by way of statute under section 13 of the Supply of Goods and Services Act 1982, and that the duty was a species of the Quincecare duty established by the High Court in the well-cited case of Barclays Bank v Quincecare [1992] 4 All ER 363.
APP fraud is referred to as “authorised” because, from the bank’s perspective, the payment is authorised by the customer.
The Quincecare duty requires a bank to exercise reasonable care and skill in carrying out a customer’s instructions, including to refrain from acting on the customer’s instructions in circumstances where it has been put on inquiry.
The High Court Judge dismissed the claim and granted summary judgment in favour of the bank, finding that:
Mrs Philipp appealed.
Setting the summary judgment aside, the Court of Appeal held that as a matter of law the duty identified in Quincecare, which is a duty on the bank to make enquiries and refrain from acting on a payment instruction in the meantime, does not depend on whether the bank was instructed by an agent of the customer or the customer themselves. It therefore decided that it was possible, at least in principle, that a relevant duty of care could arise in the case of a customer who instructs her bank to make a payment when that customer has themselves been the victim of APP fraud.
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The right occasion on which to determine whether the duty in fact arises is at trial. The question to be answered at trial will be whether the bank was put on inquiry by virtue of the facts and circumstances present and known by them at the time of the transactions, including the applicable banking practices, that executing the order would result in Mrs Philipp’s funds being misappropriated.
This decision of the Court of Appeal extends the scope of the duty imposed on banks in Quincecare to include instances where individual customers have themselves authorised the bank to transfer money as a result of APP fraud committed against them and appears to suggest a willingness on the part of the English courts to confront increasing levels of APP fraud head-on.
This extension of the duty imposed on banks will come as welcome news for victims of APP fraud, particularly individuals, but is likely to receive a less enthusiastic response from banks and other financial institutions which may find themselves reimbursing customers for losses caused by fraudsters.
Hannah Sharp, Partner
55 Ludgate Hill, London EC4M 7JW
Tel: +44 0207-246-8000
Hannah Sharp is a partner in Rosling King’s Dispute Resolution Group specialising in financial services disputes, fraud and commercial litigation, both domestic and cross-border. Hannah has significant experience of acting for banks (investment and retail) and other financial institutions, corporates and ultra-high-net-worth individuals on a broad range of complex disputes.
Rosling King LLP is a London-based law firm specialising in serving the needs of financial institutions, corporates and individuals.
The story began in the late 1980s. I worked for American Express Bank in a wealth advisory role and was shocked to hear so many investors’ stories of dreadful mis-selling and the downright fraud they had suffered prior to seeking assistance from AMEX. I could see how the very strict internal control framework which we had to work to in AMEX protected the clients and quickly gathered that very few British investment houses had similar protections in place at that time.
This led me to become interested in financial services regulation. In 1991 I took up an opportunity to establish the world’s first offshore enforcement function with the Isle of Man Financial Supervision Commission. It was a fabulous job. The island had become a refuge for UK advisors who had not achieved licensing under the UK Financial Services Act of 1986. They would form a Manx company using nominee shareholders and directors and under that cloak of anonymity carry on their (often fraudulent) investment business in the UK.
In those days the Isle of Man courts required a local cause of action to trigger civil discovery proceedings and police needed either a Manx victim or perpetrator. As a result of these legal restrictions, nothing had been done to help these investor victims. However, after the introduction of the Manx Investment Business law, the activity of these UK operators comprised unauthorised investment business (as the Manx company they were using did not have authorisation under the regulatory regime of the Isle of Man) and my division could take action.
It was my job to receive the investor complaints, investigate using statutory powers, get the company files from the company administrators offices, establish the beneficial ownership, track the assets, wind up the company in the public interest and through the position of Provisional Liquidator, deemed Official Receiver, recover the assets for the investors. I took over 50 cases to court during that period and used Companies Act disqualification powers to ban 12 directors.
We also assisted the UK regulator of the day, the Savings and Investments Board, to achieve the first offshore freestanding Mareva injunction in a case called SIB v Lloyd-Wright. These developments in effect ended offshore secrecy, the principles being quickly followed in cases across the Crown Dependencies, Caribbean and other British legal model offshore territories.
I took over 50 cases to court during that period and used Companies Act disqualification powers to ban 12 directors.
It is a time I remember as innovatory, where personal effort made a real difference and when I really learned about the terrible personal damage that happens to victims of fraud. Families split, marriages fail, homes are lost. Investigating and catching the baddies became a passion – and remains so to this day!
I took that passion to a new job in Jersey in 1999 when I was appointed Deputy Director General of the Financial Services Commission (JFSC). It was a big job. I was responsible for developing a team capable of bringing in an all-crimes anti-money laundering framework and devising a regime to regulate the trust company industry; investment advisors, managers and dealers and later looking at money services business including “non-fiat” currencies and various other areas. Across the same timeframe, we had to deal with the progress of the global unfair tax competition initiative and ensure all our regulatory framework was such that our financial services business held the information they would be required to produce.
During my ten years, we built a fabulous organisation, lifted the reputation of Jersey to that of a leading wealth management jurisdiction – and, of course, I learned a great deal about the way trust and company structures work, and can be abused, which has stood me in great stead in countless investigations. I left the Commission in 2009 and started Sator Regulatory Consulting Limited, which did what it said on the tin, and in turn merged that with BDO in 2016, exiting in late 2020.
It has been a great journey. One cannot ask more of a career than to have fun, help people and make some money! Now I have the delightful opportunity to “hand craft” a collection of appointments to match my favourite working areas – fundamentally financial services and investigations. Accordingly, I am particularly delighted to have taken up two key appointments, one as independent non-executive director of Santander International and the other as Chairman of Central Associates Limited.
One cannot ask more of a career than to have fun, help people and make some money!
Santander is an outstanding bank with a caring and professional culture and I thoroughly enjoy my interactions with them. I particularly enjoy the balance they achieve between being leading innovators on the one hand, yet maintaining a very prudent approach on the other.
Central is in an entirely different market sector, taking me right back to my love of investigations. The company is based in London, operates globally and undertakes investigation, intelligence and surveillance mandates for corporates and private clients.
Over the 13 years Central has been in business, we have taken on a broad range of work. The mandates vary widely but all focus on protecting or finding people, assets or information. Mandates can relate to private and highly personal matters, or be relatively public involving litigation support, establishing publicly disclosable evidence. Throughout our many assignments, the tasks have varied considerably, and subjects in these cases have ranged from rogue businesspeople and common fraudsters to high-profile political figures and kleptocrats.
It is through the creativity and skill of our worldwide investigative team that we are able to use multiple and varied avenues of intelligence to complete each instruction. Covert surveillance, human Intelligence (HUMINT) and desk-based investigations, for example, allow us to trace persons of interest, establish patterns of life, identify residential addresses, places of business and associated individuals.
In international tasks of this nature, our principal objective is to gain a complete and comprehensive understanding of the subject’s offshore structures and from this to flush out the various activities, relationships and assets to retrieve the misappropriated funds. We have also been able to reclaim regime assets looted from overseas governments and identify the wealth the subjects have derived from corrupt practices.
Our principal objective is to gain a complete and comprehensive understanding of the subject’s offshore structures
Across these assignments, significant assets and holdings of real estate (residential and commercial), have been identified and traced back to the subjects of our enquiries, who often use complex structures through nominee holdings and trusts across a range of offshore jurisdictions to obscure their nefarious practices. To date, we have conducted work on the ground in 38 jurisdictions, located across most of the earth’s continents.
I think half are personal attributes and half are knowledge-based. The personal attributes run on from my previous comments – the old saying “people buy people first” is very true. You cannot be sustainably successful in the long term if no one trusts you, no one likes you and you have a reputation for dumping others and only looking after yourself.
Of the knowledge-based skills, case mastery and organised working habits get you most of the way home, but I think there is another aspect worth mentioning, and that relates to commercial standards. Although the structures and transaction trails through which white-collar crime is effected are often very complex (and they need to be mastered), it is important to identify the points of dishonesty and/or points of conduct which run contrary to normal business practice and prevalent commercial standards. That is where the mischief will lie. To do this, one has to understand what normal, honest behaviour looks like for those types of transactions. From there it is much easier to demonstrate why the course which was taken was improper.
Male or female, I think one just has to go all in. The harder you work the luckier you get. I am a big believer in mastering the detail, being totally on top of the paperwork, gripping the evidence. Advocacy is fine, but demonstrable fact, clearly explained, wins cases.
That advice is aimed for the casework side of our working life, but it also applies to our role as line manager, team leader, director or indeed leader of a business. Avoid becoming one of those “bosses” who does not bother to read the minutes and has not learned the brief or reviewed the draft. I say ‘always sweat the detail.’ It may not be sexy, but it totally empowers you in any dialogue, whether with colleagues on an internal matter, in client interactions or across the courtroom or negotiating floor.
I think one just has to go all in. The harder you work the luckier you get.
On the advice list, I would also counsel people to be good colleagues. Help one another, be generous with your knowledge, be kind. It is not necessary to be personal friends with colleagues, but you do need effective working relations if you are to deliver the mission successfully.
The ICIJ is definitely an amazing organisation and much of their investigative work has certainly been in the public interest, although one can have an interesting debate on the sources and provenance of the data their work is based upon.
Those points aside, there is no doubt that people quite often dodge their tax. The poor do it alone, the rich with so-called professional advisors. Those who dodge tax or aid and abet tax evasion all commit criminal offences. They should be prosecuted.
I think investigations are often not progressed because there is misplaced mystique about “offshore”. There is a lot of misunderstood terminology, so people – even professionals – are not actually speaking the same language. People instruct us to look for trust bank accounts, for example, when a trust clearly cannot have a bank account; people instruct us to identify the beneficial owner of a trust when a trust clearly does not have a beneficial owner; people confuse a power of attorney with a nominee agreement, or shares held as nominee versus shares held under a declaration of trust.
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Requests which ask the wrong questions will inevitably not produce the answers required. Step one, therefore, is to work with an investigatory firm with solid offshore experience. Contact us!
Helen Hatton, Chairman
Tel: +44 020-7459-4650
Helen Hatton is the head of Central Associates Limited and, in addition to her roles mentioned in this article, is a Fellow of the Institute of Advanced Legal Studies, a Fellow of the Royal Society of Arts, a member of the Editorial Board of the Journal of International Banking Regulation and a Liveryman of the Worshipful Company of International Bankers. She has also been appointed to the Strategic Advisory Board of the International Fraud Group and is a recognised international speaker on regulatory and compliance topics.
Central Associates is a London-based intelligence and investigations firm. The company provides a broad range of bespoke services including people and asset tracing, litigation support and surveillance and counter surveillance.
Securities fraud, also referred to as stock or investment fraud, is a type of serious white-collar crime that can be committed in a variety of forms but primarily involves misrepresenting information investors use to make decisions.
Examples of securities fraud include Ponzi schemes, pyramid schemes and late-day trading. Securities fraud can also include false information, pump-and-dump schemes, or trading on insider information.
While always actionable under common law fraud, Congress, the Securities and Exchange Commission (SEC) and states provide for criminal and civil liability for securities fraud.
The broadest federal anti-securities fraud measure is Rule 10b-5, promulgated under Section 10(b) of the Exchange Act of 1934. Under Rule 10b-5, individuals may be civilly liable if the plaintiff establishes the following elements: (1) that the individual misrepresented a material fact; (2) that the individual did so knowingly, i.e. scienter; (3) that the plaintiff relied on the individual’s material misrepresentation; and (4) that the plaintiff’s reliance on the material misrepresentation caused their loss. If the SEC establishes those elements, then the individual may be criminally liable.
Additionally, issuers who misrepresent materials facts in a registration statement can be civilly liable under Section 11. Unlike Rule 10b-5 liability, which requires knowledge of the misrepresentation, Section 11 imposes strict liability on issuers. That is, regardless of whether issuers know of material misrepresentations, they could still be liable for securities fraud if their registration statement contains a material misrepresentation.
Typically, that involves determining two factors:
For stock price inflation, a statistical technique known as an event study is typically conducted at the time the misinformation is revealed to be false. For shares affected, there are several different types of models used to estimate how many shares were purchased during the stock price inflation period and held until after the revelation of the misinformation.
So, for example, if it is determined that stock price inflation was $2 per share and that 2 million shares are affected, total damages would be $4 million.
Securities fraud ... can be committed in a variety of forms but primarily involves misrepresenting information investors use to make decisions.
Most importantly, research skills – meaning the ability to perform an independent analysis that is scientifically accepted, outlining all assumptions needed to perform a reasonable economic estimate. Specifically, this includes deep knowledge of statistics, econometrics, financial modeling, valuation and accounting.
First, it is important to simplify technical analyses into a form the non-technical person will understand. After explaining how damages will be calculated at a very high-level and using non-technical terminology, we then get into the details and technical nuances. For example, we first explain how stock price inflation due to misinformation is calculated, then we explain that we need to determine shares affected and how those can be estimated.
Once we have agreement on the approach in general, we then describe the reason for some of the technical factors that come into play. At DMA Economics, we believe in providing rigorous analysis that is clearly communicated.
The idea of experts as hired guns or advocates for their clients. The best experts are independent and objective.
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The current laws have been used for almost 90 years, so I think it is more a matter of enforcement and issues like who is appointed to head the SEC. On this I have no prediction other than to note that enforcement seems to be stronger when Democrats are in charge.
Dr Donald May, Managing Partner
4 Lynwood Ct Cortlandt Manor, NY 10567
Tel: +1 212-390-0595
Dr Donald May is a former MIT finance professor with a wealth of experience in testifying, as a world-leading expert on the valuation of damages. Possessing over 30 years’ worth of experience in the field, Dr May provides consulting, valuation and litigation support in addition to a broad range of damage analyses and valuations for all kinds of businesses.
DMA Economics works on behalf of plaintiffs and defendants to calculate damages in high-stakes commercial litigation. Damage calculations may relate to securities fraud, product defects, theft of trade secrets or business interruption, among other areas. The team’s past clients have included billion-dollar investment funds under SEC investigation and SMEs concerned with the impact of potential litigation.
