Fraud newsletter – July 2019


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This is the first in a series of bi-monthly updates which provides an insight into a selection of recent fraud issues, as well as providing an update on key reported cases. This first issue focuses on technology as an enabler to fraud.

In particular, the UK Government has provided additional funding to counter-fraud projects, with a particular emphasis on artificial intelligence (such as the use of voice recognition technology). This will be an interesting development and one which is certainly worth monitoring as organisations attempt to keep up with fast paced fraudsters.

Cryptocurrency is at the forefront of many people's minds at the moment, as the price of a single Bitcoin recently broke the £10,500 mark and then fell to below £8,000 mark within the space of one week. Whilst on the one hand there seem to be a never ending stream of cryptocurrency related hacks or thefts (for example, the Binance exchange hack in May 2019 which resulted in £31m worth of Bitcoin being misappropriated from its users, and the "spoof" exchange scam operated by individuals who were arrested by Europol for stealing some £22m worth of cryptocurrency from 4,000 people), there are also real strides being taken to put cryptocurrency at the forefront of the world financial system. In particular, Facebook recently announced that it would launch its own cryptocurrency in 2020 called "Libra." Whilst the true impact will not be known until 2020, Forbes provides an interesting commentary click here to read.

"some hail it as the beginning of the end of sovereign fiat currencies. Others believe it will draw people into the cryptocurrency world, leading them inexorably to place their faith in the One True Cryptocurrency, Bitcoin. And others worry about the effect on central bank monetary policy and the possibility that a run on Libra could trigger another financial crisis"

Lastly, there have been some interesting developments in the banking and finance space. In April, TSB became the first bank to give reassurance by confirming that it will cover its customers if they fall victim to fraudulent activities on their account, read here. Whilst this statement is of course positive, and no doubt others will follow suit, it is not yet clear the extent to which the practical approach differs from the obligations already in place by virtue of the Payment Services Regulation 2017.

Articles of Interest

1. Email Fraud and Freezing Injunctions

A significant case in highlighting the need for the court to be pragmatic in their approach to email fraud and freezing injunctions, World Proteins KFT v Persons Unknown sets a trend in the recovery of funds from unknown parties.

2. Legal Professional Privilege

The case of WH Holding Limited and West Ham United Football Club Limited v E20 Stadium LLP highlights the importance of legal professional privilege and the how internal emails relating to settlement are treated.

3. Litigation Funding Rules in the ADGM

In November 2018, the Abu Dhabi Global Market (ADGM) issued a consultation paper setting out proposed rules for litigation funding. Trowers & Hamlins explore what this means for the region.

4. Application for Financial Provisions – how late is too late?

Recent case law highlights conflicting approaches in relation to financial provisions for administrators of estates of deceased parties.

5. Crypto Asset Activities

The UAE is capitalising on the growing sector of Crypto Assets. The UK FCA will be taking note in the recent guidance published, potentially showcasing a regulatory approach to the sector.

6. Unexplained Wealth Orders

From 31 January 2018, enforcement agencies are able to apply for unexplained wealth orders potentially having a positive impact on the fight against corruption.

7. Cyber-Attacks (Asset Freezing) Regulations 2019

Significant legislation has recently come into force providing legislative authority to respond to and deter cyber-attacks against EU member states.

8. Response and Recovery Guidance for SMEs

The National Cyber Security Centre has prepared a 5 step procedure to follow in the event of a cyber incident. Use of the procedure along with the Action Fraud hotline is a low cost way to mitigate risks associated with cyber security and the perfect introduction for SMEs who may be initially vulnerable to such breaches.

Cases to Consider

1. World Proteins KFT v Persons Unknown [2019] 4 WLUK 35

The second case in recent years to approve the granting of freezing injunctions against persons unknown. This increases the chance of recovering misappropriated funds following a cyber fraud incident.

2. WH Holding Limited (1) and West Ham United Football Club Limited -v- E20 Stadium LLP [2018] EWCA Civ 2652

The first appeal to be televised in the UK, this case reviewed the scope of litigation privilege.

3. Takhar v Gracefield Developments Ltd & Ors [2019] UKSC 13

Where judgements were decided on the basis of fraud, the original pleadings do not require a fraud argument to have been present to raise at a later date. Fraud should always be considered seriously at any stage in proceedings even after conclusion.

4. Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614

The Court of Appeal's ruling reinforces the dishonesty test in proving scenarios of dishonest assistance which will likely result in wider discretion for the courts to hold those in professional

5. Davey v Money and others (2019) EWHC 997 (Ch)

The "Arkin Cap", limiting the extent of non-party costs orders against commercial litigation funders, has been determined by the High Court to not be automatically applicable in all circumstances. Such ruling follows substantial criticism of the cap since its introduction in 2005.

6. Anatolie Stati & Ors v Kazakhstan (2019) QBD (Comm) (Cockerill J)

As well as litigation funders taking on the potential financial risk of an unsuccessful claim, this case highlights that the courts may also require the disclosure of a funders identity along with the terms of any such agreement.

Upcoming Seminars

1. Cyber Wars – is your scheme ready? – Wednesday 25 September 2019

Pension schemes hold large amounts of personal data which can make them a target for fraudsters and criminals. Join us for our upcoming seminar where we will explore what steps can be put in place to protect members and assets against the cyber risk.

Click here to register your interest

2. Reflective Loss – the Supreme Court judgment in Marex Financial Limited v Carlos Sevilleja Garcia – Date TBC

The Intervener in this case, the All Party Parliamentary Group on Fair Business Banking, and their legal team, invite you to a seminar to discuss this seminal judgment.

Click here to register your interest

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