Banking Fraud - A Government Priority
Banking Fraud - The Start of the Investigation
The first that an employee may hear of an allegation of banking fraud could be either in the context of an internal review or disciplinary procedure, or an outside investigation by the FCA, SFO or other agency such as the police.
If an internal investigation is being carried out by the employer, where there is any doubt, legal advice should be obtained immediately from specialist banking fraud solicitors. Any material gathered during meetings with colleagues or supervisors may well become evidence down the line in any criminal or regulatory proceedings. Great care should be taken in any communications.
In a banking fraud investigation the banking industry worker may not initially realise that the case has already taken a criminal turn. If the employee at any point hears the words ‘ interview under caution' or is reminded of his or her right to representation, then it means that an investigation which could lead to prosecution is being conducted and banking fraud solicitors should be contacted immediately.
Of course, once an outside agency such as the City of London Police, the FCA or the SFO etc. becomes involved, a person should be aware that the investigation has become serious. Nothing should be said without access to appropriate legal advice. In the event of arrest, a duty solicitor referred at a police station, while competent in respect of the general crime they are accredited to do, may not have the expertise or be familiar with the terminology and processes related to disclosure of rates and prices of various derivatives etc. Ideally, if an arrest is anticipated, it is advisable to identify a specialist banking fraud solicitor in advance. That specialist banking fraud solicitor can then asked for at the police station following arrest.
It is important to recognise both the Police and other state investigators as the opposition in this process. Once an investigation into suspected banking fraud is started, the agency will be working on an adversarial basis, which means that the aim is charge and conviction. Assurances from regulators and police about investigations being for the purposes of ‘ information gathering' or ‘to get your side of what happened' should be treated with suspicion, or at least severe caution. As the famous mistranslation goes, ‘ Beware of Greeks bearing gifts'.
If evidence is gathered which the prosecution thinks is strong enough to charge, then various options exist as to the law it can prosecute under.
By far the easiest option open to a prosecutor in an allegation of banking fraud which involves others or rate-fixing is Conspiracy to Defraud under common law. In extremely simplified form, the prosecution has to show a plan between two or more people to expose another to loss of an advantage or position or risk thereof.
It has been suggested that the SFO will prefer to prosecute suspects under the Fraud Act 2006, which applies to offences committed from January 1st 2007. The maximum sentence under this legislation is ten years imprisonment per offence, and in cases of large significance in the market, such sentences might be expected. Generally speaking, sentences are dependent upon the overall value of the fraud, or the overall extent of its harm, and the particular role played by the individual. Those said to have played a lesser role may be able, properly advised by banking fraud solicitors, to avoid an immediate custodial sentence.
A false representation must be dishonestly made for this offence to be made out, and the intent must be gain for oneself or loss to another. The representation could be made by entering data into a system, rather than to a person, which of course may be of relevance in rate submission cases.
Evidence in Banking Fraud Cases
The evidence in banking fraud cases can take various forms. The obvious method of forensically establishing rate-fixing is to assess lending rates (or other rates/prices) actually obtained by traders/institutions and compare them with the actual submission made to the BBA or other organisation. This will probably not, however, make for conclusive proof of guilt to the criminal standard (which is a high one). The prosecution would be expected to adduce evidence of email and recorded telephone conversations between banks to show that the misstatement was part of a dishonest plan, and not simply an error or systems failure.
Dishonesty and Interpretation
The general rules about criminal guilt apply in any case involving the alleged fixing of prices or rates. There must be a motive to distort, and there must be dishonesty for a prosecution to succeed. Submitting data might not be enough if the significance of the data is not fully known. For example, on certain days where submissions have been made, no data regarding actual trades will have been available. If estimates have to be made against a backdrop of little data, other factors may well be argued as being relevant which cast doubt on whether it was that clear cut that a submission was inaccurate. These grey areas in the interpretation of what was expected may provide an obstacle to the prosecution, as with any banking fraud investigation.
The usual rules apply with regard to specialist fraud cases. Specialist banking fraud solicitors and barristers are essential for the defence. There is usually little time to be explaining principles of banking practice to one's legal team. While every industry has its idiosyncrasies, the reality is that a basic knowledge of the workings of the City is a must.
A fraudulent trading or long firm fraud charge can be distressing, especially coming as most do after a business has failed.
Mortgage fraud investigations and proceedings can seem daunting and complicated. This offence became more commonplace and more of a focus for prosecuting agencies as a result of the banking crisis of 2008-2009.
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