Fighting Off Fraud in Times of Virus

Aziz Rahman of corporate crime solicitors Rahman Ravelli details the fraud risks posed to business by coronavirus and the ways such risks can be minimised.

At the time of writing, everyone is observing restrictions on their movements and many millions are either working from home or have stopped work altogether in an effort to stop the spread of COVID-19.

As a response to such a seismic blow to the economy, Chancellor Rishi Sunak announced huge packages of financial assistance last month in the shape of grants for the self-employed and payment of the wages of employed workers. Yet in announcing his help for the self-employed, the Chancellor acknowledged that such a scheme may be attractive to those looking to perpetrate fraud.

His statement was a recognition that whatever the health of an economy – or the financial standing of an individual or a company within it – there will always be those looking to make fraudulent gains. The situation that has been created by coronavirus will have produced new opportunities for those who commit fraud. And fraud is like a virus: it will spread and cause the maximum amount of harm unless the right precautions are taken. To paraphrase the criminologist Dr Donald Cressey, perceived financial need, opportunity and rationalisation all help promote fraud. With the current economic uncertainty, the chance for state financial hand-outs and the possibility that many may feel they should be getting something, all of Cressey’s conditions appear to be present.

The situation that has been created by coronavirus will have produced new opportunities for those who commit fraud.

That is the case when it comes to both the Chancellor’s attempts to help employees and the business world in general: new developments produce new fraud possibilities.

This is arguably why the Financial Conduct Authority (FCA) has gone to great lengths to warn that the present situation may be exploited by those looking to defraud, using anything from investment fraud and advance fee fraud through to clone firms. The FCA is urging those in business to use its Financial Services Register and its Warning List to check on the authenticity of any financial proposition made. Similarly, the National Crime Agency (NCA) is highlighting risks posed by the likes of bogus online medical equipment suppliers, fake HM Revenue and Customs, bank and loan company officials and computer hackers passing themselves off as software engineers. Companies could even find themselves being impersonated by those looking to make illegal gains.

It is now, therefore, arguably more important than ever to be alert to the risks. This means both having well thought-out and properly executed measures in place to prevent and / or identify fraud and responding promptly and appropriately if fraud is suspected.

A prompt, thorough internal investigation will always be the best way to establish if there has been fraud committed, why it happened and how to prevent repeat occurrences. This may, at first glance, appear difficult given current working restrictions. But it can be done with some “out of the box’’ thinking. Interviews, for example, could be conducted via telephone or video link; although consideration must be given to legal issues such as confidentiality and privilege in the jurisdictions where they are carried out. Document collection can be done remotely or by using an appropriate third party, providing all relevant data protection requirements are met. Once such an investigation has been completed, decisions then need to be made regarding whether its findings are shared internally and / or disclosed to the relevant regulatory agency.

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It should at this point be emphasised that despite the unusual circumstances the law and the agencies that enforce it are still functioning; even if changes are being made. To give one significant example, while Business Secretary Alok Sharma has announced a temporary suspension of the wrongful trading provisions, the law in relation to fraudulent trading – and the potential for director disqualification – remains in place. It is a development that shows that while businesses’ current problems are being acknowledged by the government, companies cannot expect to be immune from either the dangers of fraud or the consequences of becoming involved in it.

Recent weeks have seen significant upheaval in the business world – and a clear possibility for those looking to commit fraud. But companies must ensure they do what they can to minimise the potential turmoil.

https://www.lawyer-monthly.com/2020/04/fighting-off-fraud-in-times-of-virus/

Coronavirus: A Potential Claims Epidemic?

History tells us that it will only be a matter of time before claims management companies and solicitors alike, jump on the Coronavirus bandwagon and start advertising for claims. Indeed, there are already a few firms of solicitors suggesting that people can be compensated if they become infected while abroad. But while it may be possible to successfully claim against a tour operator or hotelier for Coronavirus, we anticipate that it’s going to be incredibly tough. The reason being, even if the claimant is able to prove that they contracted the virus, they must also show that the travel company did something wrong and that this negligence caused or contributed to the illness or loss.

The burden of proof is on the claimant, not on the travel company to disprove it. So, one must ask whether the hotel knew, or should they have known, that guests had contracted the virus but did nothing to stop the spread to other guests. The same goes for cruise liners and airlines – did the ship stop in an infected port and fail to screen guests or did the airline fail to properly clean its aircraft when flying to regions that are known to be affected?

While the industry should be braced for the inevitable influx of claims, determining whether a claim is genuine or fraudulent will be key.

Proving that a travel company has been negligent is no easy task and even if the claimant gets over this second, significant hurdle, they must still then prove that this negligent act caused their illness. Did stopping at the infected port, or failing to have adequate hygiene systems in place make any difference?  And the answers to all these questions, or rather the way they are tackled by the Courts, also differ depending on who you are bringing a claim against. For example, the rules for bringing an illness claim against a cruise liner differ to those used in a claim against a tour operator or hotel.

While the industry should be braced for the inevitable influx of claims, determining whether a claim is genuine or fraudulent will be key. Over the past few years, the travel industry has seen a 500% increase in gastric claims, but many claimants have since paid the price for making speculative claims under the premise that they had nothing to lose.

These prosecutions should serve as a stark warning to those that believe that bringing a dishonest claim is a minor offence, or is risk-free, as fraud will not be tolerated by the travel industry.

https://www.lawyer-monthly.com/2020/04/coronavirus-a-potential-claims-epidemic/