The Rise in Civil Fraud Cases

civil fraud cases

By Syed Rahman

The number of civil fraud cases heard in the courts has undergone a 50% rise. And while it can often be argued that statistics do not always tell the full story, in this case they are certainly telling enough for us to recognise a definite trend. 

The big question at this stage is just how long this trend will last. Or is it actually less of a trend and more of a sign of how things will be from now on? The answer can only be found by assessing the causes of the rise.

Given that the figures being cited for the rise are for the years 2019 and 2020, we have the chance to employ some degree of hindsight when it comes to them. Looking back, we can see that this period was when Covid-19 started to make its presence felt. The economy took a pounding as the pandemic took hold.

But while pandemic-related economic hardship leading to more fraud being recognised is certainly a factor for the rise in civil fraud cases coming to court, it cannot be the only one. There are other factors at play – factors that are likely to maintain and probably increase the case numbers we are currently seeing.

Perhaps the first factor is the rampant inflation that is gathering momentum. Inflation can equal hardship, which can then result in the increased likelihood of fraud. It is a simple equation that will not accurately reflect every single situation. But it is likely to be the case for some people, as the cost of living eats into their finances and their sense of security.

Tighter controls due to monetary policies are set to have a similar effect. There is little doubt that when money is scarce fraud can flourish. And the fact that we are seeing interest rates rising is good news for those who are sitting on savings and waiting to gain a good rate of return on their funds. But for the rest of the population, any increase in interest rates is one more squeeze on their finances – and a possible reason to resort to fraud.

When it comes to fraud, we are often talking about investment fraud. There is – and will – always be those individuals who are looking to separate innocent investors from their money. This happens at any given time, regardless of the economic circumstances facing particular people or the nation as a whole. Yet the reasons I have already outlined may give an extra impetus to investment fraud, as may the stock markets exhibiting more extreme volatility. Those who may have lost funds through the markets may be less than scrupulous in how they look to claw it back. Meanwhile, market unpredictability may make it easier than normal for them to hoodwink others into parting with their cash to pursue what is sold to them as a safe bet with unbelievable returns.

As the sheer scale of fraud linked to government financial support for businesses in the pandemic has been well documented, there is little point in repeating here what has been said many times. But on a micro level, the impact of Covid-19 has been profound. Changes to working practices have provided ample opportunity for fraudsters. The move to working from home saw large sections of business often functioning without the protection of safety measures that are normally implemented in the office. 

While it would be wrong to say companies were operating without their usual safeguards, there were – in many circumstances – opportunities for individuals to take advantage of the reduced levels of scrutiny they were facing. For some people, those opportunities will have been impossible to ignore. And yet not all such opportunists will avoid detection. Many of them will find themselves swelling the numbers of those forced to defend themselves in court against civil fraud claims.

Unfortunately, for the reasons I have covered here, the rise in such claims is unlikely to be a short-lived occurrence. The conditions which favour fraud have now been present for too long for such an increase to drop off in the very near future.

About the Author

Syed Rahman’s great depth of experience in serious fraud, financial crime and multi-jurisdictional investigations has earmarked him as a robust solicitor. He is proficient in both civil and criminal cases, where there is an allegation of corporate wrongdoing. Syed has substantial experience in advising corporate entities and their directors and officers in relation to investigations conducted by all the major enforcement agencies.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.