Fraud is big business, and rarely does a day go by without a major financial fraud being unmasked in the news. Finance workers are on the frontline in many of the major banking fraud investigations, and yet there is little known about the role finance workers should play in fraud investigations or the extent of their liability for involvement.
Fraud is defined in the Fraud Act 2006 as an offence committed either by false representation (lying), failure to disclose information (not telling the truth) or by abuse of position. Fraud law makes it an offence when someone knowingly acts in a dishonest way, with the intent of making a gain for themselves or inflicting a loss on another.
Financial services companies are under additional obligations to prevent fraud, by virtue of their position that places them at greater risk of harbouring fraud. These obligations include the broad responsibility to ‘take reasonable care’ in establishing effective systems to ensure compliance with anti-fraud law. Thankfully, much of the legal obligation lies with companies themselves to put in place anti-fraud processes, to ensure that staff and teams are separated to reduce the likelihood of fraud, and to foster an environment where staff are encouraged to blow the whistle when they suspect fraud is taking place.
Firms regulated by the FSA are obliged to report suspicious activity, however this obligation does not necessarily extend down to individual employees, although in some circumstances some employees may be covered by professional obligations in relation to fraud.
Finance workers should report suspected fraud, and should do so in accordance with their company’s policy on notifying management of suspicious activity. They should do so with the full protection afforded to them by the Public Interest Disclosure Act 1998, that protects a whistleblower from detrimental treatment by their employer as a result of making a disclosure. Where financial workers do find themselves unfairly treated as a result of highlighting possible wrongdoing, the Public Interest Disclosure Act 1998 allows them to bring a claim for damages. It is worth noting however that this act does not cover self-employed finance workers.
All finance workers are advised to cooperate fully with any internal or external investigations into fraudulent behaviour or fraudulent activity. If suspected personally of involvement with fraud the requirement to cooperate becomes absolute. The law requires you to be conscious of your effort to defraud a victim, and in many cases a finance worker may simply have been a pawn in a fraud committed at a more senior level. In any case, take expert legal advice from an independent lawyer prior to any involvement in an investigation.