As civil litigators we frequently deal with business-related claims involving dishonesty. These fall broadly into two categories – those involving fraud by someone known to and trusted by the victim, and fraud by unknown individuals or criminal gangs. 

The first type might be a director siphoning off funds from a company, a joint venture partner misappropriating assets, or even a family friend borrowing money for a fictitious purpose. Litigators deal with this by worldwide freezing injunctions, asset disclosure orders, and civil claims against the wrongdoer. Fraud of this kind, where existing relationships are tainted with dishonesty, has always existed, and litigators are experienced in handling it.

The second type of fraud, by a person unknown, is fraud that has become much more common in recent years because of our increased reliance on technology. This is often authorised push payment fraud, including invoice fraud, phishing, social engineering etc. A company receives an invoice from the (hacked) email address of a legitimate overseas supplier, providing new bank details – those of the unknown fraudster. The company pays, and within hours its funds leave the destination bank account. The banks and the UK police are informed, but there are delays and inefficiencies due to the cross-jurisdictional nature of the transfer, and the funds are lost. 

This second type of fraud presents a new challenge in asset recovery. It is more difficult, although certainly not impossible, to trace assets when you do not know the identity of the fraudsters and cannot bring them before the court. Civil recovery claims have therefore often focused on trying to make the paying and/or receiving bank responsible for reimbursing the victim, efforts which have, at least where tested in the appellate courts, been largely unsuccessful, despite creative efforts by lawyers acting for the victims. In practice, banks’ duties to their customers to carry out payment instructions and preserve confidentiality generally trump any duty to prevent fraud.

The Payment Systems Regulator introduced a mandatory reimbursement scheme last year, but that is limited to consumers, is capped at £85,000, and does not apply to international payments. There is still, therefore, a gap. 

There are a number of strands to filling that gap: technical measures aimed at preventing fraud, far greater international cooperation between law enforcement authorities, as well as, potentially, statutory modifications of duties on paying banks.

My colleague James Evison will be discussing all of the above and more when he chairs a panel discussion on the respective roles of the courts, regulators and government in fighting fraud during London International Disputes Week. He will be joined on the panel by Catherine Gibaud KC of 3VB, Chris Hemsley of Fingleton (formerly CEO of the Payment Systems Regulator) and Penny Dunbabin from the Home Office. Please do sign up if you haven’t already done so: LIDW 2025 - The Frontline against Fraud: common law, government policy and regulation – how the UK is fighting fraud.