Making a case for private prosecutions

Like its global competitors, businesses in the UAE are facing threats of economic crimes such as cyber-attacks. Companies are more susceptible to the sophisticated technology and expertise used to infiltrate their databases from anywhere in the world.

Bribery, corruption and procurement fraud also pose significant risks for commercial enterprise. A 2020 PWC survey found that fraud had significantly risen in the Middle East since 2018, with 46 per cent of respondents saying they had experienced fraud, corruption or some other form of economic crime within the previous two years (up from 34 per cent in 2018). In 29 per cent of cases, respondents lost between $1 million to $5 million to fraud and 26 per cent lost between $100,000 and $1 million.

In 2017, 27 per cent of UAE organisations reported losses of between $100,000 and $1 million, 17 per cent between $1 million and $5 million, and 11 per cent between $5 million and 100 million.

Since the coronavirus spread, there has been a steep upward trend in frauds, particularly phishing, online shopping, procurement frauds and more. The full extent won’t be known for some time, but we can expect losses to be devastating.

The UAE has rolled out its first national fraud awareness campaign in response - #TogetherAgainstFraud. The numbers send a clear message: Organisations in the UAE must act to combat fraud, particularly at a time when typical law enforcement is overwhelmed. One powerful tool to achieve this - that many in the UAE may not know about - is of private prosecutions which are available in many “common law” countries.

Tackling it the private way

In the UK, a private prosecution can be brought by any person or company under section 6(1) of the Prosecution of Offences Act 1985. They are an effective and valuable tool to bringing fraudsters to justice and for victims to regain their assets through the use of the criminal confiscation regime, which allows for long terms of imprisonment for non-payment of debt.

These are initated by private individuals, but run in a way similar to how a state would conduct a matter. And they tend to be better funded, more controlled by the victim and have a higher conviction rate. In the UK, private prosecutions are often used by commercial enterprises or individuals who have fallen victim to fraud and wish to send a message that such behaviour will not be tolerated.

Often the money obtained is heavily pursued and recovered in full. This, in turn, operates as an effective deterrent to any other fraudster attempting to attack.

Still have options

While private prosecutions cannot occur in the UAE, it does not mean they are not available to UAE citizens when aspects of the offending occurred in places where they are allowed - for example, in the UK, Latin America, New Zealand, Australia and South Africa.

There are numerous ways in which a private prosecution may be brought by a UAE victim in the UK. These are but some:

* With technology, much fraud is now committed from across the globe. Once the identity of the fraudster is discovered (although seemingly impossible, this can be achieved through disclosure orders), a prosecution can be brought in the country in which the fraudster committed the crime, even if the victim is in the UAE.

* In certain instances and with particular offences, the jurisdiction of the UK is broadened: fraud (and related offences), blackmail, false accounting, forgery and numerous other offences can be prosecuted if a “relevant event” had occured in England or Wales. It is immaterial that the person is a British citizen or whether they were in England and Wales at any such time.

This event could be an important meeting or a relevant transaction.

* If a conspiracy to commit the fraud had occurred, a person may be found guilty whether they became a party to it or if the act occurred in England or Wales. Likewise, a conspiracy could also occur where a party to the agreement (or their agent) did anything in the UK in relation to the agreement before its formation, or in pursuance of the agreement - even if the fraud took place elsewhere.

* A crime may be prosecuted where a substantial part of the offence was committed in the UK. It is not necessary that the final act, or even the gist of the crime, occurred in the UK.

* A person can be charged with money laundering offences where proceeds are laundered in the UK, even if the fraud was committed in the UAE or elsewhere.

A local relevance

In December, a report by Muddy Waters published findings in relation to NMC Health in Abu Dhabi, which led to private investigations that revealed significant fraud was committed.

NMC reportedly owes money to more than 80 institutions and the debt is estimated at $6.6 billion. Another B.R. Shetty owned firm listed in London, Finablr, discovered $100 million worth of cheques were issued by the company without the board’s knowledge. Investors have been left furious as millions were lost.

If elements of these offences occurred in London and proceeds spent outside of the UAE, it will be interesting to see what a criminal investigation will reveal. Or whether banks, creditors and investors ought to turn to private prosecutions to ensure their pennies are recouped efficiently.

- Kate McMahon and Tamlyn Edmonds are founding partners at Edmonds Marshall McMahon.