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Understanding Civil Fraud: Driving the Message Home - Rahman Ravelli

Author: Azizur Rahman  12 August 2013
5 min read

Many in the motor trade have come under the watchful eye of the authorities in recent years. Here, Aziz Rahman explains why it is vital that those in the industry make sure their legal affairs do not put them on the road to prosecution.

As professions go, the motor trade has never been held in high esteem by the general public. It is fair to say that the view that many people have of car dealers falls somewhere between their feelings for timeshare salesmen and the firms who spend every working moment trying to chase spurious compensation claims for clients. The motor trade has historically had a reputation problem. Whether it be for dealers fixing the milometer, telling fibs about a vehicle’s history, persuading customers to take out unnecessary – or sometimes even worthless – warranties or for generally being a little bit “wide’’ in their business practices, it seems as if everyone has a bad tale to tell about those in the motor trade.

Unfortunately, for those in the trade who are totally legitimate and honest, it is the bad cases that colour the judgement of most people. Such a perception by people may be viewed as a hindrance to business by motor traders. But some may be safe in the belief that their dealings are completely above board and that the inaccurate views of those who have never dealt with them may never impact on their business. And that may be true. But in recent years, the auto trade has been attracting the attention of organisations with far more clout than the man on the street who takes a dim view of those who make a living out of vehicles. For this reason, it is now more important than ever before that motor traders are not only operating in a totally legal, above board manner – they have to be able to demonstrate it to anyone that starts to take a serious interest in their business dealings. Failure to be able to do this will bring penalties that are far worse than a slightly questionable reputation.

A look at events over the last couple of years confirms the fact that the motor trade is under increased scrutiny. Just last year, HM Revenue and Customs (HMRC) announced that it was creating a taskforce to examine the used car sales sector of the motor trade. It was set up with the aim of clawing in an estimated £22M for the Treasury and was made up of taxation experts in the fields of VAT and PAYE. This part of the motor trade was, according to HMRC at the time, a high risk trade sector where big deals were being done in cash and yet not all the appropriate payments were being made to the tax man. Just three months ago, HMRC introduced initiatives to stop criminals avoiding paying VAT on cars imported to the UK. Two months ago two brothers in the motor trade in Nottingham were jailed for defrauding customers of more than £1M. The motor trade, it seems, is under investigation. And that poses serious challenges to everyone involved – even those who know they have nothing to hide.

If you have nothing to hide, you can only convince the authorities of this if you have the proof to hand. And that is why companies in the motor trade have to make sure they are legally compliant. Now more than ever.

Business corruption is now high up the agenda for many of the UK’s investigative and regulatory organisations. Many of them have undergone transformations in the last few years in order to enhance their effectiveness against businesses that they see as falling foul of the law. For example, the Serious Fraud Office (SFO, is now a much tougher investigating body, thanks to legislation such as the Bribery Act 2010, the Fraud Act 2006 and the Companies Act 2006. Such Acts not only give the SFO the means to burrow further into a company’s dealings, they also increase the range of sanctions available to it. The Bribery Act put the issue of corruption firmly in the lap of companies and their executives while the Fraud Act made sole traders, – of which there are many in the motor trade - trusts and partnerships liable for fraudulent trading prosecutions. Meanwhile, the Financial Services Authority (FSA) has, in the last year, been remodelled into the Financial Conduct Authority (FCA) with the express purpose of being a more effective trouble-shooter. Before its demise, the FSA was handing out an average of £1M in fines to businesses a day, which gives you an idea of the minimum amount of punishments the new FCA will be intending to dish out. And while the SFO and the FSA have been gaining some muscle, HM Revenue and Customs (HMRC) has, as we mentioned earlier, been granted a major boost in resources by the government to help it track down those it believes to be evading tax.

Those arguing against the effectiveness of such organisations will often claim that while they may have the extra powers they lack the resources to enforce them. But that is certainly no longer the case for the FCA or HMRC and the SFO believes it can go to the government for extra funding for special cases as and when they arise. The enhanced degree of cooperation between such organisations, the police and their foreign equivalents has also made it far easier for them to collate evidence of a company’s or an individual’s wrongdoing.

Faced with the prospect of coming under investigation, a company’s best (and arguably, only) defence is to show it is legally compliant. Being able to prove that the company is following best practice, operates within the law and is paying all the taxes it should is all the authorities ask; whether it is a small car lot with a handful of vehicles for sale, a major dealer or a vehicle rental firm. The principles are the same regardless of the type of company. It is clear that the motor trade has a reputation that will see many of those involved attracting the attention of the authorities. For that reason alone, such companies have to make sure they are legally compliant. If a company suspects it may be involved in wrongdoing, it should take legal advice immediately from solicitors who specialise in business crime. It may certainly be worth contacting such legal experts before any internal review of a company’s workings is undertaken, as they will know exactly which aspects of its activities will require particular investigation and, where necessary, action.

Many in the motor trade may feel such a course of action will cost them money they can ill afford. But when weighed up against the lost trade, fines, potential imprisonment, loss of working hours and reputational damage that an investigation can bring if wrongdoing is detected, such an expense can prove to be a shrewd investment. As experts in business crime, Rahman Ravelli Solicitors understands the demands that the law places on companies. We advise all types of companies on all manner of compliance issues and make sure that their response to any investigation is the appropriate one.

 Many in the motor trade are often working too hard on and off site to make sure they comply with all the requirements placed on them. But often it can take the right legal advice to make sure that minor indiscretions do not lead to major legal problems. For example, last month we secured the acquittal of a client in a multi-million pound fraudulent trading case involving the alleged sale of hundreds of vehicles on hire purchase agreements. The prosecution had produced thousands of pages of material that it claimed proved its case. But because we had worked with our client at great length prior to the trial, we were able to be pro-active and make applications to the court to access many more pages of material. This material and the legal arguments we developed from them contributed to us securing our client’s acquittal.

Many in the motor trade will be more than capable of running their own affairs. But some legal fine tuning is very often the best way to ensure such businesses do not splutter to an unfortunate halt.

Azizur Rahman C 09369

Azizur Rahman

Senior Partner

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Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.

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