Author: Nicola Sharp
2 June 2014
4 min read
A police operation spanning four countries and two continents led in 2014 to more than a hundred people being arrested due to alleged involvement in boiler room fraud. The scale and coordination of the operation says a lot about modern police methods of tackling fraud.
The headlines almost wrote themselves. It was a story where the forces of law and order were dealing a swift blow in the name of justice and, in particular, the many people who had fallen victim to boiler room fraud.
“110 held as police crack down on shares scam.’’ “Boiler room fraud smashed in police raids.’’
“Fraud police smash boiler room ring in raids.’’ “International police operation leads to arrest of 110 boiler room fraudsters.’’
The stories all took the same line. Police arrested 110 people in London, Spain, the USA and Serbia. Those arrested were alleged to have been involved in selling bogus shares in carbon credits, gold, energy, environmental projects, wine and land. It has been calculated that their victims, of which there were 850 in the UK, have lost a total of £15M to such fraud; with amounts lost varying from £2,000 to £500,000. As part of the operation, police swiftly restrained £1.5M that was in British bank accounts.
It was a news story that all the media seemed to cover. The financial figures are large, which always helps gain newspaper coverage. Accounts of the lavish lifestyle habits of those arrested and occasional references to the new Leonardo DiCaprio film “The Wolf of Wall Street’’, which is based on boiler room fraud, gave the story a gloss that is perhaps a little misleading. It was also interesting to note that in some reports (as in one of the headlines above) those arrested were already being treated as guilty. The term fraudster was being used to describe them, even though none of the 110 had been found guilty of anything or had even entered a guilty plea. Few of the news reports made reference to the fact that those arrested were not yet guilty of anything.
The operation was described as a ground-breaking partnership between UK and Spanish law enforcement agencies. It also, quite fairly, was described as a milestone for the new National Crime Agency (NCA), which helped plan it along with the Financial Conduct Authority (FCA), Serious Fraud Office (SFO) and the USA’s Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and Secret Service. It stemmed from the City of London Police and Spain’s Policía Nacional starting to forensically examine reports of investors worldwide being sold bogus shares. Arrests were made across the UK.
The investigation then started to target those the authorities believed were at the very top of the organised crime gangs who run the boiler rooms. This stage saw the involvement of the aforementioned agencies; giving the operation a multinational flavour.
City of London Police Commander, and National Economic Crime Co-ordinator, Steve Head, said: “The arrests made across four countries highlight how law enforcement can work globally in the pursuit of suspected criminals who seek shelter in foreign lands so they can target innocent people with investment scams that wreak financial and emotional destruction.”
As an operation, it was a clear example of how investigating authorities work together and share intelligence. In 2012, the Director of Public Prosecutions issued guidelines regarding cases with shared jurisdiction with overseas authorities. Our main investigating agencies now regularly work with their counterparts abroad and other agencies in the UK to create a joined-up response when an investigation is needed. It is often the case that fraud or other types of business crime span borders and, therefore, the jurisdictions of two or more countries.
The arresting of 110 boiler room suspects was a perfect example of a cross-border investigation. The task facing those who have coordinated it was to now make sure that the international teamwork continues. Those agencies involved in the investigation and arrest were keen to trumpet their success when carrying out the arrests. But, arresting people is not difficult. Building a successful case against them can be. Rahman Ravelli has extensive experience of such cases in a variety of countries, we are more than familiar with what is required to mount such a case — and how you successfully defend yourself against one.
The DPP guidelines state that information should be shared at an early stage between prosecutors in the countries where the crimes are thought to have been committed. This information should not be divulged to a third country unless the state where the information originated gives its express permission. Those agencies involved in this operation then faced the challenge of making sure they observe the independence of individual jurisdictions. It was likely that much of this has been considered and planned for in advance but those authorities linked to the operation had to make sure there was no possibility of one nation’s jurisdiction being hampered by what is conducted in one of the other countries involved.
The boiler room arrests were a firm reminder that improved cooperation between countries and their investigating agencies boosts the potential for success in investigations; particularly in cases of fraud and business crime which are often international and complex in nature. But success in cases is based on convictions rather than arrests. Everyone involved in such an operation has to prove they can work together to coordinate and deliver a prosecution case that brings that type of success. Without convictions, such international teamwork can only be judged a failure.
It is a reflection of this increasing international prosecution togetherness that we at Rahman Ravelli are being called on more and more for our experience in coordinating international defence cases. There is no reason to believe that this will change in the future. If anything, it is probably only going to become more common as agencies around the world look to their foreign equivalents to assist them in their investigations. Anyone arrested in such circumstances, such as the 110 rounded up in connection with boiler rooms, have to make sure their legal representatives know how to work on cases that have international, cross-border and multi-agency dimensions. The right legal team can mount a sound defence case. It may even be the case that the variety of agencies that have been involved in the investigation and prosecution may not be fully comfortable with, or experienced in, working with their new, international colleagues. This can offer a defence team opportunities to challenge the evidence and the way it has been produced.
As we saw earlier in this article, multi-agency, multinational investigations can look impressive in their early stages when arrests are going on in a number of countries. The real test for all those involved begins, however, when they have to turn arrests into convictions in one of those countries.
Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.