You can hardly open a newspaper or switch on the news without being bombarded with dire prognostications about the state of the economy and comparisons with the early 1990s and previous recessions. What these earlier periods, certainly the early 1990s, also featured was a boom in fraud, with spectacular corporate collapses such as that of the Maxwell empire, the Bank of Credit & Commerce International and Polly Peck to name but a few, linked to allegations of large-scale asset misappropriation and financial reporting fraud, some of which led to criminal convictions for the perpetrators. It was also a time of some breathtaking investor fraud schemes. So has anything changed, and are we more or less exposed to these risks now than we were then?
Certainly, there has been a raft of new legislation and regulation since those bad old days and the regulatory landscape has changed dramatically. The law around pension fund protection, investment business, auditing and financial statements, internal control, insider trading, market manipulation, money laundering and the proceeds of crime have all been overhauled. We now, finally, have a definition of fraud in English law, enshrined in the Fraud Act 2006, though the full impact of this is yet to be seen. Standards of corporate governance have undoubtedly improved, at least on paper. There is also a greater general awareness – at least in the corporate sphere – of the risks, driven in part by the increasingly onerous nature of directors’ legal responsibilities and the weight of regulation.
