Byline: Clive Zietman
IT WAS Agatha Christie who said that where large sums of money are involved, it is advisable to trust no one. She was right. At the moment fraud is booming in the UK and there are good reasons for this. In an economic crisis, what had been concealed is unearthed during investigations by liquidators and the police. Added to which, certain types of fraud tend to thrive when the financial going gets tough. So what is going on? PONZI SCHEMES Charles Ponzi gave his name to this scam nearly 90 years ago. Bernie Madoff simply followed in his footsteps. In short, a Ponzi scheme is an investment business that seems (and is) too good to be true. It pays out improbable returns that suck in fresh money which in turn is used to perpetuate the myth. When investors call in their money in times of crisis (as happened with Bernie), the bubble bursts.
ADVANCE FEE FRAUD When banks refuse to lend, those in need of funds might turn to "alternative" sources. Enter the ebullient advance fee fraud. He will offer remarkable terms with the small proviso that a modest arrangement fee is paid in advance. The source of funds is usually opaque. Needless to say, the victim pays the up-front fee but the megafunding is never forthcoming.
MORTGAGE FRAUD Mortgage fraud flourishes when property prices are rising. During boom years no one worries about flimsy criteria and half-truths about income and valuation. But when the repossessions start, uncomfortable truths emerge about the basis on which the money was originally lent. The more sophisticated mortgage frauds go well beyond the activities of dodgy valuers. The schemes that emerged in the Nineties after the boom of the Eighties will be matched by schemes emerging now.
UNSCRUPULOUS LIQUIDATORS As the Roman poet Juvenal said: "Quis custodiet ipsos custodes?" Who will guard the guards? Liquidators and administrators have a huge amount of power and control over the assets of a deceased company. With the rising number of corporate failures and personal bankruptcies comes an inevitably greater workload for insolvency practitioners. The vast majority are straight but there are a few rotten eggs who are perfectly placed to turn a blind eye to wrongdoing, charge excessively and allow undervalue sales. …