May 20 2020

Freezing out the unknown

');w.document.close();w.print()}

');w.document.close();setTimeout(()=>{w.print()},300)}

Cyber crime is an increasing risk in a covid-19 new world where businesses are operating remotely and employees are working from home where they can. Fraudsters are adept at finding any weaknesses in a business’s systems and processes, particularly when the switch from ‘business as usual’ to remote working had to be quick.

Mareva injunctions can be a sharp weapon against cyber criminals who defraud businesses – even if the identity of the fraudsters is not known. The experienced commercial litigation lawyers at ParrisWhittaker are highly experienced in securing Mareva injunctions on behalf of clients – whether or not the victims know the identity of the criminals.

What’s a Mareva injunction?

A Mareva injunction is a temporary court injunction freezing someone’s assets to stop them disposing of them. The courts in the Bahamas have discretion to grant an injunction under s2(1) Supreme Court Act 1996 where it appears just and convenient to do so.

An applicant must have a credible claim against the purported debtor (eg. the cyber criminal); that they own assets within this jurisdiction and there is a significant risk of them disposing of the assets before the creditor can obtain judgment and get it enforced. In the case of cyber crime, the applicant will need to show evidence of the fraud and the amount of money that has been transferred to the fraudsters as a result of the fraud, and where it was transferred to.

Once the assets have been frozen, the victim should be able to continue legal proceedings for the return of the money obtained through the fraud.

In our increasingly digital world, it is common not to know the identity of cyber criminals – who typically hide behind the anonymity of email through the hacking of email and other digital accounts. That is what happened in a case last year which confirmed that a Mareva injunction order can be granted against ‘persons unknown’.

What’s the background?

This case¹ involved email fraud and the court was prepared to grant an interim freezing injunction against persons unknown. The applicant (World Proteins KFT) had received €2m worth of invoices from a longstanding supplier, followed by email exchanges. However, subsequent invoices purportedly from that supplier were, in fact, sent by fraudsters and World Proteins paid those invoices before realising.

The fraud was compounded by the veneer of authenticity as the fraudulent emails included the chain of genuine emails. When the fraud was discovered, €1.5m was promptly recalled but not the remaining €500,000.

An interim freezing injunction against persons unknown was therefore obtained to restrain those funds. Later, a UK bank account was identified as being associated with the fraud but just €350,000 remained there. €150,000 had been transferred to three bank accounts in Dubai.

There is a high hurdle to jump to satisfy the court that it should exercise its discretion and grant a freezing injunction but the applicant succeeded in this case. The court concluded that there was an obvious fraud; multiple causes of action existed for the claimant; and there was a real risk of dissipation of the assets if the injunction was not granted.

As it happened, the fraudsters were eventually identified. The bank records of the account into which the defrauded amounts of cash were deposited were disclosed, and the individual’s identity and address were obtained.

What does this mean?

Victims of cyber crime may be able to apply for an urgent Mareva injunction if, for instance, there is a clear case of fraud – even where the identity of the criminal is not yet known. In an increasingly digital world, the willingness of the court to order freezing injunctions in relation to the assets of ‘persons unknown’ gives a measure of comfort to those at risk.

But if there is any indication on the evidence of carelessness on the part of the victim, it is questionable the court would exercise its discretion and order a freeze of a suspected fraudster’s assets.

We can provide immediate assistance to protect you. Contact the experienced commercial dispute resolution lawyers at ParrisWhittaker for expert advice and prompt action if a freezing injunction is necessary.

¹World Proteins Kft v Persons Unknown [2019] 4 WLUK 35