Pictured above: (l-r) Joint heads of Challinors' Fraud & Asset Recovery Department Mark Kenkre and Arun Chauhan

Conservative plans for financial reforms would place additional operational onus on businesses to detect fraud by rogue employees and leave company directors increasingly liable for fraudsters on their payroll, fraud lawyers are warning.

Arun Chauhan and Mark Kenkre, partners and joint heads of the Fraud & Asset Recovery department at Midlands' law firm Challinors, said: "The Conservatives have set down plans for a new agency with beefed up powers to tackle fraud and other financial crime. The move would lead to the closure of the Serious Fraud Office and the existing patchwork system of bodies pursuing white collar crime. 

"There are also plans for financial reform whereby companies would be made liable for the actions of rogue traders and economic fraudsters on their payroll. Under current criminal liability rules companies can claim innocence of crimes perpetrated by individual employees.  

"Were such reforms to be made it would place an added onus on businesses to ensure that systems are in place to identify and detect fraud at an early stage, as if these systems are not in place the company itself may face charges for the actions of a rogue trader. This will no doubt put company directors on notice that they must be vigilant and look out for any warning signs that a fraudster may be on the company payroll.

"Many lawyers, especially those like us who specialise in fraud and financial crime, will be closely following the outcome of the election." 

George Osborne has stated that a Tory Government would create an Economic Crime Agency which would take over the 'work of investigation and prosecution of serious crime' done by the Fraud Prosecution Service, the Revenue and Customs Division and the Office of Fair Trading. 

Currently there are six different government departments and eight different agencies dealing with financial crime and fraud. There is currently £30 billion worth of fraud taking place in the British economy every year.

"It would appear that policy makers have now recognised the fact that financial crime is more prevalent and that members of the public are now becoming victims," says Arun Chauhan. "The existence of Ponzi Schemes and Boiler Room frauds, show that financial crime can affect everyday investors and it is worthy to note that George Osborne has compared stealing an individual's pension with mugging somebody in the street. "Britain lags behind the United States in prosecuting financial crime and the reform would probably be used as a declaration of the start of a more draconian regime for tackling fraud and other wrongdoing. 

"In the past the Serious Fraud Office has attracted criticism for its poor prosecution record and the Financial Services Agency (FSA) has been attacked for its light touch approach to regulation. The FSA has featured heavily in the press for its tougher approach and in particular the focussed attack on Insider Trading evidence by the handing down fines to regulated businesses that have not done enough to prevent employee fraud in 2009. There now appears to be a definite shift towards a more aggressive approach."

Challinors has offices in Birmingham, West Bromwich, Wolverhampton, Halesowen and Nottingham. The firm has 24 partners and over 100 fee earners, and is ranked as one of the top legal firms in the West Midlands, being Number 1 in the Chambers UK Directory in a number of categories, including Clinical Negligence.