Civil remedies available for email fraud victims

Alice Daniels considers the ways in which the Civil Courts can assist victims of email fraud to investigate the wrong-doers and recover their assets with reference to the case of Kahlbetzer v Aldridge (2017) (unreported).

Fraud and cybercrime is an ever growing threat for businesses, with a recent study estimating that the annual cost of fraud in the UK stood at £193 billion, £144 billion of which relates to business fraud.

Business email compromise (BEC) in particular poses an ever-increasing threat to businesses. BEC usually involves a fraudster impersonating a senior member of an organisation vie email in order to authorise the transfer of funds to the fraudster's account. Analysis of US and European organisations by cyber security firm Proofpoint has found that an estimated 75% of its customers have been affected by at least one attempted BEC attack.

The main recourse of fraud victims continues to be the relevant policing authorities and commencing a civil action against a fraudster. Where the fraudster's true identity is not known, civil action can be problematic. However, there are a number of forms of interim relief available through the Civil Courts which can assist in identifying the perpetrators of fraud and preserving the fraud proceeds. 

The benefits of obtaining such interim relief were seen in the case of Kahlbetzer v Aldridge (2017).  Mr Kahlbetzer was a wealthy Australian citizen who was the subject of an email fraud in April 2017. The fraud resulted in US$1 million being transferred from one of Mr Kahlbetzer's bank accounts to an account held at a currency trading firm in the UK. Mr Kahlbetzer subsequently commenced civil action, including applying for various forms of interim relief against various parties.

Identifying the email sender

Mr Kahlbetzer obtained a Norwich Pharmacal relief order requiring the email hosting company to disclose information about the sender's true identity. This form of relief requires a party which is involved in a wrongdoing, whether innocently or not, to disclose certain documents or information.

Identifying the beneficiary of the funds

The court made a further Norwich Pharmacal relief order against the currency trading firm to which Mr Kahlbetzer's money had been transferred. Where the identity of the financial institution to which funds are transferred is known, an order may also be sought from the court requiring the recipient financial institution to disclose information about the beneficiary of the relevant account. This information can be of great assistance in identifying who has benefitted from the fraud.

As a result of the information obtained from both the email hosting company and the currency trading firm, Mr Kahlbetzer was able to identify Mr Aldridge as an individual centrally involved with the fraud.

Preventing dissipation of assets

Following the identification of Mr Aldridge as an individual centrally involved with the fraud, Mr Kahlbetzer obtained a freezing injunction against Mr Aldridge in order to prevent him from dissipating his assets pending a finding from the court as to whether Mr Kahlbetzer could recover the defrauded sums from Mr Aldridge.

Disclosure of details of the fraud

Once proceedings have been started against the alleged fraudster, further orders can be made by the Court requiring them to provide detailed information and documentation relating to the claim and in relation to their assets. This can assist in proving the claim for recovering the defrauded funds or widen the investigation.

The above forms of relief available from the civil courts can prove invaluable in identifying those behind fraudulent activity and ensuring funds are not dissipated before they can be recovered.

For further information please contact Alice Daniels, Senior Associate in the Litigation & Regulatory Disputes team.​