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UK Financial Conduct Authority court case sets the scene for new African scam

Nigel Morris-Cotterill

The advance fee, or 419, scam industry is always looking for new opportunities and the fraudsters like to use genuine background as the reason they make contact with potential victims. A case in the High Court of England and Wales has created the conditions that are ideal for fraudsters as a hook.

The UK's financial regulator, the Financial Conduct Authority, has written to its counterparts around the world giving details of a case involving African Land and Carbon Credits schemes.

These unregistered collective investment schemes were found to be illegal and the FCA has confiscated the profits. It is now asking regulators all over the world to assist in identifying investors who may be eligible for restitution.

The cases were:

- African Land (also known as Agri Capital) which offered investments in rice farm harvests in Sierra Leone and was run by African Land Limited; and

- Reforestation Projects (also known as Capital Carbon Credits) which offered investments in carbon credits intended to be generated from land in Sierra Leone, Brazil and Australia and was run by Reforestation Projects Limited.

The High Court decided in February 2014 that the schemes were collective investment schemes which could not be lawfully operated by the defendants. Some of the defendants appealed this decision. In March 2015 the Court of Appeal rejected the appeal. On 28 July 2015, the Supreme Court refused to give the defendants permission to make a further appeal.

Following these rulings, the Court gave directions for a further trial to consider misleading statements, the extent of the defendants’ liability and the orders the Court should make. This trial took place over 22 days in July and October 2017 and the judgment was handed down on 26 March 2018.

The High Court initially ordered the defendants to pay GBP16.9 million in restitution. Following further applications by the FCA to take into account further losses from the African Land scheme, the Court has increased the amount to GBP18.7 million.

The defendants applied for permission to appeal the High Court’s decision. In a hearing on 24 April 2018, the trial judge refused the defendants’ applications for permission to appeal. Some of the defendants then applied to the Court of Appeal for permission to appeal and these were all refused in October 2018.

The deadline for making a claim via the UK's FCA is 31 March. Full details of how to make a claim are here: https://www.fca.org.uk/news/ne.... That page is the only, literally the only, authoritative source of information on how to make a claim. There is no need for third party claims companies to assist and no need to us any intermediary.

Why this is an opportunity for fraudsters

Advance fee fraud arises when a criminal tells an intended victim that there is a gain to be made but that, in order to secure that gain, a fee must be paid. In this case, criminals are likely to say something like "I have examined the FCA register and found your name as a potential beneficiary..."

For the avoidance of doubt, it is made clear that any claim not made by the deadline will not be entertained. So if the criminal says "we can help you make a claim even though the deadline has passed" that is a lie. If the criminal says "there was not time to contact you before the deadline and so we have made the claim on your behalf and we are holding your money," that's a lie because the FCA has not published a list and therefore the criminal could not know you are on it. If you receive an e-mail apparently from the FCA saying that you have been identified as a beneficiary, you should treat it with extreme caution. Do not reply to any address that is not an address at fca.org.uk. Do not click on any link that is not a link to fca.org.uk. If you permit mail in html format, do not rely on the text you can read as being the place a link will take you to. Always view mail in plain text or (a not so good solution) hover over the link and check in your browser's status bar (at the bottom) for details of the actual link.

The FCA can now proceed to take steps to enforce the orders to obtain money from the Defendants. This may mean selling Defendants’ properties and/or making the Defendants bankrupt.

The enforcement process is likely to take some time.

We have obtained new undertakings from, or injunctions against, some of the defendants to ensure that they do not move or spend (‘dissipate or diminish’) assets.

When the enforcement process has reached a reasonably advanced stage so that we can make a good estimate of the amount we will recover from the Defendants, and no later than 30 September 2019, we will apply to Court for directions about how and to whom we should distribute the funds we recover.

The eighth and sixteenth defendants settled their cases previously and have contributed GBP33,000 and GBP200,000 towards compensation. We have received this money and will hold it until the Court issues directions about returning money to affected investors.

--FCA Notice