In a previous update, we highlighted the risk posed by alcohol fraud to the food and drink sector. We also set out preventative steps organisations should take to mitigate the risk of alcohol fraud, including the importance of:
- Knowing the risks to which you are vulnerable.
- Well organised paperwork.
- Properly drafted, formal contracts.
Even when these preventative measures are taken, instances of fraud may occur.
What options are available to organisations in the food and drink sector where a fraud concern has been identified?
Internal investigation
In the event of a fraud concern, immediate steps should be taken to investigate matters.
Legal support should be sought to guide the organisation through an internal investigation. The role of the solicitor will include preparing Terms of Reference confirming the scope of the investigation, advising on relevant materials, engaging with individuals including witnesses and producing advice to the organisation.
The advice provided by a solicitor will be protected by "legal professional privilege". This means that an organisation cannot be compelled to disclose the terms of the advice unless it wishes to do so.
Reporting to the authorities
Where an internal investigation confirms that a fraud has occurred, the next step will be to engage with the relevant authorities. In this respect, organisations have a number of options.
First, a report can be made to the Scottish Food Crime and Incidents Unit via its Hotline. This Unit is the investigations and intelligence gathering arms of Food Standards Scotland.
Where the Unit is satisfied serious and or complex fraud or noncompliance in relation to the Scottish food and drink industry has taken place, it will carry out an investigation and seek to disrupt the conduct. Disruption may take the form of:
- Investigating instances of food crime.
- Supporting Local Authorities in carrying out their own investigation.
- Acquiring communications data to help with the progress of criminal investigations.
In November 2022, the Unit supported the prosecution of a Perthshire businessman accused of fraud having allegedly sold £600,000 worth of tea purchased from wholesalers outside the UK which the businessman had told purchasers was homegrown. The case was due to go to trial in April 2023 though no outcome has yet been published.
The Unit may also report matters to Police Scotland direct.
A direct report to Police Scotland
Second, a report can be made direct to Police Scotland by the affected organisation.
Police Scotland has a dedicated economic crime team containing specialist officers with experience of investigating financial crimes such as fraud.
In the event of a police investigation, the affected organisation will support the lead police officers by providing relevant information. Ultimately the aim is to assist the police in gathering sufficient evidence to report matters to Scotland's sole prosecuting body, the Crown Office and Procurator Fiscal Service, with a view to a criminal prosecution against the wrongdoers.
Civil legal action
In addition to engaging with Police Scotland, organisations can raise civil legal action with a view to recovering their losses. Again, it will be important to seek legal support as soon as possible with a view to taking advice on the merits of an action for recovery.
If you have any questions on how to protect against the risk of fraud, or the steps to take if you are concerned that there has been a fraud in your business, please do not hesitate to contact the Corporate Crime and Investigations Team at Brodies
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