What is a commercial fraud?

There is not a single legal definition of commercial fraud, as this concept covers a wide range of areas.

However, it is possible to propose a descriptive definition, outlining the main elements, permitting to detect the possibility of fraud.

What are the key elements that can help identify a commercial fraud?

• Deceit (deliberate actions that can be qualified as criminal conduct)
• Economic dimension;
• The deliberate action results in loss of value for the target;
• The target is deprived without his/her informed consent of assets or of legal rights.

Possible causes of action

• Breach of fiduciary duty;
• Breach of trust;
• Conspiracy;
• Deceit;
• Dishonest assistance / Fraudulent intent and actions;
• Abuse of confidence;
• Fraud on power;
• Restitutionary causes of action.

However, in order to proceed to filing a claim against the physical person or the legal entity involved in the fraud, one should be able to recognize and identify the fraud.

So, what are some of the indicators of commercial fraud?

• Irregular documents: Commercial frauds involve often the use of documents, drafted improperly in order to mislead.
• Misuse of technical terms: Such terms may be used in order to gain credibility. However, it should be noted that often they are not used properly in order to mislead.
• Disproportionate returns: Commercial frauds often involve transactions/deals with disproportionate returns/benefits in relation to the risks (no or little risk transactions).
• Undue secrecy: Commercial frauds are often characterized by undue secrecy and confidentiality.
• Abuse of incentives: In this case, the abuse of incentives aims to convince the mislead the target so that it overlooks the questionable aspects of the transaction/fraud. This practice is often used to target consumers. You can find further information in our related article: unfair commercial practices.
• Overly complex or simplistic transactions: Such transactions are designed to appear overly complex in order to obscure its fraudulent basis or overly simplistic, although it includes more complex elements.

If a company is involved in a fraud, it is possible to proceed to the piercing of corporate veil. For further information could can read our related article on piercing the corporate veil.

It is often very difficult to prove fraud due to the secretive character of fraudulent activities. In order to collect evidence, there are several ways of action, among which are the following:

• Discovery and Tracing orders / Norwich Pharmakal orders, which can be used to obtain information on the stolen assets (their value, location etc) in order to assist the victim trace his/her assets and obtain evidence.
• Search Orders / Anton Piller Orders, which can order one party to allow the other party to enter its premises in order to collect and preserve evidence which can be used in the proceedings.
• In the meantime, it is also possible to apply for a freezing order (Mareva Injuction) in order to block temporarily the assets or for interim orders blocking the exercise of certain acts, including the implementation of corporate decisions etc. which could be taken with fraudulent intent.

For further information on the various orders and interim injuctions in Cyprus, you can find further information in our related article.

If you require legal advice on how to protect yourself against fraudulent actions or on how to recover your stolen assets, you can get in touch with our team.