Private prosecutions offer utility companies an innovative and effective way to combat fraud by providing recourse in cases where civil remedies are unavailable or ineffective. They send a firm deterrent to would-be fraudsters and allow companies, in their capacity as private prosecutors, to recover a significant portion of their legal costs and corporate losses.
Fraud in the Utility Sector
Utility fraud can arise in a variety of ways. It can involve fraudulent behaviour such as an individual tampering with a power meter, using a false identity to avoid paying bills, opening and closing different client accounts, or diverting the source of a utility.
Digitalisation has increased utility companies’ exposure to fraud, as fraudsters have developed new methods to exploit digital payment systems. Two examples are Account Takeover Fraud (“ATO Fraud”) and Synthetic Fraud
- ATO fraud: The fraudster targets payments from the utility company to customers to obtain the benefit of overpayments, return security deposits, damage claim or rebates, or disaster recovery payments.
- Synthetic fraud: The fraudster combines fictitious and real information, such as names and other personal details, to create false identities, which are then used to defraud utility companies.
Detection and deterrence
As fraudsters have exploited advances in technology, utility companies have also developed new technologies to enhance their ability to detect fraud. After implementing these new technologies, one source estimates that European utility companies have increased the amount of detectable fraud from 5% to 50%.[1]
However, given the rampant rise in fraud across society, utility companies will need to deter it hereto. Private prosecution may be the utility which helps utility companies to take advantage of their increased ability to detect fraud. But what is a private prosecution, and how can utility companies deploy them?
What are Private Prosecutions?
Under section 6(1) of the Prosecution of Offences Act 1985, a criminal prosecution may be brought by a private individual. This is called a private prosecution. The individual assumes the role of the prosecutor and must comply with the same obligations as a public prosecutor. They must pursue all lines of inquiry to identify relevant information and disclose this material to the defence.
To bring a private prosecution, an individual must satisfy the “Full Code Test”. This requires the prosecutor to provide sufficient evidence for a realistic prospect of conviction and, demonstrate that there is a public interest in bringing a prosecution.
Private prosecutions often progress quicker than public prosecutions and allow the private individual to play a greater role in the prosecution process. Private prosecutors are also entitled to recover their legal costs, which is typically around 70-90%.
Private prosecutions carry criminal sentences, including potential custodial sentences, which act as a powerful deterrent. So, how can private prosecutions be used to respond to utility fraud?
Private Prosecutions – Greater utility for the utility sector
Private prosecutions can be deployed to target utility fraud by sending a message that fraud will not be tolerated, and any attempts to defraud the organisation will face potential criminal liability. More often than not, criminals learn (and learn to avoid!) those companies that take a hard-line stance against fraud. They also provide recourse in cases where civil remedies are unavailable or ineffective; for example, where the fraudster has no traceable assets or refuses to engage with the civil disputes process. Utility companies will no doubt be familiar with such cases.
Private prosecutions, therefore, provide a solution to the rise in fraud and to ultimately boost companies’ overall efficiencies. Enabling utility companies to divert more resources into developing technology which produces greener, and cheaper energy.
To find out more about how private prosecution may work for your business, contact KateMcMahon@emmlegal.com, Partner at Edmonds Marshall McMahon, a specialist private prosecution law firm.
Dylan Silvain & Oliver Fredrickson
[1] Fragkioudaki A, et al. (2016) Detection of Non-Technical Losses in Smart Distribution Networks: A Review.
