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Fraud on investment bank shows need for compliance in hiring decisions

The Central Criminal Court of England and Wales, commonly known as the Old BaileyThe London High Court’s recent decision in Otkritie v. Urumov, with headline damages of about $150 million, involved two discrete (but ultimately connected) frauds perpetrated on a Russian investment bank.

The first fraud involved the hiring of an international financial trading team for a substantial sign-on fee. The fee was then retained by the leader of the trading team and partly used to pay bribes to a number of the bank’s officers who had been tasked with hiring his team.

The second fraud involved the leader of the trading team and his associates carrying out a fraudulent purchase of Argentinian warrants at a grossly inflated figure, which realized a loss of close to $150 million.  

The difficulties facing the court can be gauged from the list of recorded issues which included bribery, forgery, blackmail, intimidation, entrapment, subterfuge, kidnap and even murder. 

The judge said, “Anyone sitting in court listening to the evidence and the parties’ respective submissions might have been forgiven for supposing that they were in the Old Bailey rather than in the Commercial Court…”

On top of that, the judge recorded that the claimant’s main witness was not only a self-confessed rogue, fraudster and serial liar, but was capable of cunning deception, and that each of the individual defendants gave evidence that was dishonest, at least in part. 

The decision illustrates the importance of compliance professionals being closely involved in the hiring of significant personnel, particularly when large sign-on fees are involved.

The interplay between compliance and hiring policies has recently been highlighted in a number of cases about people related to influential officials or decision makers.

The decision in Otkritie v. Urumov also shows how effective AML procedures within an institution can reveal fraudulent transactions.

It was a notification by Bordier Bank to the Swiss authorities, relating to the proceeds of the second fraud, that led to the criminal proceedings against the main protagonists.

Finally, the case provides a useful cut-and-paste summary on the English law relating to civil bribery, deceit, conspiracy and dishonest assistance.

A copy of the decision in Otkritie v. Urumov can be found here.


Alistair Craig is a commercial barrister practicing in London.

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