Conventional and cyber-related fraud schemes are on the rise. These include fake supplier fraud and CEO fraud, which seek to misappropriate funds, and phishing, which targets confidential information.
The Canadian Anti-Fraud Centre stated in its latest annual report (2022) that it had received over 91,000 reports of conventional and cyber-related fraud that year, representing losses of $530.4 million. By comparison, the Centre observed $380 million in reported losses in 2021 and $165 million in 2020.1 As of June 30, 2024, it had identified 15,941 fraud victims and $248 million in associated financial losses.2
The misappropriated amounts can be significant, and the confidential information is often highly strategic. Such losses can have serious long-term consequences for the defrauded entity. No organization is immune to scams, as illustrated in a recent case involving Hydro-Québec and one of its suppliers.3
Prevention is key
To reduce risk and maximize the chances of recovering the losses, it's vital for a company to implement appropriate measures. If the organization is attempting to recover lost funds, it must provide convincing evidence that it acted prudently and had preventive mechanisms in place prior to the fraud. This means it's important to take action before a fraud occurs.
In addition, since managers, senior officers and directors have an obligation to act with prudence and diligence at all times in the company's interests,4 and given the increase in fraud cases, it has become all the more necessary to implement the required safeguards for reducing risk and preserving the company's rights and remedies.
Our lawyers can help you quickly implement the measures your company needs to protect itself against fraud. With our assistance, you, your managers and your employees will have more time to dedicate to the company's day-to-day operations because you'll be spending less time dealing with fraud.
With our extensive knowledge of best practices based on the precedents and principles applied by the courts, we can provide you with insight on several topics: actions that senior officers and managers should take before and after a fraud occurs; the employee and management positions at risk of fraud or phishing; potential fraudulent actions, such as e-transfers and promissory notes; techniques used by fraudsters; and preventive measures the courts consider effective and in the interests of the company. If you can demonstrate that your company acted prudently before a fraud occurred, this can also significantly increase your chances of recovering the amounts lost. This exercise is essential to prevent your company from having to absorb all or part of the loss.
Lastly, when a company is the victim of fraud, it's important to know whom to exercise a remedy or file a claim against, determine who must pay for the loss, and act quickly to preserve evidence and the remedies available to you. A rapid response is also essential for maintaining the company's image and reputation.
Our firm has the necessary expertise to accompany you throughout the process, and our specialized civil and commercial litigation team is available to answer your questions.
Footnotes
1. Canadian Anti-Fraud Centre. 2022 Annual Report, PS61-46E, https://antifraudcentre-centreantifraude.ca/.
2. https://antifraudcentre-centreantifraude.ca/index-eng.htm.
3. https://ici.radio-canada.ca/nouvelle/2093196/hydro-quebec-fraudee-pour-plus-de-450-000#:~:text=Le%20subterfuge%2C%20connu%20sous%20le,du%20fournisseur%20ont%20%C3%A9t%C3%A9%20vis%C3%A9s [in French only]
4. Art 322 of the Civil Code of Québec, c CCQ-1991; s 119 of the Business Corporations Act, c S-31.1; s 122 of the Canada Business Corporations Act, R.S.C. (1985), c C-44.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.