Fraud poses a particular threat to sovereign wealth funds (SWFs) due to the vast sums of money they invest, and the fact that this is often spread over lots of different industries that the fund managers are not necessarily experts in. The risk profile of SWFs is therefore very broad when compared to other types of funds.

In this episode of FInsight, Charles Thomson and Henry Garfield, partners in Baker McKenzie’s dispute resolution practice in London, talk to Kate Geale about recent developments, legal issues, practical tips, and strategies around cross-border fraud and asset tracing in SWFs. The episode also tackles emerging trends around the growing emphasis on sustainability and the increasing impact of cryptoassets.

Here are other takeaways from the episode:

  • The road to recovery of stolen assets is a long one – and a number of steps can be undertaken immediately after the fraud is discovered. There are two main buckets – (1) legal issues and (2) practical considerations – with the two running in parallel.
  • The continuing development of crypto assets offers a sophisticated new playing field for fraudsters, and the massive increase in digitalization during the pandemic has only accelerated fraud concerns.
  • SWFs are coming under greater scrutiny than ever before, especially in light of the growing emphasis placed on ESG factors. It is important that they pay close attention to the statements they make to investors, in order to avoid falling foul of fraudulent misrepresentation claims, for instance.

A global, holistic strategy is key to tackling fraud in relation to SWFs, with a joined up approach across different jurisdictions and an ability to move quickly where necessary. Affected parties should start building a legal team (including forensic accountants) and putting in place a solid communication procedure to maintain confidentiality and ensure that privilege is maintained. SWFs may also be under an obligation to report the incident to its investors, the government and other relevant financial bodies.

You can also read the accompanying publication, The State of State Immunity, which is part of the on-going Sovereigns Series – Worlds in Motion. The series maps the post-pandemic environment for sovereigns globally.

Author

From starting off with four lawyers, a secretary in 1949, to becoming one of the largest law firm by revenues, markets and headcount today, our commitment to excellence underpins our path to success. With 77 offices in 47 countries and 13,000 people, we are the world's premier global law firm.