Insolvency profession calls for the return of Criminal Bankruptcy

Criminal bankruptcy should be reintroduced to help return money from fraudsters to their victims, according to a new report published by the insolvency trade body, R3.

The report argues that the UK's fight against fraud has been hampered by cuts to the government's anti-fraud agencies budgets, and that powers to investigate fraud by insolvency practitioners should be used more widely.

According to the National Fraud Authority, fraud cost the UK economy £52bn in 2013. Meanwhile, the Serious Fraud Office's budget has fallen to £35m from £52m in 2008.

Insolvency practitioners believe Criminal Bankruptcy Orders would allow for more effective retrieval of funds from defendants than is possible under confiscation orders.

Giles Frampton, president of R3, said: "Insolvency practitioners already have significant powers to investigate fraud and find redress for victims. At the moment, these powers are only used in a limited number of situations: increasing the opportunities to use insolvency practitioners' powers would help bring fraudsters to justice and ensure victims are properly compensated."

"Given government spending and resource cuts, it's likely there are a number of cases involving fraud that government agencies just can't afford to pursue. Insolvency practitioners can provide much-needed extra capacity and additional powers to fight back against fraud."

Frampton added: "Insolvency practitioners are Officers of the Court and are highly regulated and qualified. Extending the opportunities to use their powers would iron out existing inconsistencies, such as the fact that companies can be made insolvent in the public interest, but individuals can't."

Criminal bankruptcy would see those convicted of fraud put into bankruptcy where the loss or damage caused to others by their offence exceeds £15,000. The offence was removed from the statute book in 1988 as part of a legislative 'tidy-up'.

The report from R3 also suggested alternative ways to use insolvency practitioners' powers in the fight against fraud. These include allowing the Secretary of State for Business, Innovation & Skills to make an individual bankrupt in the public interest, and for directors of such companies to face automatic disqualification from acting as a director in the future.