SFO to hunt down hedge fund fraudsters

Hedge funds are in the sights of the Serious Fraud Office, following high-level talks with accountants.

SFO chief Richard Alderman said that the high-risk, high-reward investment companies were an area of concern and discussions with members of the profession had added weight to doubts.

The clampdown comes alongside the high-profile collapse of the Weavering Capital hedge fund.

Speaking at a KPMG Fraud in Business Club meeting this month, Alderman said he was ‘particularly concerned’ about hedge funds. He added: ‘We became more and more concerned the more people told us that this was not an area of risk.’

Since then, Alderman has been in discussion with senior accountants and leading corporates. Jeremy Outen, partner at KPMG Forensic, was involved in the talks and said that, while hedge funds had been discussed, the risk of fraud had increased across the board.

‘There’s a concern that [hedge funds are] suffering in this market as much as anyone.’

Fraud experts have backed Alderman’s approach. ‘We think he is spot on. We think hedge funds are going to be a very big area for fraud,’ said Simon Bevan, forensic partner at BDO Stoy Hayward. ‘When you say you are going to invest in X, but it’s not an independent third party, that would be a big red flag.’

An SFO spokesman said: ‘There are a number of issues, including transparency on what actually constitutes a hedge fund and its financial backing.’

A senior adviser to hedge funds told Accountancy Age Alderman’s comments had left the industry operating in ‘a climate of suspicion’.