In these times of austerity are we going to see a turf war between Government departments result in the break up of the Serious Fraud Office? Under plans currently being considered by the Government the Crown Prosecution Service will take over the handling of complex fraud cases whilst the new National Crime Agency is all set to carry out the SFO’s investigative role.
Some are now beginning to ask whether this territorial fight will result in the fight against financial crime being lost. The National Crime Agency (NCA) will be sponsored by the Home Office and aims to be bigger, better and more powerful than the existing Serious Organised Crime Agency (SOCA). Its focus will be on organised crime networks and terrorism and has been described as "an FBI- style specialist police force". This maybe somewhat prophetic as when SOCA was formed there was some disappointment amongst those recruited from the then National Crime Squad and HM Revenue and Customs that they would not be referred to as ‘Agents’.
The Home Office have said " The Government is determined to give greater focus to tackling both serious and economic crime" but some see the re-shuffle as a territory grab and the fear is that with harsh budget constraints fraud investigations will be downgraded and its budget diverted. To many white collar crime lawyers this may seem strange as in practice they can see that fraud is on the increase. The National Fraud Authority recently announced that fraud costs the UK over £38 billion annually. The estimated loss to the public sector being £21 billion and £12 billion in the private sector, of which mortgage fraud and insurance fraud amount to a huge annual loss of £3.1 billion with another £3.6 billion losses being recorded in the financial services industry.
Would you therefore be wrong to worry that fraud investigations would be given a lesser priority if the new shake up happens? The losses are certainly large enough to make political capital of. At the start of the year Francis Maud the Minister for the Cabinet Office described the public sector loss as " the equivalent of building 800 secondary schools, or employing over 615,000 nurses" adding " it’s a problem we are not going to ignore. Ripping off the tax payer will not be tolerated." Is this just political rhetoric or does the will to prioritise fraud investigations still exist?
In coming to any firm conclusion about the Government’s focus and where the Serious Fraud Office sit within that it may be helpful to note that it has been reported that in recent months the SFO have lost several senior prosecutors and that all the uncertainty about its future could prompt other lawyers to leave. Two years ago following the House of Lords decision in the high profile and hugely expensive ‘pharmaceutical criminal cartel’ case which saw the decision go against the SFO, a number of senior lawyers quit and morale was low. A new director was appointed but he himself has seen his organisation sharply criticised by judges in a series of bribery cases. This has hampered the organisation’s attempts to persuade companies to come forward and admit to corruption, the very thing which the latest director championed shortly after he joined.
In the light of those morale zapping decisions, the SFO will need to fight to attract and retain specialist lawyers as some look for a quick exit to one of the myriad of other agencies who also carry the responsibility for investigating and prosecuting fraud. One quick look at the Attorney General’s website and you may be surprised to see that there are 13 different organisations within the counter-fraud community. They range from the Financial Services Authority, the Office of Fair Trading, City of London Police (designated as the National Lead Force for fraud), BIS, the Department for Business, Innovation and Skills, to the Metropolitan Police but to name a few, and all have a very similar mission statement ‘to protect society from serious economic crime’.
Before last year’s election there were vey advanced plans to merge the FSA, OFT and SFO to create a single super agency. However following strong lobbying and a recruitment drive which saw some SFO lawyers move to Canary Wharf, the FSA saw off those plans and have since been praised for their efforts to combat insider trading. At was at about the same time that the responsibility (and purse strings) for financial crime regulators was passed from the Treasury to the Home Office which it is reported favoured breaking up the SFO and merging it with the new super-charged NCA.
There are a number of senior fraud practitioners who think that it would be counter productive to break up the SFO stating that " on complex economic crime cases investigators need to work closely together" adding " we are of the clear view that the integrated investigator / prosecutor model is the preferable is the preferable model in combating economic crime.
With so many different agencies all competing for Government funding, the SFO’s chequered history and despite the Government’s determination to give a greater focus to tackling both serious and economic crime, this may be the beginning of the end for the high profile organisation.
Tim Hayes is a practising barrister, who enjoys partnership status at Pannone LLP. He was the one of the lead lawyers in the ‘pharmaceutical criminal cartel’ case and currently represents one of the defendants in the £60 million Cheshire Building Society fraud at Southwark Crown Court.
