19 May 2017
In its manifesto, released yesterday, the Conservative Party pledged to abolish the Serious Fraud Office (SFO) as an independent agency, instead merging it with the much larger National Crime Agency (NCA):
‘We will strengthen Britain’s response to white collar crime by incorporating the Serious Fraud Office into the National Crime Agency, improving intelligence sharing and bolstering the investigation of serious fraud, money laundering and financial crime.’
The pledge was met by immediate and universal criticism from anti-corruption groups and financial crime experts. Jonathan Fisher QC, a leading barrister in white collar crime cases, said it sent a ‘wrong message about the UK’s resolve to tackle serious fraud and corruption’. David McCluskey, partner at the law firm Taylor Wessing, told the Financial Times that ‘the UK’s reputation as a bastion of the rule of law will be seriously harmed’.
They’re quite right. If it is genuinely the Conservatives’ aim to strengthen the UK’s response to white collar crime, scrapping the SFO would be counterproductive. The agency is a world-leading repository of expertise on financial crime. In recent years it has taken a number of courageous decisions to mount prosecutions in complex and demanding areas of the law that a lesser agency would have filed as ‘too difficult.’
In search of the government’s rationale
The pledge to abolish the SFO made in the manifesto appears in a single sentence sandwiched between promises to ‘create a national infrastructure police force’ and ‘extend direct entry into the police’. No explanation for it is given.
As Home Secretary, Theresa May tried twice merge the SFO with the NCA: once in 2011, when she was halted by opposition from Ken Clarke and Attorney-General Dominic Grieve, and again in 2014. Whether she is motivated by the potential for efficiency savings or by simple scepticism of the agency is unclear. The former would be particularly unwarranted, given the SFO’s annual budget is a measly £33 million, which this year it has already made back many times over in fines.
The SFO has certainly had a mixed track record over the past decade. In 2006 it abandoned a corruption probe into BAE systems following pressure from Saudi Arabia, and in 2014 it had to pay more than £3 million in damages to entrepreneur Vincent Tchenguiz for his wrongful arrest. It was also caught making secret, unauthorised exit payments to senior staff.
But the agency has gathered speed in recent years, securing significant deferred prosecution agreements with Tesco for false accounting and with Rolls-Royce for crimes including conspiracy to corrupt, false accounting and failure to prevent bribery. In the latter settlement the fines totalled more than half a billion pounds, and commentators observed, wrongly, that the cloud above the SFO had finally lifted.
The agency continues to work on highly significant cases including an investigation into whether senior Bank of England staff were implicated in LIBOR rigging, and an examination of the links between Barclays and Qatar at the height of the financial crisis. It is a great shame that these will almost certainly now be disrupted.
The National Crime Agency: a poor fit for the SFO’s specialist work
The mismatch between the SFO and the much larger National Crime Agency stems from the NCA’s sprawling remit: it is required to tackle organised crime—from gang violence to paedophilia—in all its colourful forms. But the NCA lacks the SFO’s hard-won expertise in investigating and prosecuting ‘heavy fraud’ and complex financial crime and few talented SFO employees—who will have no difficulty finding well-paid employment in the private sector—are likely to want to transfer to the larger agency.
The result of the Conservative manifesto pledge will be an immediate paralysis of ongoing investigations, an unwillingness to take new cases and, if the pledge is followed-through, significant damage to the SFO’s world-leading expertise. With renewed allegations concerning large-scale money laundering in London’s property market, the government’s timing could hardly be worse.
The people happiest at this decision will be those in the crosshairs of the agency’s investigations, who will no doubt rejoice that such a diligent and effective adversary is being shut down.
Tom Devlin is a leading financial investigator and a partner at Stephen Platt & Associates LLP. He has advised and acted for regulators, banks, investment funds, trust companies, and professional bodies.
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