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A Unified Fraud Prosecution Office—Has a Case Been Made Out?

The views expressed in this article are those of the author alone and do not necessarily represent those of either Peters & Peters or the Fraud Advisory Panel.

Fraud in the UK is now estimated (still not measured) at £30 billion per annum. The variety of fraud has itself multiplied as delinquent ingenuity mirrors creativity and risk-taking in the legitimate economy. At the same time, as we look back 25 years to the Roskill Committee Report, we remark that a coherent anti-fraud strategy is yet to emerge. This goes both for government and the private sector. Roskill was concerned only with making recommendations for the more efficient investigation and prosecution of fraud by the State. Among his recommendations was a call for the creation of a single or unified agency to investigate and prosecute all serious fraud. This idea, when eventually translated into policy implementation, became the Serious Fraud Office, a body less all-embracing than Roskill’s model but nonetheless presented as the answer to serious and complex economic crime. Upon it rested the expectation that an organisation which, contrary to other agencies, would both investigate and prosecute, and would be muscular enough to prise evidence from both commerce and the professions. It was given the power to interrogate both suspects and witnesses under compulsion and to recruit accountants and other specialists to analyse the evidence and produce it in a forensically acceptable form.

It is not the concern of this article, any more than it was of the Fraud Advisory Panel Working Group I chaired, to judge the performance of the SFO. Suffice it to say that, from the outset, it was bound not to fulfil all that was expected of it, particularly not the hyped-up role bestowed upon it by the popular press. It was not a unified office, as Roskill envisaged, possibly because of a reluctance to weaken the remit of existing agencies like the CPS, the Revenue prosecuting agencies as they then were, and other government departments who jealously guarded the right to bring criminal proceedings, however infrequently that might occur.

The very concept that some frauds, discovered or reported, could be singled out for special measures was problematical even at its creation. The Treasury, in far less straightened times than now, was nervous about committing a large budget to an untried crime control vehicle, and policy and performance was left to be developed by successive directors with occasional nudges from politicians and the media. It had, and still has, no police force of its own, so has been reliant upon the goodwill and availability of the economic crime components of the larger UK forces. Latterly, it has been given the extra and heavy responsibility of confronting the corruption of public officials—incidentally, at a time when its financial resources have actually been reduced. In addition it has had to shoulder the burden of affording assistance to overseas agencies at a time when transnational fraud has increasingly proliferated.

Mercifully, perhaps, there is no absolute requirement to report fraud, or else this agency and its sister agencies in the UK would have been totally overwhelmed with work. Politicians and the public appear to have judged the SFO by the number of its successful convictions, not surprisingly, perhaps, when it has tackled the most high-profile cases of the last two and a half decades. At a time when the government has set up a National Fraud Authority, when the financial crisis of 2008–2009 has put financial wrongdoing on the front page, and the wasting of scarce resources has become an election issue, it seemed appropriate to consider whether things could have been done better and as a possible guide to the future design of policy.

The FAP Report illustrates that, far from unifying the future response to serious and complex economic crime, there has been an increase in bodies tasked with tackling the same general area, giving rise to the question of whether, other considerations apart, a large unified agency should now be reconsidered to confront a problem which has become more serious, more prevalent and more complex than it was in Lord Roskill’s day. There is no doubt a political will to persuade society of the corrosive and subversive effects of economic and financial crime. Bodies like the Fraud Advisory Panel were brought into being alongside National Fraud Fora to persuade civil society to take adequate preventative measures as well as to join in the State’s attempts to contain this criminal conduct. Since Roskill, it has been accepted that the State alone cannot deal with the occurrence of crime, particularly economic crime. However, it remains the duty of government to mark society’s intolerance of this delinquency by making detection, investigation and punishment a realistic consequence of this behaviour.

In the years since Roskill, society both domestically and globally has become more regulated, and indeed the very word regulation has acquired widespread acceptance, provided always that it is proportionate and effective.

Against this background, the Working Group, upon whose short Report this article is based, asked itself whether it made sense to have an SFO, and a Fraud and Revenue & Customs Division of the CPS, working alongside the FSA, the Office of Fair Trading, Department for Work & Pensions and the Ministry of Defence among others.

 

Being Was it possible, we asked, to fashion clear policy objectives governing cases to be considered, methods and powers of enquiry, preventive criteria, and ultimately desirable outcomes, forensic and non-forensic for so many different and sometimes competing organisations? In addition, how were business organisations, often regulated or governed by more than one agency, to fashion their own policies? Equally, how was the legal profession advising their clients corporate and individual to predict outcomes when confronting one agency rather than another? With the exception of the FSA, all the above agencies are centrally and publicly funded. The FSA is funded by those it regulates, and the income it generates from fees and penalties it imposes. Given that there are many overlaps between the remit of the SFO and the more limited remit of the FSA, was it possible, if desirable, to marry the two in a single United Fraud Prosecution Office? The use of the word prosecution has itself been called into question by the increasing application of non-forensic punishments: regulatory penalties, fines, disgorgement, possible deferred prosecution arrangements, disqualification and debarment.

Would, for example, a unified office not only bring economies of operation, as envisaged by the merging of the CPS with the RCPO, but also the development of a predictable policy of outcomes that prevented the possible perception that white collar crime was being treated more lightly and rigorously than its blue collar “counterpart”? Visiting delinquent corporations with meaningful punishment is a relatively modern concern, and its development may be hampered if too many agencies exist to define its character.

One body to deal with all fraud is clearly unworkable. One body to deal with conduct which includes all serious fraud including tax fraud and corruption may be practical. Again, the Working Group recognised that special interests such as the policing and prosecution of criminal cartels may best be left to specialist agencies like the Office of Fair Trading, particularly given the low number of cases involved, however serious the financial consequences.

Similarly, most of the work of the Revenue & Customs is best policed and sanctioned by specialist investigators and their trained prosecution lawyers. However, thought should perhaps be given to the creation of machinery which could assign cases, where more than one type of serious and complex delinquency is involved, to a unified body.

One frequently overlooked recommendation of Roskill was the setting up of an oversight and review body to monitor efficiency and recommend reform in keeping with ever-changing developments in economic crime, so that a UFPO could make as profound an impact proactively as reactively. The SFO itself is not a failing institution, and if its occasional shortcomings make the headlines, they may be avoidable in the future by the application of a more coherent evidence-based programme, which does not leave it at the mercy of comparisons with other competing agencies at home, or models borrowed from other jurisdictions.

While there is no unified approach to the establishment of a larger and more inclusive agency, there is a danger that some types of economic wrongdoing will either go un-investigated and unpunished or perhaps worse still will not receive the attention and sanction that society has a right to demand.

At a time of financial cutbacks, it may not be popular to canvass the idea that a UFPO should not be created simply to bring about economies of size. If there is to be a shift in society’s response to suffering billions of pounds of harm each year from serious dishonesty, it should be on the basis that the UK will be seen to be tough on financial and economic crime, as well as on the causes thereof.

It hardly needs to be pointed out that, as we move towards rewards for self-reporting and plea bargaining for malefactors, it is essential that these same malefactors should not be able to go agency shopping to secure the best leniency deal.

Ultimately, punishment following prosecution must remain the province of the judiciary. What the FAP Working Group is keen to engender is a debate on those steps leading to a decision to prosecute or not to prosecute, or leading to leniency and/or consensual outcomes.

The FAP has invited all the main stakeholders in the debate to offer their views on the Working Group Report so that the debate may be better informed.

The Working Group’s Report may be found on the Fraud Advisory Panel website.

© MONTY RAPHAEL 2010

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