SFO - Serious Fraud Office

Cambridge Symposium 2013

02 September 2013

SPEECH TO CAMBRIDGE SYMPOSIUM

JESUS COLLEGE

2nd SEPTEMBER 2013

 

I have served as the Director of the Serious Fraud Office since April 2012.

It is no secret that the incoming senior management inherited problems: not least the Tchenguiz litigation and well known governance issues.

In response, we have made radical changes over the past 16 months. These are designed to maximise the quality of the SFO's legal decision-making and of its output.

In summary:-

We have restated the role and purpose of the SFO. We are investigators and prosecutors of the topmost tier of serious and complex fraud, bribery and corruption. We are not a regulator, a deal-maker or a confessor.

We have recalibrated our take-on criteria accordingly: we aim to adopt those cases which undermine UK commercial and financial plc in general and the reputation of the City of London in particular. We will also cover cases where there is a strong public interest element or a new species of serious fraud.

We have restructured the organisation into casework divisions, building in successive layers of challenge and quality control. Our entire caseload

- investigations and prosecutions- is subject to regular scrutiny by senior management to ensure quality and progression.

We have a completely new senior management team and board structure.

We have issued revised guidance on corporate self-reporting. This was necessary because the previous guidance implied that a corporate self- report guaranteed a civil rather than a criminal outcome. No prosecutor should be giving that sort of guarantee in advance. Instead, we apply the full code test to the evidence. In that process, the fact of a genuine self- report is capable of being a decisive factor in the application of the public interest limb of the code test.

We have agreed new funding arrangements with the Treasury. We have a return to blockbuster funding, to cover exceptional investigations, such as that into Libor manipulation. In amongst the small print, and against the trend, the SFO achieved a 5% increase in its baseline funding for 2015-16. On my watch, the SFO will never decline to investigate on grounds of cost.

We are in the process of ramping up our intelligence capability. Corporates need to understand the risk that we will learn of wrongdoing should they consider burying criminal misconduct rather than self-reporting.

We welcome new prosecutorial tools, such as Deferred Prosecution Agreements, which will go live in early 2014.

The refocusing of the SFO's mission is reflected in our caseload. We have progressed and charged in inherited investigations. We have opened new investigations, some of which we have announced. The biggest is Libor. This investigation employs a team of 60. Charges have been laid against 3 individuals so far. There will be further significant developments in due course.

Others include Weavering Capital, ENRC, Barclays, GPT, Olympus, Alstom and a cluster of pension liberation frauds. We have some 68 cases on our books at present, including matters under development in our intelligence section; these include eight Bribery Act projects. We have also charged our first offences under the Bribery Act 2010.

We have some 28 defendants in 11 cases before the courts awaiting their trial.

I am determined that the SFO should do what it was designed for and not take the easy path of dumbing down to boost the figures. The SFO will take on those cases which need the Roskill model of multi-disciplinary, team-based investigation. Less challenging cases can and should be done on the traditional police/prosecutor model. We are there to do the cases that others cannot.

We need emphatically to communicate the law enforcement narrative of which we are a part. What the SFO does helps to underpin the recovery by attacking criminal corporate behaviour and thereby encouraging good corporate culture. Similarly, foreign bribery undermines civil society, and ultimately harms the poorest most. We can never accept the argument that a bribe is just the necessary price for doing business abroad.

On another front, I am delighted that the old SFO's tendency to leak to the media has abated. But we are seeing a new phenomenon of individuals and corporates of interest to the SFO trying to spin their way to the result they desire by judicious use of the media. We have seen instances where such spin has been swallowed without much examination or challenge.

I am well aware that all our cases are high profile and therefore high risk. When it comes to prosecutions of corporates, the SFO's performance is often compared unfavourably to that of US prosecutors. The key reason for this is the much higher bar that we in the SFO face in proving corporate criminal liability. Currently, in order to prove corporate liability, we have to prove that the controlling mind of the corporate was complicit in the relevant criminality.

In practice, the email trail has a strange habit of drying up at middle management level. Why not extend the principle encapsulated in S7 of the Bribery Act, and have a corporate offence of a company failing to prevent crimes of dishonesty or fraud by its servants or agents, subject to a statutory adequate procedures defence? The approach is there already, and echoed in Health and Safety legislation.

It is usually argued that this would have the effect of punishing a corporate for negligence. To that I would say that we are talking about a very high degree of negligence, and such an offence would sharpen corporate vigilance around compliance.

It is said that conviction of the corporate adds nothing to the conviction of the individuals, where they are prosecuted. To that I would say that there will be cases where a company should be marked with a conviction for failing to prevent fraud by its employees. This is particularly so where the company has profited from the dishonest activity.

If the public interest requires more corporate prosecutions, then such a change is high on my wish list.

It is my intention to recharge the SFO's corporate self-respect and to bring it to the top of its game as a specialist investigator and prosecutor of the topmost tier of serious and complex fraud, bribery and corruption. The SFO's problems are not over, but we are set firmly on an upward trajectory.