Questions over what will be done with Britain’s Serious Fraud Office (SFO) have become almost a running joke in the media. Much has been made of its budget cuts (almost 50 per cent between 2008 and 2014), its key staff departures and, more recently, its mistakes.
We in the business crime world are all much the poorer for it, because one thing the UK badly needs is a strong, independent fraud prosecutor.
I use the word prosecutor deliberately, because the SFO’s true value is, and always was, in deterrence. Reaching settlements with companies does little to enhance that – particularly when, as with BAE Systems, the company is perceived to have got off lightly. BAE has just paid £29.5 million to Tanzania to settle an investigation that some had originally speculated would cost the company £500 million in fines.
Established in the late 1980s in a blaze of publicity, this new generation agency – including investigators and lawyers in one team for the first time – set about notching up some spectacular successes (BCCI) and ignominious defeats (the Maxwell brothers). Armed with their deadly weapon, the section 2 Criminal Justice Act 1987 compulsory disclosure notice, SFO investigators made the City of London sit up and take notice. Yet there was always a hint of sensitivity about the organisation, particularly in respect to some high-profile acquittals. This is a shame, as no prosecutor should ever shy away from pursuing difficult cases in the public interest.

Overseas focus

When Richard Alderman became the SFO’s sixth director in 2008, he implemented a change of direction. Instead of focusing on UK-based fraud by and against individuals, he prioritised the investigation of UK-based companies and individuals that committed bribery overseas, anticipating the 2010 Bribery Act.
In developing a corporate self-reporting strategy, he looked to the US, where the Department of Justice was extracting serious money from companies who, it seemed, were required to investigate themselves, admit bribery and then pay handsomely for the privilege. His motives in doing so were unimpeachable: faced with dwindling resources, he put the SFO’s might into investigating an unquestionable evil – the UK’s link to the routine, institutionalised corruption that pervades some countries at every level and is uncomfortably prevalent in Europe. This approach certainly made headlines in the City; whether it struck fear into the heart of fraudsters preying on individuals remains to be seen.
Judges bristled at what they perceived as an overenthusiastic desire to persuade individuals to plead guilty based on promises that the SFO – under the current law – could not keep. This was arguably the greatest flaw in Mr Alderman’s grand plan to make UK white-collar prosecutions more like those in the US – no British prosecutor can agree a plea on the basis of a sentencing range, or even of a particular type of sentence. This belongs to the judiciary, which jealously guards its independence in this area.

Political handwringing

Everything has its price and some have criticised this increased focus on overseas bribery since, with the current budget cuts, it necessarily means a lesser emphasis on prosecuting UK-based cases at a time when the financial crisis has triggered an explosion in domestic fraud.
It is hoped incoming Director David Green, himself a renowned prosecutor, will realign the SFO back to doing what it did best – putting people on trial – irrespective of the political handwringing surrounding it. Of course there will always be fraud prosecutions. What matters is whether people with the right skills will have sufficient resources to pursue them at a level that will provide a true deterrent.
Dealing with the SFO is not more difficult, it is easier, precisely because (despite the criticism currently aimed at the organisation) it is more competent at business crime prosecution than general prosecutors. Interviews are more efficient and to the point, document reviews produce more relevant material and, most importantly, the core of a case (if there is one) is identified to defendants earlier, concentrating their minds on what they truly face, rather than whether or not the prosecution will slip up.

Wily defendants

If we lose the SFO, already difficult fraud cases involving wily, manipulative defendants and hundreds of individual victims (boiler room frauds and Ponzi schemes come to mind) will become even more complicated and burdensome to an overstretched prosecution service that has other priorities to juggle.
Defence lawyers will (as is their duty) take advantage of prosecution mistakes that the SFO has already learned from and costs (and acquittals) will rise.
Worse than that, the already faded perception of the seriousness with which the UK prosecutes fraud will suffer a serious blow. Politicians stress the importance of protecting the City of London’s pre-eminence as a hub for business and headquarters of global corporations – particularly those providing financial services. Any fraud lawyer, however, knows bad money follows good and, if that money can be laundered through the Square Mile, it can resurface almost anywhere.
Not having a dedicated fraud prosecutor in the City is the financial equivalent of having a part-time antiterrorism unit – it may be cheaper, but you will not sleep very well at night.

David McCluskey is a white-collar crime specialist partner at City of Londonbased law firm Peters & Peters Solicitors