Serious Fraud Office (SFO)

www.sfo.gov.uk

The SFO is a specialist prosecuting authority tackling the top level of serious or complex fraud, bribery and corruption… part of the UK criminal justice system covering England, Wales and Northern Ireland, but not Scotland, the Isle of Man or the Channel Islands.

The Function:

At the time we had a look at the SFO’s website, the below description appears as to its function:

We take on a small number of large economic crime cases.  In considering whether to take on an investigation, the Director of the SFO applies his Statement of Principle, which includes consideration of:

  • whether the apparent criminality undermines UK PLC commercial or financial interests in general and in the City of London in particular,
  • whether the actual or potential financial loss involved is high,
  • whether actual or potential economic harm is significant,
  • whether there is a significant public interest element, and
  • whether there is new species of fraud.

We also pursue criminals for the financial benefit they have made from their crimes and assist overseas jurisdictions with their investigations into serious and complex fraud, bribery and corruption cases. As of 30 September 2017 we will have the power to investigate and prosecute the new offence of corporate failure to prevent the facilitation of overseas tax evasion. We are unusual in the UK in that we both investigate and prosecute our cases. We were set up this way because these kinds of cases are complicated and lawyers and investigators need to work together from the beginning.

The History:

The Serious Fraud Office owes its origins to the work of the fraud trials committee, set up under the chairmanship of Lord Roskill in 1983 after a series of failures to secure convictions in relation to high-profile City of London scandals. The SFO began its work in 1988. …Under the model recommended by Lord Roskill at the conclusion of the fraud trials committee in 1985, it is both investigator and prosecutor of the cases that it handles. A string of failed City of London fraud cases undermined public trust and inspired the recommendation and decision to break with the usual division between those two roles that we see in most of the rest of the English and Welsh legal system. (Stephen Timms, Labour East Ham, Serious Fraud Office — [Albert Owen in the Chair]  – in Westminster Hall, 7th February 2017.)

The Unpredictable Future:

Prime Minister Theresa May announced in March 2017, in her Conservative Party’s manifesto, that her government was…

“….incorporating the Serious Fraud Office into the National Crime Agency”…

The NCA is not a yet a widely respected organization within law enforcement circles and still has to prove itself in a meaningful way. In 2015, it was forced to admit that every single one of its live investigations would have to be reviewed after “systemic” use of potentially unlawful search warrants.

….She (Theresa May) tried and failed twice to do so in her previous role as Home Secretary, but met stiff resistance.  Some claimed it was empire building — the NCA was May’s pet project launched back in 2013 and meant to be the UK’s equivalent to the FBI. Others have suggested that she is committed to bringing the SFO under ministerial control….….The move has serious implications for the SFO’s ability to operate free from political interference.  Whereas the SFO is overseen by the UK’s Attorney General, the NCA is directly answerable to the Home Secretary, who is a government minister. The SFO’s arms length from government for the kind of cases it investigates is essential. The SFO is investigating some of the largest UK companies, many of whom are key partners in the government’s industrial strategy and have regular and close contact with government. (Susan Hawley: UK leader pledges to bring SFO under political control, May 22, 2017)

Even as the largest-ever financial sanction in criminal history was agreed in Rolls Royce, and £500 million hit the Treasury, the agency’s future remained in doubt.  Then came the election and the loss of a Parliamentary majority, and then the Queen’s speech, in which there was no mention of the SFO’s abolition.  But still, the Prime Minister refused to commit — a spokesperson reported as having said that the “Government will consult widely on the next steps forward.” (Bill Waite on the SFO: Five More Years!,  Bill Waite, September 20, 2017)

The Prime Minister, when she was Home Secretary, tried in 2011 and again in 2014 to bring the SFO into the new National Crime AgencyThe Financial Timesreported on 5 October 2014 that she was  “to revive plans to abolish the UK’s main anti-fraud and corruption agency and bring it into her new FBI-style national crime force, according to officials familiar with the situation.”  I am glad to say that that move was resisted. The director of the SFO from 2012 to the present, David GreenQC, was clear in his statement that it would  “distract and destabilise the SFO in a really bad way at a time when” it was “grappling with what” was  “probably its heaviest-ever workload and making real headway.”  …. Moving the anti-corruption role of the SFO into another agency would undermine UK leadership in this area. I agree with Transparency International UK, which says that it “strongly opposes the abolition of the SFO unless an alternative is proposed which is demonstrably better. We believe that is highly unlikely given the SFO’s recent success, the instability and damage to caseload that would be caused by abolition, the detailed analysis that went into the creation of the SFO, and the lack of expertise and track record in any other government agencies regarding prosecutions of corporate corruption.” (Stephen Timms,  Labour East Ham, Serious Fraud Office — [Albert Owen in the Chair]  – in Westminster Hall, 7th February 2017.)

How well is SFO doing?

It is quite difficult to assess its effectiveness. Its case load is deliberately small: under David Green, it has focused its attention, taking the most serious and complicated cases through to prosecution. However, we can say that over the four-year period, 2012-13 to 2015-16, it had a case conviction rate of 81%, although that goes up and down from year to year, and since then it has achieved some important successes, including the first individual prosecutions for LIBOR rigging, which are welcome, and the recent landmark deferred prosecution agreement with Rolls-Royce, which resulted in a fine of £671 million, which was equivalent to the company’s entire operating profits. The SFO is undoubtedly making an impact. The question is whether it is as effective as it could be and as we would all wish it to be. (Stephen Timms,  Labour East Ham, Serious Fraud Office — [Albert Owen in the Chair]  – in Westminster Hall, 7th February 2017.)

The Budget:

Parliamentary Debates on Local Issues:  Westminster Hall, 7th February 2017.

I want to return to the issue of public confidence that justice will be done in fraud cases when arguing that the Government need to look again at the mechanisms by which the SFO is funded….The question is whether it is as effective as it could and should be, and that is why I now want to come to the numbers and my concerns about the way it is funded. It receives its funding as a mix of core costs and what is termed “blockbuster” funding… I noticed that in the exchange between my hon. Friend and the head of the Serious Fraud Office in the Select Committee on Justice, he made the point:

I would like to move to less dependence on blockbuster funding and more core funding”.

I think he is on to something and I want to explain why, in my view, that shift would be worth making.  Blockbuster funding is additional funding allocated on a case-by-case basis where individual, high-profile cases are likely to cost more than 5% of the SFO’s core budget—those costing more than around £1.5 million. To access that funding, the SFO has to apply directly to the Treasury. As I understand it—I hope the Minister will tell us a bit more about this—applications bypass the Attorney General’s office. However, as my hon. Friend Marie Rimmer has pointed out, the basis on which they are approved or denied is not transparent…We have seen a big shift over time away from core funding towards blockbuster funding. That inevitably means fewer permanent staff at the SFO and more temporary staff. That raises a serious concern about how the SFO is able to function. In 2008, core funding was £52 million. In 2015-16, the total budget was about the same, but core funding was only £34 million. For each of the last three complete financial years, the blockbuster funding element was large: £24 million in 2013-14, £24.5 million in the following year and £28 million in 2015-16. In 2015-16, the blockbuster funding was more than 80% on top of the core funding. The SFO’s total expenditure has been as much—perhaps rather more—in recent years as it was in 2008, before core funding started to be reduced as part of the Government’s efforts to cut public spending, but a big slice of the funding today is in the form of this one-off, exceptional Treasury grant. I am grateful to the hon. Gentleman for drawing attention to the fact that, as a result of that, a large proportion of those working at the SFO are temporary staff brought in for a particular case and then laid off when it is concluded. (Stephen Timms,Labour East Ham, Serious Fraud Office — [Albert Owen in the Chair]  – in Westminster Hall, 7th February 2017.)

In congratulating Stephen Timms on securing this overdue debate on the workings of the Serious Fraud Office, I register my concern that the regular reliance of the SFO on special funding facilities from the Treasury lays it open to the charge that it lacks full and proper independence.As we know, we live in financially straitened times for those agencies that depend on the public purse. Nevertheless, the sight of the SFO repeatedly having to go cap in hand to the Treasury for supplemental income opens up the Government to the potential accusation that they at least have the ability to close down what might be politically sensitive inquiries by the simple expedient of refusing the SFO funding.I am not suggesting for one moment that the Government are behaving improperly. However, they must see that there is an inherent conflict of interest, which will persist unless and until the SFO’s funding is placed on a more sustainable and arm’s length basis. (Mark Field Vice-Chair, Conservative PartySerious Fraud Office — [Albert Owen in the Chair]  – in Westminster Hall, 7th February 2017.)

SFO Disclaimer:

The SFO is a relatively small, highly specialised government department that is permitted by law only to investigate cases where there are reasonable grounds to suspect serious or complex fraud or corruption.
If you believe that you are the victim of anything other than the most serious or complex fraud, you should normally pursue the matter through your local police force.  The police has primary responsibility in the UK for investigating all types of criminality including fraud and other offences of dishonesty.  You can find contact details for your local police station in your local directory or by dialling 101.
Alternatively, you may prefer to pursue the matter through Action Fraud which is the UK’s national fraud reporting centre. Its online fraud reporting service http://www.actionfraud.police.uk/report_fraud is available 24 hours a day for you to report a fraud and find help and support.  Action Fraud also gives help and advice through its telephone contact centre.  Call 0300 123 2040 to talk to an Action Fraud specialist.  There is more information about Action Fraud on its website at http://www.actionfraud.police.uk/.