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In praise of the SFO

In praise of the SFO


Why would any government scrap a financial fraud watchdog that has shown leadership in innovation and generates significant revenue for the Treasury, asks Pavlos Panayi QC

Fraud lawyers breathed a collective sigh of relief at the news that the proposal to abolish the Serious Fraud Office and merge its functions into the National Crime Agency was absent from the Queen’s Speech.

It is worth remembering why the SFO was founded and is now widely regarded as a world-class prosecuting authority. In the 1970s and early 1980s, the failure of the authorities to effectively prosecute fraud was damaging the reputation of the City of London and of Britain in the world.

Scandals like the collapse of Johnson Matthey Bankers in 1984 and allegations of fraud associated with the Lloyd’s of London insurance market syndicates led to a growing international perception that UK law enforcement was incapable of investigating and prosecuting complex fraud, particularly where many of the suspects had resources which far outmatched those available to the police and prosecution agencies.

The government of the day established the Fraud Trials Committee under the chairmanship of Lord Roskill. The principal recommendation of the Roskill report was the establishment of a new organisation responsible for the detection, investigation, and prosecution of serious fraud cases.

The famed ‘Roskill model’, bringing together expertise from multi-disciplinary teams of investigators, lawyers, advocates, and analysts throughout the life of an investigation and prosecution, is still at the heart of the SFO approach and it is one of the reasons for the SFO’s success in recent years. The nature of its remit, to investigate and prosecute crime – the only prosecuting agency in the UK that does both – is one of its key strengths.

It should surprise nobody that the SFO has been at the heart of controversial news stories since its establishment in 1988. Its remit has necessarily seen investigations into the largest and most expensively represented British and international companies, directors, and company officers. Decisions to commence investigations or prosecutions in high-profile cases where public and industry opinion is often polarised can leave the SFO facing controversy with every decision, with the only certainty that it will be damned if it does and damned if it doesn’t pursue a particular defendant or company.

As home secretary, Theresa May pushed hard in 2011 for the abolition of the SFO, but was blocked by strong opposition in the Cabinet. The resurrection of this proposal in the Conservative election manifesto resulted in near-universal condemnation from barristers, solicitors, politicians, civil servants, and former law officers, who observed that the SFO had put the failures of the 1990s behind it and was now a lean, effective prosecuting authority with a reputation for innovation and excellence.

Many pointed to the £500m payout from Rolls-Royce agreed in January 2017 as part of a deferred prosecution agreement, the £129m Tesco Stores DPA in April 2017, the first successful Bribery Act investigation into Standard Bank, and a string of convictions in complex fraud trials as proof of its success.

Others noted that the SFO is highly cost effective and uses its relatively small budget for maximum return. The SFO recently pioneered the use of Ravn machine-learning software to conduct a document review in the Rolls-Royce investigation, eliminating human error and making vast savings in fees for repetitive work. In fact, the SFO generates substantial income for the Treasury. In 2016/17, working within a budget of only £53m, the SFO secured fines, confiscation awards, and DPAs totalling £524m.

The recent charges brought against Barclays and four of its former executives for fraud arising out of the 2008 Qatari recapitalisation is, for many, the latest proof that the SFO will pursue investigations fearlessly and prosecute where there is a viable case, whatever the complexities or the size or apparent reputability of the individual or corporate entity.

Industry insiders speak of David Green QC leading a confident team which has gone from strength to strength and which relishes the challenges that the SFO caseload brings. Many worry that now is the wrong time for the government to cast doubt on the future of the SFO, which has, under Green’s tenure, established a reputation for expertise, professionalism, and effectiveness. The SFO will always have to take decisions in high-profile cases where public opinion is polarised and is likely always to face criticism, whatever course it takes in prominent cases.

International observers will wonder why there is anything other than very public governmental support for an organisation that has the confidence of its law enforcement counterparts in the US, Europe, and around the world. Lawyers have expressed the wish that the current uncertainty will not result in any diminution in the expertise at the SFO nor in the restless urge among the Roskill teams to do things better and more efficiently with every new case.

Pavlos Panayi QC is a barrister at 7BR