Rahman Ravelli
Rahman Ravelli Solicitors Logo
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

About Us Expertise PEOPLE International Legal Articles News Events Contact Us toggle button for phone toggle button for search
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
search
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
search

The SFO: An Assessment by The Institute of Economic Affairs

Author: Niall Hearty  4 April 2023
4 min read

Niall Hearty of Rahman Ravelli summarises the key findings of an IEA report into the performance of the Serious Fraud Office.

An analysis of the Serious Fraud Office (SFO) conducted by the Institute of Economic Affairs has been fiercely critical of the agency.

“Fraud Focus. Is the Serious Fraud Office Fit for Purpose?’’, an IEA discussion paper written by the IEA’s Academic and Research Director, Dr James Forder, concludes that the SFO’s activities are being hampered by inappropriate and unprofessional conduct. It highlights the SFO’s failed prosecutions and argues that radical reform may be needed of the agency and / or the relevant law.

The report says that since its creation in 1988, the SFO’s record of successful prosecutions has been unsatisfactory. It adds that the agency has been mistake prone, is to blame for spectacular prosecutorial failures and has been responsible for too many instances of inappropriate or unprofessional behaviour – behaviour that suggests a change of culture and even an institutional reorganisation is necessary.

The report does say that the complexity of the SFO’s cases may be part of the reason for its poor performance – a situation not helped by aspects of the existing legal framework. But it also says that the agency’s use of deferred prosecution agreements requires careful scrutiny. It highlights the SFO’s “very poor record’’ in prosecuting individuals from companies which agree DPAs. The report adds “an inappropriate use of DPAs threatens the development of a thoroughly degenerate form of justice. If the SFO lacks confidence in its ability to achieve appeal-proof convictions in full trials, it will inevitably be driven towards seeking DPAs as a way of achieving some form of success.’’

Failings

In citing a variety of what it views as SFO shortcomings, the report states: “It is beyond doubt that many of the SFO’s failures have occurred because of failures by the organisation itself, whether they be poor prosecutorial decisions, ineffective case management, procedural non-compliance, or administrative blunder. In addition to this, and also contributing to some of the most noted failures of the organisation, there have been specific and sometimes very serious, failings in the behaviour of individuals.’’

It adds: “The SFO’s long record of generally poor handling of its cases, combined with the collection of instances of reprehensible behaviour, point to much deeper cultural failings.’’

These failings that the IEA highlights include the SFO’s inability to secure convictions of those it investigates. The report says the agency is responsible for a series of expensive and high-profile failed prosecutions, unlawful prosecutions, and breaches of the Civil Service code.

It adds that despite investigating cases for up to a decade, the SFO often fails to successfully prosecute because of a litany of errors. Such errors have included failing to disclose potentially exculpatory evidence, mishandling documents, using unlawful search warrants, undertaking inadequate legal analysis, making spurious allegations and, in one case, forging a letter.

The report cites a wide range of SFO cases that have had to be dropped or have collapsed. The failure to convict Tesco executives in 2018 of fraud and false accounting, the collapse of cases against Barclays and some its senior individuals over its 2008 Qatar fundraising, the disclosure errors in the Serco and Unaoil cases and the disastrous 2011 arrest of the brothers Vincent and Robert Tchenguiz over the demise of the Icelandic bank Kaupthing are among the examples detailed by the report.

Reform

The SFO’s long record of failure demonstrates, according to the report, a need for reform, possibly even its abolition, with its powers reallocated to other government agencies. The report also mentions the possibility of replacing juries with expert tribunals on complex fraud cases.

The report quotes from assessments of the SFO by HM Crown Prosecution Service Inspectorate, including a report from ten years ago referring to “clear room for improvement’’ and HMCPSI Deputy Chief Inspector Anthony Rogers telling the House of Commons Justice Committee last year that the agency has “a culture of non-compliance – people thought they knew better’’.

The author states: “All in all, there is a clear need for a thoroughgoing rethink of the legal and institutional aspects of the investigation and prosecution of serious fraud. One clear possibility is that this may result in the abolition of the SFO and the adoption of alternative institutional arrangements.’’

He adds: “The depth of the problems at the SFO and their recurrent occurrence in particular therefore suggest that serious consideration should be given to a more radical institutional change. It is not evidently the case that there needs to be a specialist agency for the investigation and prosecution of specifically serious fraud.’’

The need for reform is re-emphasised in the report’s conclusion, which says: “Evidently, change is required. Changes in three areas of law should be considered. These are the rules of disclosure; the issue of the criteria for establishing corporate liability in fraud and the problem of the ‘directing mind’; and the question of whether there should be a means to substitute expert panels for juries in complex fraud cases, or alternatively or additionally, where there should be a specialist panel of expert judges for those cases.’’

The Economic Crime and Corporate Transparency Bill’s proposal to introduce an offence of failure to prevent economic crime offence may prove to be a welcome addition to the SFO’s armoury. It would mean that any company that fails to prevent fraud by an associated person would commit an offence, with the only defence being that the company had reasonable procedures in place to prevent fraud or that it was reasonable not to have such procedures in place.

This addresses the second area for change identified by the report. Yet some commentators have already voiced concern that the Bill does not go far enough, and smaller companies look set to be exempt from this. It is unlikely, therefore, that the Bill will satisfy the report’s author, who concludes that “it is clear that the current situation is not acceptable’’.

Niall Hearty C 07998

Niall Hearty

Partner

niall.hearty@rahmanravelli.co.uk
+44 (0)203 910 4565 vCard

Download Profile PDF

View Profile

Niall has a wealth of corporate crime expertise and an ability to coordinate global bribery and corruption cases. His achievements in such investigations have made him a logical choice for corporate clients.

Share this page on