The Serious Fraud Office (SFO) – the UK’s top fraud fighting body – has been in the news again in ways it won’t welcome after top KC Clare Montgomery called for the SFO to be merged into the Crown Prosecution Service (CPS).
There are reasons for revisiting how the different prosecutors fit together (in our view by looking again at creating a super prosecutor for economic crime). But the CPS hasn’t exactly covered itself in glory prosecuting big ticket fraud either. In this blog we lay out why the SFO needs to be beefed up and given a chance rather than facing yet more uncertainty about its future.
A torrid 2022
2022 was a rough year for the SFO. Despite some important successes, including the corporate conviction of mining giant Glencore for bribery, and fraud convictions in the Harlequin, Axiom and Global Forestry Investment cases, the SFO faced two independent reviews into the wreckage of collapsed trials.
The Calvert-Smith review looked at serious shortcomings that resulted in the overturning of three convictions in the Unaoil bribery case. The Altman review of the collapsed fraud trial of former directors of government services provider Serco identified systemic weaknesses in the SFO’s disclosure processes. Meanwhile, the SFO faced criticism from the High Court for “bad faith opportunism” in accepting unauthorised disclosures from the lawyers working for another mining giant, ENRC.
This year will see the agency chart a new future under different leadership, as Director Lisa Osofsky steps down after five years at the helm. 2023 is also dotted with a number of big trials which will test whether the SFO can successfully navigate its ongoing disclosure issues, and bring home prosecutions of individuals following corporate convictions (GPT Special Project Management and Glencore) and Deferred Prosecution Agreements (G4S).
So what’s in the inbox for any incoming Director and how can the SFO’s mojo be beefed up in 2023?
Here we look at four priority actions needed to set the agency up for the future.
1. Grasping the disclosure nettle
Although the Serco and Unaoil cases unravelled in different ways, the common thread was issues with disclosure.
The current disclosure regime laid out in the 1996 Criminal Procedures and Investigations Act was created for a pre-digital age – the year that Microsoft launched an email service, and 11 years before the iPhone was invented. It urgently needs a serious overhaul, including streamlining processes for review of vast amounts of digital data; refining the scope of “relevant” material; ensuring better and earlier judicial management of the process; and simplifying how unused material is disclosed. Clare Montgomery KC agreed that the disclosure regime is broken and argued for a radical “keys to the hen-house” approach which would let the defence see all the material and be responsible at the end of the day for what material it wants to use. The CPS has always resisted this as something that would leave defendants reliant on the skills of their defence lawyer.
This fairly controversial area needs urgent attention. The government should look at commissioning a judge-led independent review of the options for reform that leaves nothing off the table.
2. Resourcing the agency properly
Three of Altman’s top recommendations for tackling the SFO’s disclosure failures related to resourcing. The Calvert-Smith review also revealed a picture of an agency with desperately understaffed teams working through holiday and sick leave. The SFO’s November 2022 progress report on its implementation of the reviews’ recommendations shows that Altman’s proposed reforms are unrealisable due to “existing budget and public sector pay constraints.” The SFO couldn’t for instance “allow an uplift in counsel fees without adversely impacting other parts of the SFO’s work,” showing just how tight the budget is.
Without proper resourcing for reform, the problems identified by Altman and Calvert-Smith will persist. The SFO has been haemorrhaging staff since 2016 and currently operates at a vacancy rate of about 20%. To turn the tide, the SFO needs to be able to recruit and retain top talent by offering competitive remuneration and financial incentives such as specialist pay-scales and salary top-ups.
The agency brought in £1.6 billion between 2016 and 2021, against a budget of £304 million over that period. An obvious solution is to reinvest a far greater percentage of that back into the SFO, and to give the agency the freedom to set salaries that attract the best legal talent.
Reinvestment back into law enforcement is gaining traction as an argument – with Labour recognising it along with influential cross-party APPGs and recent parliamentary committees including the House of Lords Fraud Act 2006 and Digital Fraud Committee.
3. Guaranteeing the SFO’s existence and independence
While the SFO rightly faces close scrutiny for mistakes, it is deeply damaging to morale at the agency that every failed prosecution is a cue for someone to step forward to call for its disbandment.
The government should put to bed once and for all any doubts about the absolutely vital role the SFO plays as the only law enforcement agency focusing on top-level corporate serious and complex economic crime. It isn’t clear to us that if it were merged with the CPS, there is the expertise and skills there to do this kind of work. That doesn’t mean that there shouldn’t be bold thinking about whether systemic efficiencies could be created by looking at whether a merger of the SFO with the CPS’s Serious Economic Organised Crime and International Directorate into a super prosecutor or whether significantly closer working (being in the same building for example) could produce better results for law enforcement.
It does mean that efforts to bring the SFO under greater political control should be resisted at all costs. Calvert-Smith’s recommendation for increased oversight by the Attorney-General was seriously flawed and creates real risks of increased political interference in the agency’s investigations, ignoring the hard learnt lessons from the BAE al-Yamamah scandal which severely damaged the reputation of the UK internationally.
The Attorney General will be publishing a revised framework agreement between the Law Officers and the Director of the SFO this spring. It should alarm everyone who cares about having a truly independent law enforcement body to investigate top tier economic crime – often committed by those with direct access to, or cosy relationships with, those in power – that this agreement could introduce greater political oversight of the SFO’s work.
4. Strengthening accountability of and support for senior leadership through creating an independent oversight panel
The independence of the agency shouldn’t mean there isn’t real accountability of the SFO’s leadership. But rather than introducing political oversight, accountability could be better achieved by having an independent panel, composed of a former judge, a former investigator and former senior lawyer to perform a robust assurance function for the director’s decisions. This could include handling complaints from staff teams, and would introduce a greater measure of oversight without impinging on the SFO’s operational independence.
To sum up…
The appointment of the next director of the SFO is one of the most significant economic crime related recruitments of the coming year. It is also a valuable opportunity to reset the strategic direction and institutional culture of the agency, dispelling any perception that the SFO is timid, defensive or risk-averse. Whoever it is needs to be someone with big boots, very high levels of legal clout, and a lot of determination to take on the SFO’s challenges and prove just how critical it is to the UK’s fight against economic crime.