Memorandum submitted by Mr George Staple,
CB QC, Clifford Chance
The Committee has registered its concern about
the incoherent appearance of the efforts of the many government
departments involved in the fight against economic crime. There
is a worry that the involvement of so many different departments
results in a failure properly to focus on the whole area with
which the government is trying to deal. That is not only in relation
to corruption but also fraud and money laundering.
The Committee has specifically mentioned the
Home Office, HM Treasury, the Department of Trade and Industry
and the Department for International Development together with
other regulators and non-governmental bodies, such as the Financial
Services Authority ("FSA") and the British Bankers Association.
Save for the FSA which, once the Financial Services and Markets
Act comes fully into force later this year, has investigation,
supervisory and prosecution powers, the Departments mentioned
are responsible for different aspects of policy in the area of
economic crime. Other departments with a policy interest are the
Foreign Office, the Lord Chancellor's Department, the Cabinet
Office and the Attorney General. However, none appears to be given
responsibility to take a clear lead in ensuring that our laws
and the international treaties to which we are a party are fully
up to date and effective and that the resources provided are adequate
and are being directed in the most productive way.
It is no better when one moves from policy to
look at responsibility for investigation and prosecution. Some
bodies have responsibility only for investigation, namely the
police and the National Audit Office with the National Criminal
Intelligence Service having an intelligence role. Others are responsible
for both investigation and prosecution, namely the Serious Fraud
Office, the Department of Trade and Industry, HM Customs and Excise,
the Inland Revenue, the Department of Social Security and the
FSA, with the Crown Prosecution Service being responsible for
prosecution alone.
There may well be good reason for different
departments with a specialist interest to retain their area of
responsibility. For instance, it is likely that the Inland Revenue
will carry out a more effective investigation into a tax fraud
than will a local police fraud squad. Although expertise in the
investigation and prosecution of money laundering offences may
in time develop within the FSA, there are at present no specialist
investigators or prosecutors in the fields of corruption and money
laundering apart from within the Serious Fraud Office whose remit
does not specifically cover such offences.
The Serious Fraud Office was established on
the recommendation of the Fraud Trials Committee under the chairmanship
of the late Lord Roskill, which reported in 1986. Recognising
the fragmentation of the system for dealing with fraud cases the
Committee included as one of its recommendations the setting up
of a co-ordinating body which it called a Fraud Commission. Paragraphs
2.49 and 2.50 of the Committee's Report refer to this as follows:
"2.49 In view of the fragmentation of
the present system, it is essential, in our opinion, that there
should come into being an independent monitoring body which has
the responsibility for studying and advising from year to year
on the efficiency (which includes issues of cost effectiveness)
with which fraud cases are conducted. Its main objectives would
be to watch the system in operation for the detection and pursuit
of fraud cases until the final verdict, including the time which
elapses at the various stages including the time between the discovery
of fraud and its reporting to the prosecuting authority; to inquire
into major variations or breakdowns in the system; above all to
assess the possibility of improvements by changes of policy and
procedure or the introduction of more efficient techniques. Apart
from other advantages we believe that this would provide a degree
of co-ordination of the numerous interests involved which is at
present lacking. An additional function which the independent
body should, we think, perform would be to observe the introduction
of such of the recommendations in this report as prove acceptable
to the Government and to assess their efficacy. We think that
an annual report should be published.
2.50 The choice of the independent body would
be for consideration by the Government in the light of this report.
We are reluctant to suggest the creation of an entirely new body.
We would prefer to see the work we have in mind for it being carried
out by a body within the existing machinery of Government, although
an independent element, such as an independent Chairman, would
be desirable. Such a body might suitably be called the "Fraud
Commission.""
The Committee concludes its remarks on this
subject at the end of paragraph 2.51 as follows:
"We think that one of the tasks of the Fraud
Commission should be to work in close touch with all bodies who
now or in the future work on the same lines, including those bodies
concerned with self-regulation."
Although the Committee's vision of a body working
within the existing machinery of Government, with an independent
element, was intended to provide a co-ordinating function between
departments with responsibility for fraud cases, its views would
apply equally to the offences of corruption and money laundering,
which are inextricably linked with offences of fraud. Such a body
might suitably be called an "Economic Crime Commission".
Extension of the remit of the Serious Fraud Office
The existing remit of the Serious Fraud Office
is contained in the Criminal Justice Act 1987.
Section 1(3) provides:
"The Director may investigate any suspected
offence which appears to him on reasonable grounds to involve
serious or complex fraud."
and Section 1(5) provides in part:
"The Director may (a) institute and have
the conduct of any criminal proceedings which appear to him to
relate to such fraud."
So when on occasions the SFO has investigated
and prosecuted offences of corruption and money laundering they
have had to involve fraud. "Fraud" is a term not defined
in English law. Most offences dealt with by the Office, however,
arise under (i) the Theft Acts, such as theft, obtaining by deception
and false accounting, (ii) the Companies Acts, such as fraudulent
trading, and (iii) the common law such as conspiracy to defraud.
The criteria for acceptance of cases are published
in the SFO's Annual Reports and in the 1999-2000 Report were stated
as follows:
"The key criterion for the SFO to take on
a case should be that the suspected fraud was such that the direction
of the investigation should be in the hands of those who would
be responsible for the prosecution.
The factors that would need to be taken into
account include:
1. The sum at risk is estimated to be
at least £1 million (this is simply an objective and recognisable
signpost of seriousness and likely public concern rather than
the main indicator of suitability).
2. The case is likely to give rise to
national publicity and widespread public concern. These include
those involving government departments, public bodies, the governments
of other countries and commercial cases of public interest.
3. The investigation requires a highly
specialist knowledge of, for example, financial markets and their
practices.
4. The case has a significant international
dimension.
5. There is a need for legal, accountancy
and investigative skills to be brought together as a combined
operation.
6. The suspected fraud appears to be
complex and one in which the use of Section 2 powers might be
appropriate."
The most serious and complex cases of corruption
and money laundering would also fall within these criteria. The
Office has all the necessary skills, and is given the necessary
powers to investigate such cases, for example, that contained
in the Section 2(2) of the Criminal Justice Act 1987, as follows:
"The Director may by notice in writing
require the person whose affairs are to be investigated . . .
or any other person whom he has reason to believe has relevant
information to answer questions or otherwise furnish information
with respect to any matter relevant to the investigation. . ."
Other provisions under Section 2 include the
power to require the production of documents, and the power to
apply to a Justice of the Peace for a warrant authorising a constable
to search for and seize documents. It is an offence under Section
2 to fail without reasonable excuse to comply with any requirement
imposed under Section 2 by the Director.
Criminal activities in the financial field may
involve fraud, corruption or money laundering or a combination
of one or more of these. It does not seem logical that the SFO
should not be able to use its resources and powers to investigate
and prosecute corruption and money laundering simply because in
some cases they may not involve fraud. The SFO's remit should
therefore be expanded specifically to cover all three offences
committed either in combination or isolation. Its resources should
also be increased to enable the Director to take on more cases
of corruption and money laundering likely to result from the extended
remit and benefiting from the Office's powers, expertise and methods
of working.
Mr George Staple CB QC, Clifford Chance LLP
January 2001
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