The Work of the Serious Fraud Office

Written evidence from the Serious Fraud Office

INTRODUCTION

1.1 The Serious Fraud Office (SFO) welcomes the opportunity to present this memorandum to the Justice Committee ahead of the Director giving evidence before the Committee on 13 November.

1.2 The Committee has requested a memorandum covering a number of topics. This note addresses the headings provided by the Committee.

EXECUTIVE SUMMARY

1.3 The memorandum sets out some background to the SFO, its establishment and current position in the Government’s counter-fraud strategy. Consideration is given to the SFO’s international work and its use of existing legislation. The final part of the memorandum comments on the SFO’s capability, including external inspections of the SFO, and the recent Judicial Review of search warrants issued to the SFO in 2011 in the Kaupthing/Tchenguiz case.

1.4 Although the SFO has had some high-profile successes in recent years, it has also been roundly criticised and received significant negative press attention, which has led to low morale.

1.5 In 2011–12, verdicts were reached in 20 SFO cases, securing 38 convictions. The average prison sentence for immediate custody was 56 months. There were three civil settlements (worth a total of £16.2 million).

1.6 The SFO has successfully managed its expenditure within the Comprehensive Spending Review reductions whilst taking on some cases that could equally well have been dealt with by the police and CPS. The new Director, David Green CB QC, has re-focused the role of the SFO to a more traditional model of investigating and, if appropriate, prosecuting top-end fraud, bribery and corruption. He has already re-started two criminal investigations stayed by his predecessor.

1.7 The Prime Minister has made clear that the SFO has the resources that it needs to meet its current workload and if it needs more resources it will be provided with them. The Director has re-structured the work divisions and built a strong core team.

1.8 SFO cases are extremely complex and their investigation and prosecution can take years to complete. An extreme example is the investigation into Asil Nadir, which ended with a prosecution this year, began in 1990.

1.9 It is important to explain the context and practicalities of the SFO’s work: its position as a part of the Government’s counter-fraud strategy; the challenges of prosecuting serious fraud; the size of the organisation and its caseload; the fact that prosecution, although preferred, is not the only way in which the SFO can successfully tackle serious fraud.

1.10 There is room for the SFO to improve its capability. The new Director began work in April this year, and has restructured the office, bringing in numbers of experienced staff to build in layers of quality assurance.

BACKGROUND INFORMATION ON THE ROLE OF THE SFO

Establishment

2.1 The Criminal Justice Act 1987 established the SFO, which began work in April 1988. It is a non-Ministerial Government department that investigates and prosecutes serious or complex fraud, and corruption.

2.2 This followed the Fraud Trials Committee Report (commonly known as the "Roskill Report") published in 1986. Its main recommendation was to set up a new organisation responsible for the detection, investigation and prosecution of serious fraud cases, with all the necessary skills under one roof.

ROLE OF DIRECTOR AND PARLIAMENTARY ACCOUNTABILITY

2.3 The Director of the SFO is appointed by, and superintended by, the Attorney General (Mr Dominic Grieve QC MP). The Director may investigate any suspected offence which appears to him on reasonable grounds to involve serious or complex fraud.

2.4 The current SFO Director is David Green CB QC. He was called to the Bar in 1979, appointed Recorder in 1996 and took silk in 2000. He spent 25 years prosecuting and defending at the Criminal Bar before being appointed the first Director of Revenue and Customs Prosecutions in April 2005. After a brief period back at the Bar he became SFO Director on 23 April 2012.

2.5 The Attorney General is accountable to Parliament for the SFO and the other Law Officers’ Departments. In July 2009 the then Attorney General (Baroness Scotland) published a protocol which set out the relationship of the Attorney General with the prosecuting authorities superintended, in collaboration with their directors.

THE SFO’S PLACE IN THE GOVERNMENT’S APPROACH TO TACKLING FRAUD

2.6 The SFO is part of a network of Government agencies and other organisations which work to combat fraud and corruption. The Government confirmed in June 2011 that the SFO would remain independent.

2.7 The Director believes that the SFO exists to prosecute serious and complex fraud, as the Roskill report originally envisaged. He believes it should focus particularly on serious and complex cases which:

¾ undermine confidence in the UK’s business and financial institutions;

¾ have a significant public interest element;

¾ may present a new species of fraud;

¾ are high value or impact; and

¾ concern bribery and corruption which disadvantages British companies, or where British companies themselves are corrupt.

2.8 The Director wants SFO to be a centre of excellence using the best tools and resources. The SFO will cover particularly complex investigations by supplementing permanent staff with short term specialists. The Director and the Attorney General agree that there should be a healthy interchange between the public and private sectors, which brings benefits to both.

AIMS AND VALUES

2.9 The SFO’s work is part of the overarching aims and objectives of the criminal justice system and contributes to:

¾ reducing fraud and corruption and the cost of fraud and corruption;

¾ delivering justice and the rule of law; and

¾ maintaining confidence in the UK’s business and financial institutions.

FINANCE, HR, GOVERNANCE, IT AND COMMUNICATIONS AND ANY CURRENT ISSUES

Finance

3.1 The SFO’s annual resource (DEL) expenditure for the last six years was:

2006–07

£40.7million

2009–10

£40.1 million

2007–08

£43.3 million

2010–11

£35.9 million

2008–09

£53.3 million

2011–12

£31.6 million (subject to audit)

In recent years the SFO has received Asset Recovery Incentivisation Scheme receipts of at least £2.5 million per year. This has resulted in large part from a small number of civil recovery settlements with companies involved in corruption cases, and is not a reliable source of future funding of the SFO’s core budget.

3.2 Like many other departments the SFO is required to make 25% savings over the period of the Comprehensive Spending Review. The 25% cost savings will come from a number of sources. These include relocating the SFO to existing Government premises in Cockspur Street, and the move to its new case management system, Autonomy Introspect Digital Review System (Autonomy). The Autonomy system supports in an integrated way the volumes of information associated with large economic crime cases, and contributes to the SFO’s progress in reducing the duration and cost of cases.

3.3 The Director has made clear that the challenge for the SFO is to live within the resources it has been given, and to ensure it gets the most that it possibly can from that.

HR

3.4 The SFO has a headcount of around 360 people, including 300 permanent staff. Over 90% are frontline staff (lawyers, investigators, accountants and those working in Digital Forensics) who work flexibly across cases.

3.5 The SFO participated in the Civil Service People Survey in 2011. The SFO achieved a response rate of 78% (up from 70% in 2010) and an engagement score of 50% (a small change from 51% in 2010).

Governance

3.6 Since starting his role in April, the new Director has restructured the SFO and made several high profile appointments to his top team, building in layers to examine the quality of cases as they progress.

<?oasys [pf10p0] ?>3.7 The SFO’s casework in fraud and bribery and corruption is now organised into four divisions, comprising mixed teams of lawyers, accountants and other investigators. Each division is headed by a Senior Civil Servant reporting to the Director. These Divisional Heads are responsible for providing assurance to the Director for their Divisions’ casework. In addition, case review panels have been established so that the Director, General Counsel and Adviser can review the progress of cases. In addition there will be a quality assurance programme. This will take forward the recommendations of the HMCPSI report (please also see 7 below).

3.8 The Director has appointed Alun Milford as General Counsel, and His Honour Geoffrey Rivlin QC has also been appointed as an adviser to sharpen the focus of investigations and prosecutions. He will advise on the appropriateness of civil settlement and, potentially, Deferred Prosecution Agreements. In addition, he will lead on the enhancement of professional training to improve quality.

IT and communications

3.9 The SFO operates digitally. In 2011, the SFO loaded around 35 million individual documents into its review system. To handle such volumes, the SFO had to increase its data processing capability by over 1800% in three years.

3.10 As part of his restructuring of the SFO, David Green has established a new Policy, Strategy and External Relations Division which will rebuild and develop relations with other key players in the counter-fraud strategy.

Current issues

3.11 Prosecuting serious fraud is challenging; it is a high risk business. Every one of the SFO’s cases is high-profile and well-defended. Although the SFO believes that each case has a realistic prospect of conviction, not every case will result in convictions. If they did, the SFO would be accused of being too timid in its prosecution strategy.

3.12 This is a time in which the media and commentators are paying greater attention to serious fraud and financial crime. That heightened interest is in part due to the recession, which also places pressure on the SFO’s budget and resources. The cases addressed by the SFO require specialist prosecutors and investigators. They are few in number, and occasionally the SFO has to contend with headlines such as "Serious Fraud Office fails to conduct a single ‘dawn raid’ in past year", and "Bribery Act one year on: lack of prosecution has led to businesses questioning the SFO’s enforcement appetite".

3.13 For searches, fluctuations in quarterly or annual figures reflect merely whether or not searches were required in that period, rather than the SFO’s overall caseload or activity. Searches are just one part of the complex work that takes place during investigations. There are other ways to obtain evidence and the SFO is required to consider alternatives to searches before it applies for search warrants.

3.14 The Bribery Act came into force on 1 July 2011 and is not retrospective. As the SFO’s cases can take many months to conclude, especially when they involve obtaining evidence from overseas, the SFO’s first prosecutions are yet to come.

PERFORMANCE AND DELIVERY

4.1 In the last few years the SFO has brought between 10 and 20 cases to trial each year.

4.2 SFO prosecutions are usually followed up with confiscation proceedings which can lead to substantial orders against defendants. For instance, Saghir Afzal and Ian McGarry, who were jailed in June 2011 after admitting to defrauding several institutions, have been ordered to pay £29.3 million and £1.6 million respectively. The SFO assists HM Courts & Tribunals Service in enforcing confiscation orders by, for example, triggering default sentences and appointing enforcement receivers to realise known assets. However, in common with other agencies, the SFO experiences practical difficulties in enforcing some of the largest confiscation orders, especially those where the Court finds that a defendant has failed to discharge the burden on him to explain the whereabouts of his benefit from criminal conduct (so called "hidden assets" cases). In the aforementioned case of Afzal (who has appealed his conviction), the Court based its findings on large sums previously transferred to Pakistan, and it will in practice be difficult to enforce this order in the absence of co-operation from the defendant. This is an area where the SFO, and no doubt the other agencies involved, would welcome reform so that unpaid orders do not remain outstanding indefinitely.

4.3 In some cases, the SFO has used its civil recovery powers to recover funds through the High Court. These powers became available to the Director of the SFO in 2008, and their use is subject to guidance published by the Attorney General. Examples of this approach include:

¾ BAE Systems plc agreeing to pay £29.5 million in voluntary reparations for education in Tanzania. The payment followed a settlement between BAE Systems plc and the SFO agreed in 2010.

¾ Macmillan Publishers Limited paid £11 million in July 2011 in settlement of a case involving their African activities.

¾ Oxford Publishing Limited has paid £1.9 million pursuant to a civil settlement in 2012.

4.4 In aggregate, recent SFO work has resulted in the removal of substantial sums from defendants and others involved in SFO investigations. In the financial year 2011–12 over £50 million of criminal assets were recovered, and in 2010–11 the total was £42.5 million. These outcomes should be assessed in context as both years’ figures reflect certain exceptional case outcomes as follows:

¾ in 2010–11, £32 million was returned directly to the victims of a pension fraud case with the help of the Swiss authorities prior to the relevant criminal case subsequently brought by the SFO; and

¾ in 2011–12, £29.5 million of the total was the sum paid by BAE Systems plc, and a further £11 million was paid by Macmillan Publishers Ltd, as described above.

4.5 The SFO has broken new ground in using anti-money laundering legislation to claw back shareholder dividends generated from unlawful activities. The SFO has also been at the forefront of the Government’s consultation on Deferred Prosecution Agreements which, if enacted, will provide a valuable additional tool in the fight against corporate economic crime.

4.6 A problem is that it is impossible to write off orders which cannot be enforced, and thus the figure of unrecovered assets tends to rise steadily.

COLLABORATION WITH NATIONAL AND INTERNATIONAL PARTNERS

5.1 The International Assistance Unit of the Serious Fraud Office (SFO) was created in 1995. The Unit’s aim is:

To provide fast effective assistance to foreign states who are investigating serious/complex frauds in which people or companies based in the UK are victims or of which people or companies based in the UK are suspected perpetrators. This enables the SFO to access reciprocal assistance for its own investigations through the contacts and good working relationships which the unit develops.

5.2 The Unit has five investigators and one legal adviser dealing exclusively with incoming mutual legal assistance (MLA) work. In requests for restraint and confiscation, the unit is assisted by a lawyer in the SFO’s Proceeds of Crime Unit. The Unit also provides advice and support to the domestic investigation teams in relation to their outgoing MLA requests.

STAKEHOLDERS AND PARTNERS

5.3 The Unit works in collaboration with other UK stakeholders such as the Metropolitan and City of London Police, the Crown Prosecution Service, Her Majesty’s Revenue and Customs, the Financial Services Authority, Her Majesty’s Court Service, the Serious Organised Crime Agency and the United Kingdom Central Authority.

5.4 It also works closely with European institutions such as Eurojust, Olaf (the European Anti-Fraud Office) and Europol, and is represented on the European Judicial Network which facilitates co-operation between Member States of the European Union. It has participated and supported Department for Business, Innovation and Skills representation at meetings of the Anti-Bribery Working Group of the Organisation for Economic Co-operation and Development (OECD).

RESULTS AND STATISTICS

5.5 During the last five years the International Assistance Unit at the SFO has formally assisted over 225 overseas criminal investigations from 55 jurisdictions. The table below shows the number of countries assisted and new requests received by the Unit since 2003–04:

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

Countries assisted

30

31

23

24

30

41

45

45

34

New requests referred

30

35

41

53

45

55

48

40

45

<?oasys [np ?>5.6 The map below shows the countries assisted by the SFO since 2003.

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5.7 Since 2007, requests relating to corruption and bribery offences have increased. Between 2007 and 2012 the SFO assisted in 63 corruption cases, 50% of which were referred from Europe.

5.8 Requests received from Africa all involved elements of corruption. The most significant changes to the SFO’s role in MLA during the last five years are in its commitment to developing countries in Africa. In partnership with DFID and the FCO, investigative training has been provided to lawyers, investigators and Police in countries such as Ghana, Nigeria, Uganda and Zambia.

AN ASSESSMENT OF THE ADEQUACY OF EXISTING POWERS, INCLUDING UNDER THE FRAUD ACT 2006 AND THE BRIBERY ACT 2010

6.1 The SFO derives its powers from various pieces of legislation in addition to those about which the Committee has asked. As well as the Criminal Justice Act 1987, other important legislation relating to the SFO includes The Regulation of Investigatory Powers Act (2000), The Proceeds of Crime Act (2002), The Serious Organised Crime and Police Act (2005) and The Serious Crime Act (2007).

6.2 There is a wide range of powers and investigative techniques tools available to the SFO. The SFO has to be alert to new types of fraud which may emerge that may require different powers or legislation. Deferred Prosecution Agreements (please see also elsewhere) and SOCPA powers in particular will assist.

6.3 The SFO recognises that the global financial crisis has focused attention on the behaviour of banks and bankers, and that there is a heightened anxiety about whether or not individuals and corporations are being properly held to account for their actions.

THE FRAUD ACT (2006)

6.4 The Fraud Act (2006) applies to offences committed on or after 15 January 2007. It introduced three new core fraud offences, which replaced deception offences described by the Theft Act.

6.5 An important change brought about by the Act was that offenders have to dishonestly make a fraudulent representation, or abuse trust, or fail to disclose information with the intent to cause a loss or gain. The new offences do not require the prosecution to prove that there was an actual victim or that anyone in particular was deceived (although this may still be relevant in establishing dishonesty).

6.6 Six individuals were convicted in SFO cases for offences under the Fraud Act in 2011–12.

6.7 The SFO will always use the most appropriate legislation for the circumstances of a case. The Ministry of Justice, in a memorandum submitted to this Committee in June, commented that "the common law offence of conspiracy to defraud is thought still to be essential". The SFO agrees.

THE BRIBERY ACT (2010)

6.8 There are extremely high expectations of the Bribery Act, reflected in the number of Parliamentary Questions that have been asked about it. It is important to recognise that the Act is not retrospective: it applies only to offences committed after the Act came into force on 1 July 2011.

6.9 Shortly after the Act came in, it was clear that many companies were taking urgent steps to ensure that they complied with it. The SFO did not believe that it was in the public interest urgently to pursue such companies. However, the SFO has recently re-stated its policy and made clear that it considers there to be no excuse for non-compliance.

6.10 We recognise that there is considerable public interest in this area, and the SFO has been asked on several occasions how many cases are under investigation under the new Bribery Act. At the investigative stage, it may be clear that criminal offences have been committed, but the charge will be decided at a later stage when all the evidence has been collected.

6.11 The SFO continues to bring cases under the old bribery legislation.

DEFERRED PROSECUTION AGREEMENTS (DPAS)

6.12 The SFO fully supports the proposals to introduce DPAs. They would provide a constructive option for prosecutors dealing with corporates in appropriate circumstances. They are more flexible than the present instruments of fines or "winding up" arrangements.

6.13 Under a DPA, the prosecutor would lay, but would not immediately proceed with, criminal charges pending successful compliance with agreed terms and conditions stated in the DPA.

6.14 The terms and conditions might include:

¾ a financial penalty;

¾ costs;

¾ restitution for victims;

¾ disgorgement of the profits of wrongdoing; and

¾ implementation of reforming measures.

6.15 The key benefits could be:

¾ the avoidance of a lengthy investigation and trial;

¾ the avoidance of a conviction and consequent debarment from competition for certain contracts;

¾ supporting public confidence;

¾ providing restitution;

¾ offering flexibility; and

¾ allowing reform and compliance exercises to keep functioning.

6.16 Whilst a DPA is not a sentence upon conviction for an offence, a DPA might fulfil some or all of the purposes of a sentence, that is:

¾ punishment;

¾ reduction of crime (including by deterrence);

¾ rehabilitation of offenders;

¾ public protection; and

¾ restitution to victims.

LIBOR AND THE FINANCIAL CRISIS

6.17 A number of press reports and exchanges in Parliament have commented on the adequacy of powers in relation to LIBOR. The SFO Director has confirmed that he is satisfied that existing criminal offences are capable of covering conduct in relation to the alleged manipulation of LIBOR and related interest rates.

6.18 Nonetheless, the SFO welcomes the recommendations of the Wheatley Review that a new offence relating to the manipulation of LIBOR and other benchmarks be introduced.

6.19 The SFO’s investigation into conduct related to LIBOR was announced on 6 July. It involves a number of financial institutions and is on-going.

6.20 The SFO welcomes the increased attention being paid to the issue of serious fraud in the context of the financial crisis. The public perception of bankers and financial institutions has changed. This means organisations like the SFO are also under heightened scrutiny and must be seen to be delivering.

6.21 While prosecution will usually be the outcome of an SFO investigation, it will not always be possible, practical or pragmatic to prosecute. If prosecution is not in the public interest, then (prior to the possible introduction of DPAs) the SFO will, where appropriate, seek a civil settlement. The SFO will respond to the OECD’s call for maximum possible transparency and explanation where it agrees to civil settlements.

6.22 Civil recovery can be an effective option when prosecution is not appropriate. It is not a risk-free exercise as it involves potentially lengthy litigation at the High Court and an exposure to costs against the SFO.

6.23 In cases where a civil settlement is agreed, information about corporations’ wrong-doing is published and they are required to make appropriate monetary restitution.

EXPERIENCE OF INSPECTION BY HMCPSI

7.1 The SFO was inspected by Her Majesty’s Crown Prosecution Service Inspectorate (HMCPSI) in spring 2012. Following an initial invitation from the SFO’s previous Director, Richard Alderman, the Attorney General (AG) asked HMCPSI to review the SFO’s casework, as well as some broader issues such as its processes for accepting cases. David Green, as the incoming Director of the SFO, welcomed the review. The report has not yet been delivered to the SFO or AG.

7.2 The purpose of the review is to provide information to the AG and the Director of the SFO about the effectiveness of the SFO, in order to assess future priorities and drive forward continuing improvement. The process is intended to be constructive, and relevant to current issues, but not a direct response to on-going or recent cases.

7.3 The focus of the review is to assess the quality and efficiency of the SFO’s casework and thus complement previous reviews which have focused on management processes and organisational structure. The review includes consideration of:

¾ corporate structures and processes which support casework; and

¾ strategic decision making, investigation, prosecution and victim/witness care.

7.4 A familiarisation visit in February 2012 was used as an opportunity to inform staff about the review and its purpose.

7.5 The inspection was conducted by a team from HMCPSI of which Michael Fuller, the Chief Inspector, had oversight. The team was made up of lawyers and individuals from a range of backgrounds, together with forensic accountancy and investigative capability.

7.6 An agreed framework was drawn up before the inspection went ahead, addressing all aspects of the review and the manner in which it would be carried out.

7.7 The Inspection focused on systems, rather than individuals or particular cases. A large amount of casework was scrutinised. The team also spoke to front line workers, and focus groups were arranged to seek the views of a range of investigative staff.

7.8 All members of the SFO were actively and positively engaged, particularly as they were presented with the opportunity to set out their own thoughts through focus groups and inclusive initiatives during the process. A series of questions and scenarios were posed to members of the Board as well as Case Managers, which tested their own understanding and actions in terms of handling cases. HMCPSI will feed back to everyone in relation to improvement and development of the SFO’s operational practice and procedures.

7.9 A final report will be given to the SFO in autumn 2012. The SFO will consider its recommendations. The Director has invited the Inspectorate to return so that they can review the action SFO has taken.

PROGRESS IN IMPLEMENTING RELEVANT RECOMMENDATIONS OF THE DE GRAZIA AND CABINET OFFICE REVIEWS

Jessica De Grazia review

8.1 Following on from a series of cases that had failed during prosecution, Jessica De Grazia was commissioned in 2008 by the then Attorney General to review the SFO in relation to two US agencies: the US Attorney’s Office for the Southern District of New York, a federal prosecution agency; and the Manhattan District of Attorney’s Office, a local prosecutor’s office, two well-established bodies prosecuting serious and complex economic crime; and to offer recommendations to improve the SFO’s performance.

8.2 The review contained 34 recommendations which focused on all aspects of operations, capability, leadership, governance and external relationships. The review also considered whether the SFO was still viable as a combined investigation and prosecution agency.

8.3 When Richard Alderman was appointed as Director in mid-2008, he embarked on a programme of change for the SFO, aiming to transform the organisation into a modern, sophisticated anti-fraud agency with much-improved success rates and a reduction in time to investigate and prosecute cases.

8.4 The recommendation to recruit specialist senior investigators resulted in the establishment of the Chief Investigator role.

8.5 A great deal of work on case acceptance and review processes was set in train. All policies, procedures, operational handbooks and manuals were revised. Risk assessments and operational orders for deployment of staff were introduced. This work was completed working jointly with other law enforcement and criminal justice partners.

8.6 The issues raised by the De Grazia review will be revisited when the HMCPSI report is received.

CAPABILITY REVIEW (CR)

8.7 In response to the De Grazia review, the SFO invested heavily in a transformation programme. During this transitional period, the SFO invited a Capability Review Team to assess its current position and explore SFO’s ability to function as a standalone non-ministerial government department.

8.8 The CR Team included Sir David Bell (Chairman of the Financial Times), Phil Collins (Director of the Office of Fair Trading), and Mike Eland (Director General, Enforcement and Compliance at HMRC). The team was positive about the transformation that had taken place in the SFO, and thought that the SFO had the correct vision and was on track to deliver impressive and improved results.

8.9 The review focused on a number of core areas relating to capability: strategy, leadership, and delivery. The CR team recommended that the SFO:

¾ continued to promote to staff the need for change in order to help them understand their role in implementing the organisation’s strategy;

¾ further streamlined decision-making and made it more inclusive; and

¾ capitalised on its significant achievements to date by refining and implementing its people and culture plans.

8.10 The SFO was praised for significant transformation progress, but more work needed to be carried out in relation to wider engagement and collaboration with other cross-Whitehall departments.

8.11 The organisation was invited to explore all means of enhancing engagement with staff. At the time staff felt undervalued and not recognised for their efforts and commitment. In addition, the SFO was invited to revisit training and development and performance management; the HMCPSI report will require a further revisiting of these matters by the Management Board of the SFO.

IMPLICATIONS OF THE OUTCOME OF THE TCHENGUIZ CASE FOR ORGANISATIONAL PROCESSES

9.1 The SFO has conceded that serious mistakes were made with the application for search warrants in this case. It acknowledged the reasoned tone of the judicial review judgment and the helpful comments it contained. The judgment highlighted the importance of quality and accuracy in the drafting of the Information supporting warrant applications and further underscores the importance of the new Director’s emphasis on quality being applied at every level of the SFO’s casework.

9.2 The SFO asked a senior lawyer to review the case internally. In her evidence to the judicial review, she set out two lessons which the SFO should learn:

¾ the need for the Information to be supported by a schedule so that it was clear what underlying material justified the statement made; and

¾ the need to see that the Information was checked and assured by those with sufficient expertise and experience.

9.3 The Court additionally set out further lessons that needed to be learnt and these will also be reflected in future practice.

9.4 Work is presently underway to establish a rolling programme of case review panels which will ensure that every case receives critical scrutiny and independent challenge from senior staff at key points in its lifecycle.

9.5 The Director has also established a new Quality Assurance team, also headed by a Senior Civil Servant. The team’s work will include monitoring internal processes to ensure that they remain responsive and fit for purpose.

A COMMENT ON FUNDING AND RESOURCES FOLLOWING JUDICIAL CRITICISMS IN THE TCHENGUIZ CASE AND IMPLICATIONS FOR THE LIBOR INVESTIGATION

9.6 The judgment commented on the resources required for investigating and prosecuting serious fraud in a postscript. The postscript uses the lessons described in the judgement to inform broader comments about the difficulties investigating and prosecuting serious fraud offences.

9.7 It should be clear that the outcome of this particular case does not reflect the quality of the rest of the SFO’s work. However, the SFO welcomes the added context which the postscript gives. The SFO believes it is important to consider funding and resources in a broader context, recognising that the SFO is one part of the Government’s overall strategy for tackling fraud.

9.8 First, it needs to be recognised that prosecuting serious fraud can give rise to significant challenges. Cases are often complex, both legally and factually. Defendants may have vast resources of capital which they can draw on to fund their defence. The SFO has to focus on top-drawer fraud. By their nature, these are the most difficult cases-those that no one else can investigate or prosecute.

9.9 Second, SFO cases tend to be high profile; they represent a minuscule proportion of the investigations or prosecutions taking place in the criminal justice system but receive a disproportionate amount of media attention.

9.10 Third, no other organisation in the country both investigates and prosecutes cases of this nature. The investigatory process can often be extremely long, and, just as with any other investigatory authority, a significant number of investigations will not lead to criminal charges.

9.11 Certain cases (such as the recent LIBOR investigation) have the capacity to require additional resources at short notice. That means that the SFO’s funding needs to be kept under constant review so that it remains responsive. The Prime Minister has previously made clear that if the SFO needs more resources, they will be provided.

9.12 It is also helpful to note that the SFO has consistently improved and has been providing more for less. Very substantial sums of money have been recovered from the proceeds of crime, as described above.

9.13 Nonetheless, in the light of the Judicial Review, it is clear that there remains significant room to improve the quality of work undertaken by the SFO. The Director has taken steps described above (3.7–3.9) to ensure that quality is built in at every stage of the SFO’s casework, and he has been clear that the SFO has to demonstrate that it is worth its funding.

October 2012

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Prepared 13th February 2013