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The UK official body the Serious Fraud Office (SFO) should be replaced with a new body to combat economic crime with more emphasis on prevention. That’s according to a new paper published by the free market think tank, the Institute of Economic Affairs.
It states that the SFO has been plagued by high-profile failures, including ethical misconduct and incompetence. In 2021, a high-profile bribery conviction of a former Unaoil executive was overturned due to the SFOโs failure to disclose key material relating to its directorโs โinappropriateโ communications with a Unaoil advisor during the prosecution.
The economic crime academics Professor Mark Button, Dr Branislav Hock, and Dr David Shepherd are calling for the SFO to be abolished and the setting up of a Serious Economic Crimes Office (SECO). Such a new body would keep powers to prosecute serious fraud, and would have new responsibilities to deter fraud before it occurs. The office would be expected to develop good practice advice on prevention and work with the private sector.
According to the report authors, the criminal justice system is incapable of addressing the intricate, technical and complex nature of cases involving serious fraud. This is leading to costly delays and, often, failed prosecutions. The SECO would instead be encouraged to embrace alternative justice mechanisms, including Deferred Prosecution Agreements and using larger fines. There would also be expanded powers to set standards and impose regulatory sanctions. This would include โEthics ordersโ, which would require corporations to implement ethics and compliance programmes.
The authors also envisage the creation of a register of serious economic crime offenders, modelled on HMRCโs list of individual and company tax defaulters. A spot on the register could result in prohibition from being a company director or selling financial products. The report suggests enhancing collaboration with private investigators specialising in economic crime. This could involve staff exchanges or outsourcing partial or full investigations to consultancy firms such as Kroll, KPMG, or EY.
The 32-page discussion paper says that the SFOโs focus on high-profile prosecutions has diverted resources away from other important areas, such as crime prevention and the support of small and medium-sized enterprises that are increasingly susceptible to fraud. The proposed SECO would address these gaps by prioritising a more balanced approach, combining enforcement with preventative measures.
Prof Mark Button, Co-Founder and Co-Director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth, said: โSerious economic crime is at record level and set to continue to rise. The existing structures and approaches are failing to have a significant impact and this report sets out a wide range of innovative reforms and actions to cope with this increasing challenge.โ
Dr Branislav Hock, Co-Editor in Chief of the Journal of Economic Criminology, said: โSegregated serious economic crime policing structure in the UK requires new enforcement authority that operates above the surface of institutional and procedural complexities.โ
And Dr David Shepherd, economic crime researcher and Senior Lecturer at Portsmouth, said: โThe SFO is hamstrung by its focus on criminal justice and courts that are not fit-for-purpose. Breaking these constraints with a revitalised agency, a new identity and a broader range of regulatory-style powers would better serve the public good.โ
SFO view
The SFO in its strategy for 2024-29 acknowledged that complex fraud, bribery and corruption ‘impact many thousands of citizens, damaging their health and well-being and destroying their confidence in our financial systems. These crimes have a corrosive effect upon the reputation of the UK.’ The SFO director Nick Ephgrave said: “The SFO is uniquely constituted to tackle this threat, with a multi-disciplinary team of experts and the powers and responsibility of a public prosecutor, but it needs to adapt and develop to maintain its effectiveness.” He acknowledged needing to ‘progress at a faster rate, this means taking bold and pragmatic decisions on our casework’.
