Tackling cross-border fraud
12 May 1995
15 January 2014
24 January 2014
4 October 2013
12 February 2014
26 March 2014
There has been much discussion in the press about the increasingly international nature of serious fraud cases.
Frauds which cross national boundaries can present serious problems for prosecuting authorities.
The only effective response the international community has in tackling this rapidly escalating problem is to increase co-operation between states. Thankfully, our own Government has responded positively to this although much still needs to be done.
Until recently, the special investigatory powers of the Serious Fraud Office (SFO) - the so-called Section 2 powers created by the Criminal Justice Act 1987 which compel the production of written or oral evidence on request - were limited to UK fraud investigations only.
Since these powers have proved effective, their limitation to UK frauds was frustrating for investigators from other countries looking into offences by overseas organisations committed in the City.
All this changed in February 1995 when the director of the SFO was empowered to use Section 2 powers in aid of overseas cases of serious or complex fraud referred by the Home Secretary.
The powers are set out in Section 164 of the Criminal Justice and Public Order Act 1994 which amends the Criminal Justice (International Co-operation) Act 1990. It was as a result of recommendations by the 1991 Royal Commission on Criminal Justice that this change in the law was made.
There were already precedents close to home, in the important offshore financial centres of the Channel Islands and the Isle of Man.
The law officers there have been empowered for some time to investigate serious fraud "wherever committed" using powers of compulsion similar to our own Section 2 powers.
The SFO continues to benefit regularly from this.
To receive SFO help, an overseas authority must first write to the Home Office. If the Home Office thinks the case is appropriate for the SFO, it will ask the overseas authority to sign an undertaking saying it will not use a statement obtained from any person in criminal proceedings against that person without express permission from the Home Office.
This is an essential safeguard against the compulsory nature of a Section 2 interview.
The Home Office retains the right to allow a statement compulsorily obtained by the SFO to be used at a foreign trial in the same way that it could be used at a UK trial. If a defendant at a foreign trial contradicts in the witness box what he said earlier in a Section 2 interview, he can be confronted with the Section 2 statement.
In fact, requests from other countries for assistance seldom extend to the interviewing of potential defendants. The SFO's experience to date has been that requests have been for the gathering of documents, and the interviewing of witnesses rather than defendants.
Once the overseas authority has signed the necessary undertaking, the Home Office refers the case to the SFO. The director of the SFO then decides whether or not to accept the case.
If he accepts the case, the director can authorise a foreign investigator to accompany SFO investigators during interviews or in obtaining documents through Section 2 powers.
The director of the SFO exercises strict control over the use of SFO powers on behalf of overseas authorities. Section 2 interviews are always conducted in the presence of a member of the SFO and overseas investigators are required to sign an undertaking to exercise Section 2 powers only as directed by the SFO.
An interview under Section 2 can produce a witness statement which the witness normally agrees to sign. If the overseas authority also requires, for admissibility, the statement to be authenticated by a court, it is a simple matter for that to be referred by the Home Office to a suitable magistrates court.
A summons for the witness is then obtained so that the pre-prepared statement can be signed before a magistrate.
So far this year the SFO has helped 10 countries with 14 separate serious fraud investigations: 22 Notices to Produce documents have been served; 12 potential witnesses have been interviewed; and in conjunction with the Metropolitan Police, eight search warrants have been executed.
Requests for the SFO's help have been received from countries as far afield as Australia and Argentina as well as those closer to home like Germany and Switzerland.
Those helped to date include a Los Angeles attorney investigating a multi-million dollar fraud involving the takeover of an international cinema group.
We have also assisted investigators from the Norwegian Serious Fraud Office in its enquiries into a large-scale foreign exchange dealing fraud.
The cases in which assistance has been given have included at least one tax fraud.
Contrary to popular belief, there is no rule of international law prohibiting assistance in the investigation of tax fraud.
This is made clear by Section 4 (3) of the Criminal Justice (International Co-operation) Act 1990 and by the UK's signing of the Special Protocol on Fiscal Matters to the European Convention on Mutual Assistance in Criminal Cases.
So, far from being prohibited from assisting overseas tax fraud investigations, the UK is, in certain circumstances, positively obliged to do so.
The ability of the SFO to assist its opposite numbers overseas is already starting to pay dividends.
The hope must now be that those who have benefited will want to reciprocate and will press for similar legislation in their own countries.