The Allen Stanford case highlights the powerful impact that government can have when agencies join forces to catch criminals.
Although it is a challenge to find anything positive in the face of such far-reaching fraud affecting so many innocent victims, the united front shown by the US Department of Justice (DoJ), of which the FBI is a part, and the Securities and Exchange Commission (SEC) is good news for the US taxpayer and bad news for criminals. It would be welcome if we saw a similar attack on crime in the UK: the Financial Services Authority (FSA) and the Serious Fraud Office (SFO) joining forces to hunt down the guilty and bring them to justice.
In these difficult times further evidence of malfeasance, fraud and money-laundering is certain to emerge. In this context joint investigations are a cheap way to maximise resources and score results. In the US it is standard procedure to see multi-agency operations. Agencies do have different mandates: the FBI is a law-enforcement agency while the SEC is a regulator with enforcement powers. They cover two different but potentially overlapping jurisdictions. They can work in tandem or pursue parallel investigations, such as the DoJ and the Internal Revenue Service (IRS) have done in pursuing alleged tax cheats banking with UBS.
Importantly, US federal authorities operate under different standards of proof. In a criminal case the DoJ must produce proof beyond a reasonable doubt, while the SEC must satisfy the balance of probabilities if it files a civil complaint. Also, each agency has different powers: the DoJ uses the Grand Jury to investigate cases, while the SEC and IRS have separate investigatory means at their disposal. In this mix there is the potential for agency turf wars, which can only help the criminals.
But it is not enough to merely hold formal managerial meetings to divide up criminal and regulatory investigations. While the FSA and SFO may exchange documents and conduct cordial discussions, it is quite another thing to allow the FSA to ‘ride shotgun’ at SFO interviews. This simply doesn’t happen as often as it should. Why shouldn’t the FSA benefit from the SFO’s extensive Section 2 interview powers? This wouldn’t diminish the effectiveness of the SFO and could only hurt the wrongdoers.
In the US it is commonplace for the IRS and the Drug Enforcement Administration to link hands in dope investigations – obviously because of the likely money-laundering implications. Similarly, US agents from various organisations, such as the Postal Inspection Service, the immigration authorities and the Department of Labour, will work together if there are cases of employment benefit fraud involving illegal immigrants. Other areas where cooperation is prevalent include insider trading and Foreign Corrupt Practices Act investigations. There is no reason in theory why the FSA and SFO could not similarly join forces. So far there is not much evidence of agencies working together to plan cases, identify targets and co-ordinate fully all aspects of criminal and civil investigations.
The FSA has used the City of London police in certain cases. This may amount to little more than using them as its legs rather than as partners in strategy and case planning. Although there are proper distinctions between civil and criminal cases, and these are apportioned between the FSA and the SFO, there is already considerable cross-over (the SFO has just resolved the Balfour Beatty case pursuant to a civil order). It seems both agencies are testing out the methods that work for them: the FSA is prepared to go down the criminal route in some recent insider trading cases, while the SFO has not shunned the civil law. But there is fertile ground for further cooperation between UK agencies, most particularly in the area of asset tracing and recovery.
Only when this country makes any parochial agency interests subservient to the goal of finding and prosecuting criminals will justice be fully served.
Lisa Kate Osofsky was formerly deputy general counsel for the FBI
