There is a certain irony that on the day the Serious Fraud Office (SFO) announced the discontinuance of its five-year criminal investigation into the activities of the Union of Democratic Mineworkers and the world’s largest personal injury compensation scheme, the Financial Services Authority (FSA) was busy raiding the offices of three leading financial institutions in connection with its largest ever criminal investigation into insider dealing.
Although it is a specialist and dedicated prosecutor, following the catastrophic failure of Operation Holbein (the SFO’s inquiry into alleged price fixing in the pharmaceutical industry), the SFO has appeared to be reluctant to take on and prosecute the most difficult cases of corporate fraud. In addition, the SFO’s increased use of its powers of civil recovery and the publication of its guidance for companies to self-report instances of bribery suggests a more imaginative (and plainly less expensive) use of its powers in its efforts to seek redress and punish corporate wrongdoing. Even the redress it has tried to obtain from BAE Systems was a far cry from the penalties the SFO was publicly suggesting would be imposed just a few weeks earlier.
No such timidity from the FSA. Over the past 12 months the FSA has seen repeated victories in respect of all the prosecutions it has brought for insider dealing. It is results that alter behaviour and nothing should deter would-be offenders more than the ever-increasing list of formerly respectable City figures languishing in prison. More prosecutions are to follow, a number of insider dealing cases are awaiting trial, a large insider dealing case may be about to be charged and just a couple of weeks ago the FSA sought the extradition of a suspect from Mayotte, a remote tropical island in the Indian Ocean.
There are important legal issues over the FSA’s increasing appetite to be the lead prosecutor in cases of ’City crime’. The FSA is funded by the financial services industry and not the taxpayer. Some may feel that there is something inherently inappropriate in the state contracting out its responsibility to investigate and prosecute serious crime to a private company. Furthermore, unlike the police and Crown Prosecution Service, there is no separation between FSA investigators and prosecutors, and many defence practitioners feel that its staff lack the sense of fairness ingrained in many who work within the public sector. This attitude is transposed into its methods. On the ground the FSA is increasingly using its wide-ranging powers in an aggressive and some may argue disproportionate manner. As a matter of routine the FSA is seeking to use the pre-charge restraint powers under the Proceeds of Crime Act far more aggressively than other prosecution agencies.
Suspects arrested in dawn raids generally find their bank accounts frozen, often in sums far in excess of the amount of any alleged criminal benefit, thereby depriving suspects of the specialist representation needed to properly defend themselves. Pre-charge legal aid is not generous and suspects can be under investigation for years, yet the tactical choices made by the defence at the outset of an inquiry can seriously affect trial outcomes in the event of a charge. There are no such resource limitations upon the FSA, who unfettered by the restraints of the public sector regularly instruct the very best Queen’s Counsel.
Will this new aggression be enough to save the FSA in this election year? Is the regulatory approach of the SFO to be welcomed? These questions are not directly relevant. What is in fact needed is a joined-up and consistent approach to City crime. Whatever the result of the election, the case for a new, dedicated, properly resourced, publicly funded and accountable agency to assume responsibility for all City crime with a full range of regulatory and criminal tools at its disposal is overwhelming. With the current fiscal climate, whether that will happen is another matter.