SFO head defends agency's perceived "lack of appetite" for prosecuting senior UK bankers

Out-Law News | 06 Mar 2014 | 11:34 am | 2 min. read

The head of the Serious Fraud Office (SFO), which investigates and prosecutes serious and organised crime in England and Wales, has defended the agency's record against UK banks and senior bankers in the aftermath of the financial crisis.

Speaking to Radio 4's Law in Action programme, David Green denied there was a "lack of appetite" for prosecuting senior bankers, and rejected the idea that the six traders that have been charged with offences as part of its LIBOR investigation were "footsoldiers". He also restated how difficult it was to hold companies criminally accountable for fraud or theft carried out by employees.

"The SFO will prosecute where the evidence supports it," Green told the programme.

"In order to make a company liable for fraud or dishonesty by its senior management, the law requires that a controlling mind was complicit or involved in that fraud or dishonesty. If the public interest requires more corporate prosecutions, then legislation must be amended to include failing to prevent fraud within a corporate," he said.

Green also responded to criticism about the lack of prosecutions brought under the Bribery Act since it came into force on 1 July 2011. The SFO recently announced its first criminal charges under the Bribery Act and prosecutions would follow, Green said.

Other than for corporate manslaughter offences, to which a separate legal regime applies, companies can generally only be found criminally liable for the acts of employees or agents if the offender was a "directing mind" and the act was the "will of the company". Case law and guidance from the Crown Prosecution Service (CPS) limits this to actions by the Board of Directors, managing director and other senior officers who carry out management functions and speak and act as the company.

When the Bribery Act came into force in July 2011, it created a new offence of "failure to prevent" bribery by people working for or on behalf of a business. A company will be found responsible for bribery carried out by employees or agents unless it can show that it had "adequate procedures" designed to prevent bribery in place. The Banking Reform Act, which received Royal Assent at the end of 2013, will introduce a new criminal offence of reckless misconduct that leads to bank failure which could be used to prosecute senior bankers in future.

White collar crime expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that these legal developments were part of a growing trend that financial institutions should make themselves aware of.

"Enforcement action has been and is being taken against bankers and banks by the SFO and the Financial Conduct Authority (FCA), the financial services regulator," he said.

"Recent changes to legislation illustrate the government's desire to hold bankers criminally responsible for misconduct. Should the government introduce further legislation along these lines, including the concept of bankers being held criminally responsible for any reckless banking misconduct, the tables are likely to turn and an increasing number of prosecutions should follow. Financial institutions and banks must take note that this shift is coming and address the risks of criminal prosecution," he said.

During the interview, Green acknowledged that new deferred prosecution agreements (DPAs) could play a role in granting prosecutors access to more evidence that could later be used against individuals in senior management responsible for the misconduct. However, DPAs are only available to companies that self-report offences to prosecutors, and which agree to co-operate throughout the investigation, he said.

DPAs became available to prosecutors in England and Wales at the end of last month. They are designed to encourage businesses to self-report wrongdoing in the hope of more lenient treatment, including the possibility of avoiding a criminal investigation and potential prosecution, if strict conditions agreed by a judge are met. These conditions may include payment of substantial penalties, the need to compensate victims and submitting to regular reviews and monitoring depending on the circumstances of the case.