SFO head makes the case for agency independence, but more efficient funding model needed, says expert

Out-Law News | 27 Oct 2014 | 10:19 am | 2 min. read

Merging the functions of the Serious Fraud Office (SFO) with those of the new National Crime Agency (NCA) in relation to economic crime would be "just not sensible" and could impact on investigations, the head of the SFO has warned.

Speaking at a conference hosted by Pinsent Masons, the law firm behind Out-Law.com, David Green set out a robust defence of the SFO's role and the importance of its independence from government. He also said that there was no evidence that abandoning the current model for some other arrangement as suggested in a recent Financial Times article would lead to better results.

Green also confirmed that the SFO had applied for an additional £26.5 million in supplementary 'blockbuster' funding for 2015, as it had nearly exhausted the £35.2m blockbuster funding granted to it this year. The additional funds are needed to help the agency continue its high profile investigations into the alleged rigging of LIBOR, probes into alleged overseas corruption and costs associated with the defence and settlement of recent litigation involving the Tchenguiz brothers.

Corporate crime expert Barry Vitou of Pinsent Masons said that the latest request was further evidence of the agency's need for a new, more sustainable funding model.

"It is a simple fact that the prosecution and investigation of serious fraud is expensive," he said.

"While the UK government is funding the SFO using a blockbuster funding model it would be preferable if the SFO received a proper budget up front. It needs a better system of funding so it can have a steady stream of money to ensure that it can operate as effectively as possible to stop fraudulent activity," he said.

The budget of the SFO, which is the agency responsible for investigating and prosecuting the most serious cases of economic crime, has fallen by 40% since the financial crisis. Earlier this year, it was forced to apply for £19m in additional funding to cover the costs of some of its more high profile cases. The new request it has made is for the equivalent of 75% of its budget for 2014/15.

Speaking at the Pinsent Masons conference, Green said that the idea behind blockbuster funding was to protect the SFO's most expensive investigations.

"The arrangement recognises that the SFO is demand-led and honours the pledge that on my watch the SFO will never turn down any investigation simply on grounds of cost," he said. "The mechanism is not perfect, but it does the job."

Earlier this month, the Financial Times reported that UK home secretary Theresa May was planning to close down the SFO and transfer responsibility for serious crime to the NCA. The NCA, which comes under Home Office management, took over responsibility for national and international serious and organised crime last year.

In his speech, Green said that structural change "just as the SFO is making real headway" would "create really significant upheaval and uncertainty, directly affecting current operational activity". He added that the need for "visible and demonstrable independence" forthe body responsible for investigating and prosecuting high profile cases of economic crime was vital, particularly in the context of fraud and bribery.

"Many of our cases concern blue-chip companies," he said. "They may be household names whose performance is of great importance to the UK economy and every citizen would wish them well … [Some] people may feel a certain tension between wanting the law enforced but also wanting our companies to prosper. And, of course, these corporates have real clout and influence in Westminster and the City."

"These facts alone underline the need for a visibly independent investigator and prosecutor to have the conduct of these cases. That is what the SFO is for. Visible and demonstrable independence is crucial to judicial confidence, to business confidence in London as a level playing field, and to public confidence in the investigation and prosecution of major economic crime involving our flagship enterprises," he said.

Vitou said that it was "hard not to agree" with Green that the problem with fraud was "not caused by the organisational structure of the SFO".

"Rather, it is the insufficient resources being directed at fraud especially in the face of the rise of cyber fraud that is the problem. A disruptive restructuring of the management of the SFO is unlikely to solve that," he said.