SFO focusing on high profile investigations at expense of fraud cases

Figures obtained by Pinsent Masons, the law firm behind Out-Law.com, show that use by the SFO of restraint orders to confiscate assets suspected to be the result of fraud has halved in the past year, from eight to four. There has been no corresponding increase in the number of asset freezing orders obtained by the Crown Prosecution Service (CPS) over the same period.

Civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons said that businesses would be keen to get confirmation from the CPS that it is picking up high-value fraud cases passed to it by the SFO because those cases do not meet its investigatory priorities. He said that restraint orders and freezing orders must be issued quickly to prevent fraudsters from dissipating assets before victims have a chance to recover them, but the SFO has not issued a restraint order within two months of opening an investigation in any of the past three years.

"The SFO is the UK's elite fraud enforcement agency, and businesses are keen to see it focus on cases where businesses have lost significant amounts of money – not just a select few cases that are important from a public policy standpoint," he said. "That's especially important as there is no guarantee that other agencies are going to step in and do that work."

"Restraint orders are a vital tool to help victims of fraud recover stolen assets. It is worrying to see the SFO doing less of this critical work. When working with fraud cases, it is critically important to move forward as quickly as possible to freeze assets: every day that passes makes it more unlikely that stolen assets will be recovered. If the authorities do not issue restraint orders within the first two months of their investigations then there is a high likelihood that fraudsters will successfully dissipate the assets they have stolen to avoid them being recovered by the enforcement agencies for the victims," he said.

The SFO has dealt with several high profile bribery and corporate crime cases against FTSE 100 companies in recent years, Sheeley said. Although these 'blockbuster' cases are of significant public policy interest, fraud cases can involve much greater financial losses to businesses and individuals.

Use of compensation orders to recover assets from fraudsters in order to compensate victims has also fallen over the past year, according to the figures. The SFO did not obtain any compensation orders last year, down from 10 orders worth a combined £14 million in 2016-17; while the compensation awarded to victims from orders obtained by the CPS fell by 24% over the same period, from £24.5m in 2016-17 to £18.6m in 2017-18.

"Considering fraud cost the UK economy £190 billion in 2017, such minimal sums in compensation does not even scratch the surface," said Sheeley. "Clearly individuals and businesses that have suffered at the hands of a fraudster need to take action directly and use civil law remedies to recover their monies, rather than relying of criminal prosecutors."

"Reporting a fraud to the police, SFO or Action Fraud does not necessarily lead to a timely investigation, especially if it lacks that 'blockbuster' public policy element. It is unfortunate that the current system does not tell the victim that a) the fraud will not be investigated immediately and b) they should consider alternative action against the fraudster – being civil proceedings which can generally be launched within hours of the crime," he said.

"In civil fraud cases, courts have the power to issue freezing, search and seizure orders quickly, which can be vital in stopping fraudsters getting away with the proceeds of crime. A civil action does not prevent the SFO or CPS from running a separate criminal investigation if they choose to," he said.