FINANCIAL CRIME: An Introduction

Contributed by Tom Allen, Cloth Fair Chambers 

The Financial Crime specialism that has featured in these pages for a number of editions is one that is now both thoroughly distinct from other areas of the criminal law and also increasingly diverse. Whilst it will always be concerned with the roles of individuals, the overriding sense is that prosecutors increasingly have the roles of the corporates themselves in their crosshairs – and often in relation to their activities across multiple jurisdictions. And when trouble hits and the inspectors call, there is often an urgent need to be able to marshal a coordinated and meaningful global response to a crisis. As with any other specialism, it requires advisers (and perhaps in due course, advocates) who are highly experienced in handling the breadth of questions that are posed by multi-jurisdictional investigations. This part of the Directory seeks to identify those best placed to do so.

In many ways, the departure of David Green QC from the SFO is the end of an era. At the very least it looks set to be the end of the long (and sometimes tedious) Libor era, which has played its distinct tune throughout each of the years of his appointment. The final results of that campaign still hang in the balance as we await verdicts in the Euribor trial. However, as David Green made clear in his submissions to the Justice Committee at the end of last year, there have been guilty verdicts (both through pleas and jury verdicts) in three out of the four trials. That is a fair return for any prosecutor and there can be no doubt that in general terms David Green has taken the SFO forward significantly.

The climate that will prevail over the next year will no doubt be heavily influenced by the appointment of Lisa Osofsky as the new head of the SFO. On her appointment she spoke, enthusiastically, of ‘leading an emboldened SFO to even greater heights.’ She may well be able to do so, but exactly how great those heights currently are, depends on the outcome of a number of cases already in the pipeline; first up is the ongoing Euribor trial (where they already have one plea in the bag); secondly the ENRC appeal scheduled for July; thirdly, the retrial of Tesco’s employees; and fourthly the prosecution of Barclays employees. The latter of the three poses very significant problems in the light of the recent dismissal of the charges against Barclays itself.

And whilst all of those case are hangovers from the previous regime, a number of other high-profile cases fall to be considered – Rolls-Royce in its various geographical guises, Serco, ENRC, Unaoil and Rio Tinto amongst others. There will be a large caseload for the new director to get her teeth into and good luck to her.

But whatever those outcomes, it seems entirely fair to assume that as a new Director with dual UK/US nationality and qualifications (not to mention experience practising in both jurisdictions), Ms Osofsky will be ideally placed to forge ever closer co-operation across the Atlantic and beyond.

Furthermore her familiarity with the far less hidebound US DPA equivalents should ensure a fresh look at the ways in which such agreements can be deployed. The reverberations of the Rolls-Royce DPA in which financial orders in excess of £500m were made are yet to play out. With financial penalties of this scale, the balancing act that any company will weigh up before entering into a DPA become more complex. The need for spot-on advice in these circumstances has never been greater.

Beyond the SFO, this year has seen the first testing of the boundaries of corporate prosecutions in relation to bribery. Skansen Interiors, a small, unassuming outfit, far removed from the likes of those companies who were able to reach DPA’s (and therefore not the most obvious of cases to bring), was itself successfully prosecuted by the CPS under S7 of the Bribery Act for failure to prevent bribery (and sentenced to an absolute discharge). It won’t be long before prosecutors decide that such small fry does not satisfy their appetites. The prediction here is that Skansen will in due course be seen as the thin end of what will no doubt become a wedge. More corporate prosecutions await us all.

The advent of technology is beginning to make an ever louder noise in the field of Financial Crime. It was back in March of this year that a clarion call came from Lord Justice Vos when he identified what he called the considerable scope for fraud in ‘the brave new world of Fintech’. He hazarded a guess that ‘in the digital era, the manifestations of dishonesty will take a completely different form.’ He suggested that the danger was such as to ‘make the frauds of yesteryear look modest’. This in a year when the Cyber Threat to UK Business Industry Report was published, identifying once again the familiar faces of ransomware, fake news, data breaches, crypto jacking and theft from cloud storage. It seems inevitable that all of these menaces will cross desks sooner or later. It may even be that the scandal surrounding Cambridge Analytica will lead the way with a prosecution relating to the use of Facebook data it acquired in breach of relevant data laws.

But technology is also a tool that can be put to good use by prosecuting agencies, with the SFO automating document analysis and now happily boasting of being able to process more than half a million documents a day, when recently using a pilot “robot” to scan for legal professional privilege content, at speeds 2,000 times faster than a human lawyer.

Legislative change has been dominated by the advent of the Criminal Finances Act 2017. A great deal of print ink has been dedicated to the CFA and especially to discussion of Unexplained Wealth Orders and the new corporate criminal offence of Facilitation of Tax Evasion. These offences are very clear red lights to the UK finance industry and those who advise it, and the NCA has been quick to obtain its first UWO. Whether many prosecutions for the facilitation offence will follow is a moot point. The Criminal Finances Act 2017 also extends the SFO’s powers to apply for disclosure orders in money laundering investigations as well as extending the pre-existing cash forfeiture regime to credit balances held in UK banks.

With each passing year the complexity of the Financial Crime landscape increases and so too does the need to identify those who can safely chart a way through it.