A change of guard is under way in the fight against economic crime in the UK. All three heads of the main agencies charged with tackling white-collar crime will have left their posts by the end of the year, leaving behind them questions over how effectively Britain targets insider traders, cartelists and fraudsters.
By the end of 2012 there will be a new director of the Serious Fraud Office, which investigates and prosecutes complex, cross-border fraud; a new head of enforcement at the Financial Services Authority, which prosecutes insider traders; and, confirmed on Thursday, a new chief executive of the Office of Fair Trading, whose powers include prosecuting price-fixers.
All three agencies are undergoing change – or facing the threat of it. The FSA is to be split next year to become the Prudential Regulatory Authority and the Financial Conduct Authority; and the OFT is facing proposals for a merger with the Competition Commission.
The SFO, meanwhile, received a reprieve in the summer from being rolled into a broader National Crime Agency. But it has come under fresh scrutiny this week after embarrassing revelations of a series of procedural errors in its high-profile investigation of property tycoons the Tchenguiz brothers.
Before the 2010 election, the Conservatives pledged to create a single economic-crime agency to replace the current alphabet soup of watchdogs, arguing that regulatory gaps had helped exacerbate the worst financial crisis in a generation.
Those plans were dropped once in government, in part as the European Union was also clamouring for new regulatory powers. Since then, not a single person has gone to prison in Britain for an offence related to the financial downturn.
“Our enforcement authorities are too fragmented and we are not delivering in terms of getting any good hits after the worldwide recession,” said Jonathan Fisher QC, a barrister who wrote a policy paper in 2010 arguing for consolidation of the economic crime fighters under one roof.
Lord Goldsmith, former attorney-general, says the agencies must stay under supervision of the Law Officers and not the Home Office – which would have been the case with the National Crime Agency –
to preserve independence. “The key issue is keeping financial crime from being sucked into general criminal law,” he said. “We need specialists because it’s complex.”
The SFO and OFT, in particular, have gone after “big scalps”: investigations that grab headlines and explain a philosophy to a wider audience. But such a high-profile strategy has risks: when things go wrong, they do so very publicly.
The FSA has taken a different tack. It had never prosecuted a criminal case of insider trading before 2008. Margaret Cole’s team then started with low-level cases against interns, dentists and retirees and is only now – with a confident prosecuting team that has wins behind it – pursuing larger cases against sophisticated City individuals.
Contrast that to the OFT, whose first contested criminal case was that against British Airways, a case that collapsed because of basic procedural errors.
There is also the question of their disparate powers. The OFT can grant full immunity to a company and fine 10 per cent of global turnover in a particular market – a powerful combination of carrot and stick that incentivises whistleblowing. The FSA has limited powers to plea bargain in criminal cases. The SFO hopes to gain powers to enter into US-style deferred prosecution agreements.
“The US has been much more successful in tackling financial crime,” said John Fingleton, outgoing chief executive of the OFT. “Much of that is to do with the way investigations happen and the investigative powers of agencies.”
Additional reporting by Brooke Masters in London
Officials who have led fight against white-collar fraudsters
John Fingleton, the chief executive of the UK’s main antitrust agency, will step down by the end of the year, he confirmed on Thursday.
The affable Irishman has led the Office of Fair Trading for the past seven years, taking on headlinegrabbing investigations intended to signal the importance of competition law to businesses of all sizes.
But the risks of that philosophy were laid bare by equally highprofile embarrassments, such as the collapse of a criminal trial against British Airways executives, or fines against 10 tobacco companies being thrown out on appeal after a seven-year civil investigation into promotional practices.
“You can’t do law enforcement in private, or without taking on complex cases, just as you can’t play premier football without losing some games,” Mr Fingleton said in an interview with the Financial Times.
“Each time you lose it’s demoralising but we have won by far the majority of cases we have brought,” he said.
Mr Fingleton leaves at a pivotal moment for the OFT, which the government is considering merging with the Competition Commission.
A decision on the merger and on whether to limit some of the OFT’s powers in both investigating and prosecuting cases was expected by October but is still outstanding.
Mr Fingleton has not yet decided his next move.
Richard Alderman, the director of the Serious Fraud Office who is also stepping down this year, has transformed his division. Due to be replaced by David Green QC, formerly the director of Revenue & Customs’ prosecution team, Mr Alderman has taken a pragmatic approach to bringing large companies to account, being a vocal advocate for US-style prosecution agreements.
Margaret Cole, the outgoing managing director of the Financial Services Authority, “has done a very good job in turning the FSA into quite a powerful prosecuting agency”, according to Lord Goldsmith, the former attorney-general.
The FSA had never prosecuted insider trading before 2008.
Since then it has won 11 convictions.
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