Serious Fraud Office

Mark Field Excerpts

Tuesday 7th February 2017 Westminster Hall

[Mark Field (Cities of London and Westminster) (Con)]

In congratulating the right hon. Member for East Ham (Stephen Timms) on securing this overdue debate on the workings of the Serious Fraud Office, I register my concern that the regular reliance of the SFO on special funding facilities from the Treasury lays it open to the charge that it lacks full and proper independence.

As we know, we live in financially straitened times for those agencies that depend on the public purse. Nevertheless, the sight of the SFO repeatedly having to go cap in hand to the Treasury for supplemental income opens up the Government to the potential accusation that they at least have the ability to close down what might be politically sensitive inquiries by the simple expedient of refusing the SFO funding.

I am not suggesting for one moment that the Government are behaving improperly. However, they must see that there is an inherent conflict of interest, which will persist unless and until the SFO’s funding is placed on a more sustainable and arm’s length basis.

[Alex Chalk]

Is it not important in this debate to keep a measure of context as well? The sums of money that we are talking about, while not insignificant, need to be set against a wider context. They are less in total, even including blockbuster funding, than the cost of one joint strike fighter and, given the ability of the SFO to protect British interests at home and abroad, that context is worth considering.

[Mark Field]

My hon. Friend makes a fair point, although in the comparison he draws he also possibly makes a point about the expense of defence procurement.

Those of us of a certain age cannot help but be transported back in time when we learn of the SFO’s requests for so-called blockbuster funding to pay for major investigations. Some Members will know that I am a keen pop music fan, and it is exactly 44 years ago today that the glam rock anthem “Blockbuster” by The Sweet was at No. 1 in the UK charts. Now, I am not sure that the 17-year-old future right hon. Member for East Ham was a great glam rock fan, but I am sure that his hair was fashionably longer back in 1973.

The cost of funding the SFO’s blockbuster investigations now invariably takes the SFO well beyond the Treasury’s year-on-year allocation of funding, as we have heard from other Members. Last year, the SFO’s spending reached some £65 million, which was a 12% uplift on the 2015 figure. Blockbuster funding has been applied for, not on an exceptional basis but for four of the last five years, so presumably that form of funding is here to stay permanently, at least in the eyes of the Solicitor General. I would be interested to hear what he has to say about that.

As my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) has pointed out, at the end of last year the SFO successfully secured funding to pursue criminal investigations against the Monaco-based Unaoil, which stands accused of securing complex corrupt contracts for a range of multinationals, including Rolls-Royce. I understand that the ongoing investigations over Barclays in Qatar and a range of potential fraud cases involving foreign exchange may yet have to be subject to special blockbuster funding appeals. Although I accept the Government line that that sort of mechanism allows the SFO great flexibility in the allocation of work, I trust that, as large and complex investigations become the norm, a serious re-evaluation of the pros and cons of the funding system for the SFO will be carried out.

I have to say something else, which I know will lead to my parting company with my right hon. and learned Friend in his paean to how wonderful the SFO is: I deeply regret that the reform of the entire workings of the SFO is overdue, and I believe that was yet another missed opportunity for the coalition Administration who were in office between 2010 and 2015.

For my part, as long ago as the autumn of 2009 I wrote two essays for the ConservativeHome website in the immediate aftermath of the financial crisis, setting out what I regarded as a proposed blueprint for the SFO. Then as now, I contend that an effective financial enforcement system requires the promotion of deterrence and competition, in order to boost consumer protection. Even at that time, a year after the financial crisis began, it seemed clear that, despite grandstanding galore from politicians, there was—indeed, there remains—a growing unease at the paucity of substantial change in the aftermath of that crisis.

Nowhere did that feeling resonate more than in the field of enforcement, where the prospect of adopting US-style powers to prosecute alleged wrongdoers in financial services has of course been dashed. Although over the past year or so the SFO has finally secured LIBOR convictions, it is in all honesty a body that I am afraid has long lacked clout and the respect of those who are most engaged in the financial industry.

As the right hon. Member for East Ham has said, the SFO has been operational since 1988 and the Roskill reforms. It is responsible for the detection, investigation and prosecution of serious fraud cases in England, Wales and Northern Ireland. Although it is operationally independent—as it should be—the SFO comes within the remit of the Attorney General and is given the power to bring criminal prosecutions directly. In contrast, the FCA is able to impose civil sanctions and launch criminal cases on matters such as market abuse, working in tandem with the City of London police and the Crown Prosecution Service.

There are some lawyers—perhaps those who are less close to the SFO’s workings—who continue to lament the difficulties associated with securing convictions for fraud, especially given the collapse of a number of highly complex jury trials. For that reason, many people feel that the introduction of a system of plea bargaining similar to that in the USA would not work. No one will risk blowing the whistle or turning themselves in when the likelihood of a successful prosecution being brought is—at least in recent years, as we have seen—so slim.

The SFO’s problems are not necessarily personnel problems; I agree with what was said earlier. However, having spoken to experts in this field, I have come to believe that one of the organisation’s main problems is in finding cases to investigate. Only when the police or the Attorney General have firm cause to believe that a criminal act has occurred is the SFO permitted to get involved. Moreover, when a case does get under way, its prosecutors routinely face months of battling defence lawyers before they can even get to trial. Of course, the defence has a strong incentive to engage in a war of attrition, in order to derail a prosecution on legal technicalities.

As a result, I think we have faced this task of reforming the financial services system and inculcating in the minds of its participants that sense of right and wrong, with an “umpire”—the SFO, in this case—that too often has lacked the tools or the respect from the market to do its job properly. I am not making any personal criticism of David Green, who, while at the helm, has developed a number of improvements to the SFO in the last three or four years.

Instinctively, I support a more robust economic crime policy, which would place the promotion of commercial competition at the heart of a new code of enforcement designed to deter fraudulent, anti-competitive or criminal activity. Such a policy should centre upon a new agency in place of the SFO, which would combine the SFO and the FCA’s enforcement division.

It is perhaps incongruous that the SFO stands under the jurisdiction of the Attorney General, although I very much appreciate that the right hon. Member for East Ham put that arrangement into some sort of historical perspective. Nevertheless, we should now look to place the SFO’s responsibilities within the remit of the Department for Business, Energy and Industrial Strategy, so that the SFO would work alongside the Competition and Markets Authority. By associating consumer protection with fraud and trust-busting, we would give competition its correct place as a central priority in the future commercial landscape.

[Sir Edward Garnier]

Is it not a problem to place the supervision of a prosecutor with a spending Ministry—a political Ministry? Obviously, the advantage of leaving the SFO and the CPS where they are—that is, under the supervision of the Attorney General—is that, in that respect, the Attorney General and the Solicitor General are not politicians, but protectors of the public interest. As soon as a Cabinet applies pressure upon a political Secretary of State, and we have seen this recently with the—

[Sir Edward Garnier]

I quite agree.

[Mark Field]

I very much take on board what my right hon. and learned Friend says, and I understand his concerns. He made a powerful point towards the end of his speech about the importance of there being public trust in the financial services sphere if it is to be the success we all hope it will be in the post-Brexit world.

To effect the necessary sea change in attitude and create a body with the powers of its US equivalent, we would need to be able to impose substantial fines on wrongdoers. Such fines could play a role in covering the costs of any new organisation. Clearly, there would be a need for some legislative changes, but measures would also need to be put in place to protect whistleblowers and offer genuine immunity to those who were aware of anti-competitive practice when they came forward.

[The Solicitor General (Robert Buckland)]

I am very interested in the point that my right hon. Friend outlines. What standard of proof would be applied in the proposed new regime?

[Mark Field]

I understand the point about moving away from a criminal more to a civil standard of proof. This is a back-of-the-envelope-type suggestion. I am just putting a few broader proposals forward because, as has been referred to elsewhere, the power of deferred prosecution is very much a positive step in the right direction. As Members know, deferred prosecutions will enable proceedings in a criminal case to be delayed for a given period, subject to certain conditions being met by the company in question. At the end of the set period, if all agreed conditions have been met—often, that includes paying a substantial fine along the lines of the one that Rolls-Royce had to pay—charges can be dismissed and the judgment of conviction can be entered. It is a more pragmatic prosecution-related process.

I could go on and on, but I know that at least one other Member wishes to speak and that we all want to hear from the Front-Bench spokespersons. Let me just say this, if I may: the incentives provided by healthy competition and the deterrent of stiff punishments should have formed the backbone to the new era of banking and business in the aftermath of 2008. The past two Administrations have missed the boat in restoring both the confidence of market professionals and the trust of the British public in our financial institutions. I very much hope that in addition to addressing the important issues raised in the thoughtful contributions made by the right hon. Member for East Ham and my right hon. and learned Friend the Member for Harborough, the Government will use this opportunity to take a fresh, broader look when it comes to the overall workings of the SFO, as well as its funding, and ensure that it has its rightful place within the enforcement sphere in the years to come.

[Albert Owen (in the Chair)]

I am grateful to the right hon. Gentleman. I remind Members that I will call the Front-Bench spokespersons at half-past 10. In calling you, Mr Shannon, I point out that it did not escape my notice that you were six minutes late joining us. That is discourteous to the Member leading the debate and to all other Members present. A less generous Chair would have gone straight to the Front-Bench speeches and ignored you. You are running out of excuses, but I ask you to be brief and finish at half-past.

--- Later in debate ---

[The Solicitor General]

The hon. Gentleman is right to bring me back to balance. From year to year, it is very difficult to predict. There will be times—he cited a year—when the amount of blockbuster funding exceeds the core funding, but there are other years when that is not the case. That underlines more eloquently than I can the essential fluidity of the system.

In replying to the right hon. Member for East Ham, I would deal with the question in this way. It would be troubling if either the Law Officers’ Department—there was once a suggestion that our Department should be the gatekeeper—or the Treasury acted in some way as a second opinion, second-guessing the professional judgments of members of the SFO. That would be wrong and is not what happens when it comes to blockbuster funding. No application for blockbuster funding has ever met with a refusal. That is a very important point to hold on to when it comes to the Government’s understanding of the reputational importance that the fight against economic crime has not just for the Government, but for the United Kingdom generally.

[Mark Field]

rose—

[The Solicitor General]

I give way to my right hon. Friend, who made that point.

[Mark Field]

The Solicitor General made a statement on the instances of refusal by the Treasury. I was going to come on to that. Has there been a refusal on the degree of blockbuster funding? It might not have been about the overall amount, but has there been a sense of haggling between the SFO and the Treasury over the amounts that should be given for particular cases?

[The Solicitor General]

My right hon. Friend invites me down a course that I am perhaps not fully qualified to talk about. There will of course have been discussions about the amounts, but at no time—this is again very important—has funding been a bar to the proper investigation of cases that are brought before the SFO and meet the criterion that the hon. Member for East Renfrewshire and the hon. Member for Strangford (Jim Shannon) set out. Previous Law Officers, including my right hon. and learned Friend the Member for Harborough, and current Law Officers have made it clear that funding issues will never be a bar to the prosecution of serious fraud in this country. That is why the reputation of the United Kingdom, to which organisations such as Transparency International have attested, is as one of the leaders in the field for the prosecution of economic crime.

In response to my earlier invention, my right hon. Friend the Member for Cities of London and Westminster conceded that his interesting ideas, which I very much hope will be fed into the Cabinet Office review of economic crime, must acknowledge the fact that we are dealing with not a regulatory but a prosecutorial authority. The tests, with which most hon. Members are familiar, of reasonable prospect of success and the public interest, as well as remembering the high standard of proof that needs to be reached, are vital when it comes to the criteria for an independent prosecutorial authority.

Right hon. and hon. Members will know that the Ministry of Justice is conducting a call for evidence on corporate responsibility. The Government have an excellent track record in that area, having supported and brought into force the Bribery Act 2010, particularly section 7, which created a failure to prevent bribery offence. A similar offence in the field of tax evasion is in the Criminal Finances Bill and the Government will seriously consider the outcome of the forthcoming consultation when it comes to failing to prevent economic crime.

I think the question of the attitude of the director to blockbuster funding has been adequately covered. I have described the system as inelegant, or imperfect. Although the director works within the system, at no point has he felt under any improper pressure from the Government, or the Treasury, on applications for funding. That is very important, bearing in mind the current director’s record in improving and enhancing the role of the SFO in our public life. In paying warm tribute to David Green, I also commend him for the creation of a chief operating officer post, which I think will go a long way to dealing with some of the human resources points raised by hon. Members.

On diversity, I am glad to say that when it comes to new starters at the SFO, 51% are female. I accept the diversity figures. However, before I sit down to allow the right hon. Member for East Ham to conclude the debate, I would say that it is tempting to seek to create a permanent cadre of staff at the SFO who might be able to build up expertise, but each large case stands very much on its own facts. The context of each case can vary widely. Therefore, the continuing need for flexibility in employing specialist agency staff who might be familiar with a particular scenario will not go away. I make no apology for the fact that flexibility of funding is important in terms of year-to-year demand, and employing and engaging agency staff can be of real benefit when it comes to the prosecution of specialist crime.