Serious Fraud Office

Robert Buckland Excerpts

Tuesday 18th April 2017 Westminster Hall

[The Solicitor General (Robert Buckland)]

It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for East Renfrewshire (Kirsten Oswald) on securing this debate. I noted the remarks she made in a debate on an associated issue relating to the SFO in February. I pay tribute to her and to colleagues on the all-party parliamentary group for raising this undoubtedly very serious issue, which has caused real loss for those who invested in the Connaught scheme.

The hon. Lady outlined her concerns clearly, and said that she has already raised them with the FCA. She will appreciate that the Financial Conduct Authority is a separate, independent body, and I am not empowered to comment on its investigation, which is still ongoing and is extremely complex. The fact that many investors are still out of pocket is fully appreciated, and it is understood that certainty is needed about whether they can expect to receive compensation. The FCA will update them as soon as it can, and it is encouraging investors to consider what they can do in the meantime to protect their position.

The hon. Lady raised wider issues about, first, the status and funding of the SFO, and, secondly, its relationship with other agencies that help to police economic crime, misconduct and the sort of activity that, frankly, damages the reputation of financial services not only in the City of London but in the whole of the United Kingdom. I assure her that the Government take this matter extremely seriously, because it pertains not just to economic reputation but to our national security. That is why it was welcome that the Home Secretary announced last year that wider work will be carried out through the Cabinet Office to examine our response to economic crime more broadly. As part of that examination, we will look at the effectiveness of our organisational framework, and the capabilities, resources and powers available to the organisations that tackle economic crime, so it embraces fundamental questions of the type that the hon. Lady asked.

The SFO does vital work in tackling the most serious instances of fraud, bribery and corruption. It is an important part of the UK’s enforcement regime. It is right that questions continue to be asked about the adequacy of the way in which we deal with economic crime and how we can improve it. The hon. Lady was right to ask questions about LIBOR and the sort of activity that took place at the time of the economic crash in 2008. Although it is welcome that a number of people who were involved in manipulating the LIBOR regime have been prosecuted and, indeed, convicted, I agree that more needs to be done. It is acutely incumbent on the Government and the enforcement agencies to ask those questions at all times.

The hon. Lady rightly raised the issue of funding, about which we had a debate in this House not long ago. I assure her that the director of the Serious Fraud Office, David Green, who has been doing excellent work since his appointment in 2012, is satisfied that the funding his office receives is sufficient to carry out investigations and prosecutions. Let us not forget that the blockbuster funding allowed by the Treasury gives the SFO the flexibility and fleetness of foot it needs to mount special and unexpected investigations—it is, of course, very much a demand-led office.

I am glad to report that, in recent months, the SFO has yielded hundreds of millions of pounds for the Treasury in the form of new deferred prosecution agreements—most notably with Rolls-Royce and most recently with Tesco, to name but two. I am impressed by and pleased with the progress of the SFO since the appointment of David Green and with how it has focused on the criteria that it has to apply under the governing statute that set it up some 30 years ago.

Briefly, to remind ourselves, the SFO is a relatively small, specialised department that is allowed by law to investigate and, where appropriate, to prosecute cases of serious or complex fraud, which includes cases of domestic or overseas bribery and corruption. Such fraud calls for a multidisciplinary approach and recourse to the legislative powers available to the SFO.

The criteria for case acceptance are strict. The SFO will consider all the circumstances of a case, which include: cases that undermine the United Kingdom’s commercial or financial reputation in general, and the City of London’s in particular; cases in which the actual or potential loss involved is high; cases in which the actual or potential harm is significant; cases with a very significant public interest element; and, finally, new species of fraud. All frauds are serious, causing real detriment to those who fall victim to them, but the criteria rightly set a high threshold that has to be applied by the SFO.

On the way in which the SFO works with other agencies, I reassure the hon. Lady that it has constructive strategic and working relationships with all its law enforcement and regulatory partners. It engages with other agencies whenever relevant throughout the life of a case, right from the development of that case through to its investigation, prosecution and recovery of the proceeds of crime.

Those relationships are supported continually through attendance at various cross-Government working groups and regular bilateral liaison meetings, whether at the senior or operational level, and they are underpinned by memorandums of understanding or operational protocols where necessary. Such structures have evolved over time and in particular since the establishment in 2013 of the National Crime Agency’s economic crime command. The NCA plays a co-ordinating role in a structure of governance that applies across all areas of economic crime, and the SFO plays its part in all the relevant groups to form that collective response.

There are agreed roles and responsibilities, and the SFO investigates a particular species of serious fraud, bribery and corruption cases. At all stages of the assessment, however, reports of economic crime received by the SFO are under review to establish whether the matter falls within its jurisdiction and remit. If the matter is deemed not to reach that high threshold, it is closed and, if appropriate, consideration is given as to whether another law enforcement or regulatory partner may be better placed to develop the information.

Such decisions are made with a clear understanding of the remits of the other law enforcement agencies. The decisions are underpinned by frequent meetings between members of the SFO’s intelligence unit and their counterparts in the NCA, the Financial Conduct Authority and the other law enforcement and regulatory agencies. They meet in order to avoid the inevitable duplication or the conflict that might occur between reports. It will therefore be clear that only one agency is in the lead on any given issue.

We have to appreciate that many referrers—members of the public or others—will approach several agencies with the same matter, so each other’s expertise and capabilities are needed to make real progress with an investigation and to avoid, for want of a better phrase, reinvention of the wheel. That is essential if we are to make proper progress.

In particular, regular meetings are held between members of the foreign bribery clearing house—“foreign” means the involvement of other jurisdictions, which of course includes Scotland—to place potential investigations with the relevant authority. An SFO secondee therefore works with the NCA bribery and corruption intelligence unit, which helps with that process by providing direct access to the assets of the NCA and SFO.

Operation of the clearing house is governed by a memorandum of understanding that was agreed in 2014 and is published on the SFO website. Parties to the MOU are the City of London police, Scotland’s Crown Office and Procurator Fiscal Service, the Crown Prosecution Service of England and Wales, the Financial Conduct Authority, the Ministry of Defence police, the National Crime Agency and the Serious Fraud Office. We need not end there, however, because the MOU is being looked at again and refreshed to ensure that it is as relevant as possible, bearing in mind current challenges.

Another MOU, between the SFO and the Scottish prosecuting authorities, sets out further rules for co-ordination and co-operation between the two bodies. The SFO does not have prosecutorial authority north of the border, but it has investigatory powers over frauds that could be prosecuted in England, Wales and Northern Ireland, so the co-operation with the Scottish authorities is vital.

Those MOUs set out the remit of each agency involved in tackling bribery, in accordance with the agreed roles and responsibilities grid that exists for bribery and corruption cases, and provide a framework for how the agencies will co-ordinate foreign bribery work. That ensures that all credible allegations of foreign bribery with a connection to the UK are properly assessed.

The SFO also takes part in other strategic delivery and working groups, including Project Bloom, which relates to pension fraud and is chaired by the Pensions Regulator, and the Panama papers taskforce announced by the then Prime Minister in April last year. The SFO is a founding member of the joint financial analysis centre, which is an important part of the Panama papers taskforce and was launched in July last year with the NCA, Her Majesty’s Revenue and Customs and the Financial Conduct Authority.

The SFO has invested a significant amount of its intelligence resources into that new joint analytical centre, which is complemented by a dedicated group of officers based within the SFO who manage and develop the resultant intelligence and contribute to the analytical process and the product of it generated by the JFAC.

The SFO also actively participates in a number of Panama papers forums, including the JFAC co-ordination and response group, which provides a platform to share efficiently information and intelligence, agree primacy and co-ordinate joint working. The SFO’s commitment to the principle of joint working has directly benefited numerous SFO investigations as well as an operation with HMRC, supported by the NCA, in relation to serious and complex fraud allegations. There is a referral mechanism; the SFO refers matters to the JFAC as well as being a part of that centre itself.

The SFO does not have its own powers under the Police and Criminal Evidence Act 1984. It carries out searches and arrests with the support of the NCA and police forces and it works with them collaboratively, where appropriate, throughout investigations. That symbiosis is very much a part of the way in which the SFO operates with other organisations.

I take on board what the hon. Lady said about the need further to refine and improve the process. I can assure her that with each year that passes, that is precisely what happens. If lessons can be learned from previous failures or omissions, they are learned and they are used to refine existing memorandums of understanding and existing partnership working to ensure as seamless a response as possible to economic crime. There is much to be done. Much has been achieved, but I accept the spirit of the hon. Lady’s motion: there is more to do.

Question put and agreed to.