Select Committee on International Development Minutes of Evidence

Memorandum submitted by Mr George Staple, CB QC, Clifford Chance

  The Committee has registered its concern about the incoherent appearance of the efforts of the many government departments involved in the fight against economic crime. There is a worry that the involvement of so many different departments results in a failure properly to focus on the whole area with which the government is trying to deal. That is not only in relation to corruption but also fraud and money laundering.

  The Committee has specifically mentioned the Home Office, HM Treasury, the Department of Trade and Industry and the Department for International Development together with other regulators and non-governmental bodies, such as the Financial Services Authority ("FSA") and the British Bankers Association. Save for the FSA which, once the Financial Services and Markets Act comes fully into force later this year, has investigation, supervisory and prosecution powers, the Departments mentioned are responsible for different aspects of policy in the area of economic crime. Other departments with a policy interest are the Foreign Office, the Lord Chancellor's Department, the Cabinet Office and the Attorney General. However, none appears to be given responsibility to take a clear lead in ensuring that our laws and the international treaties to which we are a party are fully up to date and effective and that the resources provided are adequate and are being directed in the most productive way.

  It is no better when one moves from policy to look at responsibility for investigation and prosecution. Some bodies have responsibility only for investigation, namely the police and the National Audit Office with the National Criminal Intelligence Service having an intelligence role. Others are responsible for both investigation and prosecution, namely the Serious Fraud Office, the Department of Trade and Industry, HM Customs and Excise, the Inland Revenue, the Department of Social Security and the FSA, with the Crown Prosecution Service being responsible for prosecution alone.

  There may well be good reason for different departments with a specialist interest to retain their area of responsibility. For instance, it is likely that the Inland Revenue will carry out a more effective investigation into a tax fraud than will a local police fraud squad. Although expertise in the investigation and prosecution of money laundering offences may in time develop within the FSA, there are at present no specialist investigators or prosecutors in the fields of corruption and money laundering apart from within the Serious Fraud Office whose remit does not specifically cover such offences.

  The Serious Fraud Office was established on the recommendation of the Fraud Trials Committee under the chairmanship of the late Lord Roskill, which reported in 1986. Recognising the fragmentation of the system for dealing with fraud cases the Committee included as one of its recommendations the setting up of a co-ordinating body which it called a Fraud Commission. Paragraphs 2.49 and 2.50 of the Committee's Report refer to this as follows:

    "2.49  In view of the fragmentation of the present system, it is essential, in our opinion, that there should come into being an independent monitoring body which has the responsibility for studying and advising from year to year on the efficiency (which includes issues of cost effectiveness) with which fraud cases are conducted. Its main objectives would be to watch the system in operation for the detection and pursuit of fraud cases until the final verdict, including the time which elapses at the various stages including the time between the discovery of fraud and its reporting to the prosecuting authority; to inquire into major variations or breakdowns in the system; above all to assess the possibility of improvements by changes of policy and procedure or the introduction of more efficient techniques. Apart from other advantages we believe that this would provide a degree of co-ordination of the numerous interests involved which is at present lacking. An additional function which the independent body should, we think, perform would be to observe the introduction of such of the recommendations in this report as prove acceptable to the Government and to assess their efficacy. We think that an annual report should be published.

    2.50  The choice of the independent body would be for consideration by the Government in the light of this report. We are reluctant to suggest the creation of an entirely new body. We would prefer to see the work we have in mind for it being carried out by a body within the existing machinery of Government, although an independent element, such as an independent Chairman, would be desirable. Such a body might suitably be called the "Fraud Commission.""

  The Committee concludes its remarks on this subject at the end of paragraph 2.51 as follows:

    "We think that one of the tasks of the Fraud Commission should be to work in close touch with all bodies who now or in the future work on the same lines, including those bodies concerned with self-regulation."

  Although the Committee's vision of a body working within the existing machinery of Government, with an independent element, was intended to provide a co-ordinating function between departments with responsibility for fraud cases, its views would apply equally to the offences of corruption and money laundering, which are inextricably linked with offences of fraud. Such a body might suitably be called an "Economic Crime Commission".

Extension of the remit of the Serious Fraud Office

  The existing remit of the Serious Fraud Office is contained in the Criminal Justice Act 1987.

  Section 1(3) provides:

    "The Director may investigate any suspected offence which appears to him on reasonable grounds to involve serious or complex fraud."

and Section 1(5) provides in part:

    "The Director may (a) institute and have the conduct of any criminal proceedings which appear to him to relate to such fraud."

  So when on occasions the SFO has investigated and prosecuted offences of corruption and money laundering they have had to involve fraud. "Fraud" is a term not defined in English law. Most offences dealt with by the Office, however, arise under (i) the Theft Acts, such as theft, obtaining by deception and false accounting, (ii) the Companies Acts, such as fraudulent trading, and (iii) the common law such as conspiracy to defraud.

  The criteria for acceptance of cases are published in the SFO's Annual Reports and in the 1999-2000 Report were stated as follows:

    "The key criterion for the SFO to take on a case should be that the suspected fraud was such that the direction of the investigation should be in the hands of those who would be responsible for the prosecution.

    The factors that would need to be taken into account include:

      1.  The sum at risk is estimated to be at least £1 million (this is simply an objective and recognisable signpost of seriousness and likely public concern rather than the main indicator of suitability).

      2.  The case is likely to give rise to national publicity and widespread public concern. These include those involving government departments, public bodies, the governments of other countries and commercial cases of public interest.

      3.  The investigation requires a highly specialist knowledge of, for example, financial markets and their practices.

      4.  The case has a significant international dimension.

      5.  There is a need for legal, accountancy and investigative skills to be brought together as a combined operation.

      6.  The suspected fraud appears to be complex and one in which the use of Section 2 powers might be appropriate."

  The most serious and complex cases of corruption and money laundering would also fall within these criteria. The Office has all the necessary skills, and is given the necessary powers to investigate such cases, for example, that contained in the Section 2(2) of the Criminal Justice Act 1987, as follows:

  "The Director may by notice in writing require the person whose affairs are to be investigated . . . or any other person whom he has reason to believe has relevant information to answer questions or otherwise furnish information with respect to any matter relevant to the investigation. . ."

  Other provisions under Section 2 include the power to require the production of documents, and the power to apply to a Justice of the Peace for a warrant authorising a constable to search for and seize documents. It is an offence under Section 2 to fail without reasonable excuse to comply with any requirement imposed under Section 2 by the Director.

  Criminal activities in the financial field may involve fraud, corruption or money laundering or a combination of one or more of these. It does not seem logical that the SFO should not be able to use its resources and powers to investigate and prosecute corruption and money laundering simply because in some cases they may not involve fraud. The SFO's remit should therefore be expanded specifically to cover all three offences committed either in combination or isolation. Its resources should also be increased to enable the Director to take on more cases of corruption and money laundering likely to result from the extended remit and benefiting from the Office's powers, expertise and methods of working.

Mr George Staple CB QC, Clifford Chance LLP

January 2001

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