The SFO should be there to pursue major cases of fraud and economic crime, not make money

Lisa Osofsky, the director of the UK’s Serious Fraud Office, is having a tough time. The UK has never been as serious as the US about tackling white-collar crime and the SFO has struggled to make any sort of impact, writes Chris Blackhurst

In her virtual Cambridge address, the former FBI lawyer again refused to be cowed (Reuters)

At this time of year I would normally have just attended the Cambridge International Symposium on Economic Crime.

It’s been a habit, a treat of mine, ever since I first started going as a journalist interested in exposing business wrongdoing back in the late 1980s. Then, the conference amounted to a gathering of 50 or so like-minded souls – investigators, legal enforcers, police, lawyers, academics – brought together by Barry Rider, a senior law don, at his college, Jesus. It’s grown hugely over the decades. This, the 38th such week, would have seen around 1,500 delegates from around the world assemble to hear talks on developments and trends in fraud investigation and enforcement, share experiences, and to network.

Alas, in 2020, the pandemic intervened, so like much else the “Cambridge fraud conference” as it is known, was cancelled and the programme rolled forward to next year. However, some of the key speakers have made their presentations available online, including Lisa Osofsky, director of the UK’s Serious Fraud Office.  

She’s having a tough time is Osofsky, a New Yorker and former FBI lawyer. She’s been censured by a judge for exchanging text messages with an agent for suspects in an investigation into oil and gas consultancy, Unaoil. Her conduct and that of the SFO is the subject of a review. Meanwhile, she faces criticism for the lack of major new cases and convictions from her two-year tenure.  

This makes me uncomfortable. I’m all for companies that have done wrong and have effectively confessed to doing so being made to cough up. But the main priority is to make them suffer

Osofsky has hit back, pointing in the Financial Times to investigations under way into Glencore, Patisserie Valerie and London Capital & Finance, and the successful conclusion of an operation run jointly with France and the US against Airbus for using bribes. Airbus has agreed to pay €3.6bn (£3.3bn) to the authorities under a “deferred prosecution agreement” or DPA.

I’ve got much sympathy for Osofsky. The fact is that this is a country that has never attached great importance to busting white-collar crime, not compared with say, the US. A comparison between prosecution rates in London and New York, similar centres, makes that clear. The Americans have greater legal powers, they devote more money to investigations, their attorneys and detectives enjoy wide political and public support, and their judges hand down far stiffer sentences.

Here, since its foundation 33 years ago, the SFO has struggled to make any sort of impact. It’s been starved of resources and profile (that troubled existence has not been assisted either by frequent poor internal management).

All the time, the bureau is competing against a rich, sophisticated City which is able to cream off the best talent and, where the SFO is concerned, can easily persuade the gamekeepers there to turn poacher in return for handsome pay increases. Our convoluted, slow legal system does not help – too often, the agency is bogged down by delay and all manner of ruses devised by slick defence lawyers.

The Serious Fraud Office is just not taken seriously enough, pardon the pun. Theresa May, when home secretary, wanted to absorb it into the National Crime Agency, and that threat was repeated in the Tory 2017 election manifesto.

So Osofsky has a tough task. In her virtual Cambridge address, she again refused to be cowed. The director reiterated her belief in the effectiveness of DPAs, under which a company agrees to make a financial settlement and reform its ways in order to avoid facing trial. Much favoured in the US, they’re relatively new here and have been championed by Osofsky.

The SFO head, though, went further. The DPAs, she said, were enabling her office to make a “significant return on investment”. Just under €1bn of the Airbus payment had gone to HM Treasury, and when that was added together with sums from DPAs involving Rolls-Royce and others the total contribution to the national coffers was “over £1.5bn”.

This makes me uncomfortable. I’m all for companies that have done wrong and have effectively confessed to doing so being made to cough up. But the main priority is to make them suffer, to feel significant pain, not to regard the DPA as another device for government revenue-raising. The agreement ought to be akin to a legal baseball bat: pay up or else, and in that respect it should be framed so as to genuinely hurt.

It should also be used as a last resort, to avoid a dragged-out legal case. If it’s seen as a nice earner, the tendency could be to seize it first, to raise some readies rather than to inflict punishment. The case in point here is that involving HSBC. The giant bank agreed to a DPA with the Americans in 2012 after Mexican drug barons were able to launder billions of dollars through its branches. But, while on its face, the amount HSBC paid, $1.9bn, was eye-watering, in reality it amounted to just five weeks’ profits.

There was a sense from listening to Osofsky of her having to justify the SFO to her superiors in terms of its ability to bring in cash. If that’s the case, then it’s unfortunate and mistaken. The SFO should be there to pursue major cases of fraud and economic crime. Period. Whether it can net the government many millions, possibly billions, of pounds is neither here nor there. It should be an institution with a prestige purpose, not another box marked “profit” on a Treasury mandarin’s checklist. It’s sad that Osofsky feels obliged to speak so, but perhaps says more about her bosses and our attitude to attacking fraud than it does about her.