In 2018 the UK’s Serious Fraud Office came under new directorship, and professionals across the financial industry watched with bated breath and cautious optimism that the SFO had finally reached a turning point, where it could overcome its most deep-rooted issues.
However, four years later, we are now approaching the publication of the findings from the government-ordered Calvert-Smith probe into the office’s mishandling of Unaoil, which many anticipate will also lay bare the structural issues that continue to plague the SFO.
Indeed, we appear to be approaching something of a ‘where did it all go wrong?’ moment for the agency.
DPAs are not the entire answer
A common criticism of the SFO’s approach to fraud prosecution has centred on its reliance on deferred prosecution agreements (DPAs) and its continued failure to prosecute a number of individuals under the agreements.
The motivation behind the SFO's reliance on DPAs is seemingly financial, rather than driven by results. For example, while last year’s annual report revealed that the SFO has delivered £1.6bn in revenue from only a handful of DPAs, it has not yet secured any prosecutions.
Offering the defence an option of paying reparations for criminal behaviour to avoid the collateral damage of multiple convictions has become a key means of raising revenue for the agency.
While the financial penalties are often significant, this outcome should not be the go-to target for fraud prosecution. It creates a double jeopardy for financial professionals and blurs the line between corporate and individual responsibility. A prosecution body that is reluctant, or outright unable, to secure a prosecution cannot be right.
A change in tactics is clearly needed. Ultimately, for financial professionals, a fraud prosecution body that more readily pursues fraud and avoids the path of least resistance would be beneficial. It would reduce the fallout of rising fraud cases and allow for the correct individuals to be targeted and prosecuted.
Digital age disclosure
Within the justice system itself fraud prosecution is also suffering from a reputational downturn, as fraud cases are often seen as unattractively long and slow. This is, in large part, due to the volume of disclosure that is often attached to high-profile cases.
Legislation governing disclosure regimes predates the digital age, and so it is not compatible with the volumes of material that digitalisation has facilitated.
The more financially supported defence teams are simply able to overwhelm the prosecution with requests for disclosure and criticising the methodology used for sifting the material.
A recent case that our team worked on had more than 50 terabytes of material, which we calculated would take more than 200 years for a single person to read through.
This problem with disclosure pertains to both civil and criminal litigation, so advisers that are involved in any kind of litigation can be affected.
Artificial intelligence could be considered as a possible solution, but concerns linger over whether technology is sophisticated enough to sift through huge amounts of disclosure to the same standards as a human.
For now, AI alone does not appear to be a practically viable solution. Perhaps a mix of AI-produced work coupled with close review by a human eye could help address the issue, but how this protocol might work would need careful consideration.