Replace Serious Fraud Office in new focus on prevention, says new IEA paper
23 August 2024
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Housing and Planning
IEA research referenced in The Scotsman
22 August 2024
In the Media
Markets and Morality
https://iea.org.uk/wp-content/uploads/2024/08/SFO-Paper_V3_Print.pdf
After a series of institutional failures, a new Serious Economic Crimes Office should be created to prosecute and proactively tackle economic crime.
The Serious Fraud Office (SFO) should be replaced with a new body dedicated to combating economic crime with greater emphasis on prevention, according to a new paper published by the free market think tank, the Institute of Economic Affairs.
The SFO has been plagued by a series of high-profile failures, including ethical misconduct and incompetence. In 2021, a high-profile bribery conviction of a former Unaoil executive was overturned due to the SFO’s failure to disclose key material relating to its director’s ‘inappropriate’ communications with a Unaoil advisor during the prosecution.
Leading economic crime academics Professor Mark Button, Dr Branislav Hock, and Dr David Shepherd are now calling for the SFO to be abolished and the establishment of a Serious Economic Crimes Office (SECO).
The new body would keep powers to prosecute serious fraud, but would also have new responsibilities to deter fraud before it occurs. The office would be expected to develop good practice advice on prevention in closer collaboration with the private sector.
According to the report authors, the criminal justice system is incapable of addressing the intricate, technical and complex nature of cases involving serious fraud. This is leading to costly delays and, often, failed prosecutions.
The SECO would instead be encouraged to embrace alternative justice mechanisms, including Deferred Prosecution Agreements and using larger fines. There would also be expanded powers to set standards and impose regulatory sanctions. This would include ‘Ethics orders’, which would require corporations to implement ethics and compliance programmes.
The authors also envisage the creation of a register of serious economic crime offenders, modelled on HMRC’s list of individual and company tax defaulters. A spot on the register could result in prohibition from being a company director or selling financial products.
The report suggests enhancing collaboration with private investigators specialising in economic crime. This could involve staff exchanges or outsourcing partial or full investigations to experienced firms such as Kroll, KPMG, or EY.
The paper says that the SFO’s focus on high-profile prosecutions has diverted resources away from other important areas, such as crime prevention and the support of small and medium-sized enterprises that are increasingly susceptible to fraud.
The proposed SECO would address these gaps by prioritising a more balanced approach, combining enforcement with preventative measures.
Professor Mark Button, Co-Founder and Co-Director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth, said:
“Serious economic crime is at record level and set to continue to rise. The existing structures and approaches are failing to have a significant impact and this report sets out a wide range of innovative reforms and actions to cope with this increasing challenge.”
Dr Branislav Hock, Co-Editor in Chief of the Journal of Economic Criminology, said:
“Segregated serious economic crime policing structure in the UK requires new enforcement authority that operates above the surface of institutional and procedural complexities.”
Dr David Shepherd, economic crime researcher and Senior Lecturer at the University of Portsmouth, said:
“The SFO is hamstrung by its focus on criminal justice and courts that are not fit-for-purpose. Breaking these constraints with a revitalised agency, a new identity and a broader range of regulatory-style powers would better serve the public good.”
ENDS
Notes to Editors
Contact: media@iea.org.uk / 07763 365520
Read a full copy of Replacing the Serious Fraud Office: The Case for a New Approach to Serious Economic Crime.
About the Authors
Professor Mark Button is Co-Founder and Co-Director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth. Mark has written extensively on fraud, cyber-fraud and private policing issues. He has conducted research on a variety of economic crime- related issues for prestigious organisations such as the Home Office, the National Fraud Authority, the Department for International Development on fraud measurement and ESRC to name some. Mark completed his undergraduate studies at the University of Exeter, his Master’s at the University of Warwick, and his Doctorate at the London School of Economics.
Dr Branislav Hock is a passionate interdisciplinary researcher who thrives in both an academic environment and practice, contributing to the knowledge that exists in the area of economic crime and compliance. With a rapidly developing international reputation for excellence in policy-oriented research, Dr Hock has played advisory roles both nationally (Home Office, Synectic Solutions, Crowe) and internationally (EU Commission, European Court of Auditors, OECD). Branislav has established an annual Winter Economic Crime Symposium and is the Co-Editor in Chief of the Journal of Economic Criminology.
Dr David Shepherd teaches and undertakes research within the field of economic crime – fraud, bribery, intellectual property crime, money laundering, industrial espionage and antitrust. His work covers offenders, victims, online behaviour, organisations, prevention and enforcement. David has published widely on these research topics in academic articles, books and technical reports. He has worked on research programmes funded by the CPNI, EPSRC, FCDO, FSA, Home Office, IPO, Nuffield and WIPO as well as NGOs and private sector firms.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
- Fraud has become the most common crime in the United Kingdom – yet, the number of fraud convictions has plummeted from 12,378 in 2012 to just 3,455 in 2022.
- In 2022-23, the Serious Fraud Office (SFO) secured just four prosecutions despite spending £76 million and employing 450 staff.
- The SFO has been more successful in securing non-prosecutorial sanctions.
- The SFO should be replaced by a Serious Economic Crimes Office (SECO), which would take a more active role in the prevention of economic crime.
The Serious Fraud Office (SFO) should be replaced with a new body dedicated to combating economic crime with greater emphasis on prevention, according to a new paper published by the free market think tank, the Institute of Economic Affairs.
The SFO has been plagued by a series of high-profile failures, including ethical misconduct and incompetence. In 2021, a high-profile bribery conviction of a former Unaoil executive was overturned due to the SFO’s failure to disclose key material relating to its director’s ‘inappropriate’ communications with a Unaoil advisor during the prosecution.
Leading economic crime academics Professor Mark Button, Dr Branislav Hock, and Dr David Shepherd are now calling for the SFO to be abolished and the establishment of a Serious Economic Crimes Office (SECO).
The new body would keep powers to prosecute serious fraud, but would also have new responsibilities to deter fraud before it occurs. The office would be expected to develop good practice advice on prevention in closer collaboration with the private sector.
According to the report authors, the criminal justice system is incapable of addressing the intricate, technical and complex nature of cases involving serious fraud. This is leading to costly delays and, often, failed prosecutions.
The SECO would instead be encouraged to embrace alternative justice mechanisms, including Deferred Prosecution Agreements and using larger fines. There would also be expanded powers to set standards and impose regulatory sanctions. This would include ‘Ethics orders’, which would require corporations to implement ethics and compliance programmes.
The authors also envisage the creation of a register of serious economic crime offenders, modelled on HMRC’s list of individual and company tax defaulters. A spot on the register could result in prohibition from being a company director or selling financial products.
The report suggests enhancing collaboration with private investigators specialising in economic crime. This could involve staff exchanges or outsourcing partial or full investigations to experienced firms such as Kroll, KPMG, or EY.
The paper says that the SFO’s focus on high-profile prosecutions has diverted resources away from other important areas, such as crime prevention and the support of small and medium-sized enterprises that are increasingly susceptible to fraud.
The proposed SECO would address these gaps by prioritising a more balanced approach, combining enforcement with preventative measures.
Professor Mark Button, Co-Founder and Co-Director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth, said:
“Serious economic crime is at record level and set to continue to rise. The existing structures and approaches are failing to have a significant impact and this report sets out a wide range of innovative reforms and actions to cope with this increasing challenge.”
Dr Branislav Hock, Co-Editor in Chief of the Journal of Economic Criminology, said:
“Segregated serious economic crime policing structure in the UK requires new enforcement authority that operates above the surface of institutional and procedural complexities.”
Dr David Shepherd, economic crime researcher and Senior Lecturer at the University of Portsmouth, said:
“The SFO is hamstrung by its focus on criminal justice and courts that are not fit-for-purpose. Breaking these constraints with a revitalised agency, a new identity and a broader range of regulatory-style powers would better serve the public good.”
ENDS
Notes to Editors
Contact: media@iea.org.uk / 07763 365520
Read a full copy of Replacing the Serious Fraud Office: The Case for a New Approach to Serious Economic Crime.
- The report builds on previous IEA research that highlighted a series of high-profile SFO failures, including forging of documents, systematic prosecutorial incompetence, and inefficiencies.
- This week, the University of Portsmouth published new research by Prof Button and Dr Shepherd suggesting that a quarter of UK adults commit at least one economic crime a year.
About the Authors
Professor Mark Button is Co-Founder and Co-Director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth. Mark has written extensively on fraud, cyber-fraud and private policing issues. He has conducted research on a variety of economic crime- related issues for prestigious organisations such as the Home Office, the National Fraud Authority, the Department for International Development on fraud measurement and ESRC to name some. Mark completed his undergraduate studies at the University of Exeter, his Master’s at the University of Warwick, and his Doctorate at the London School of Economics.
Dr Branislav Hock is a passionate interdisciplinary researcher who thrives in both an academic environment and practice, contributing to the knowledge that exists in the area of economic crime and compliance. With a rapidly developing international reputation for excellence in policy-oriented research, Dr Hock has played advisory roles both nationally (Home Office, Synectic Solutions, Crowe) and internationally (EU Commission, European Court of Auditors, OECD). Branislav has established an annual Winter Economic Crime Symposium and is the Co-Editor in Chief of the Journal of Economic Criminology.
Dr David Shepherd teaches and undertakes research within the field of economic crime – fraud, bribery, intellectual property crime, money laundering, industrial espionage and antitrust. His work covers offenders, victims, online behaviour, organisations, prevention and enforcement. David has published widely on these research topics in academic articles, books and technical reports. He has worked on research programmes funded by the CPNI, EPSRC, FCDO, FSA, Home Office, IPO, Nuffield and WIPO as well as NGOs and private sector firms.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
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