| Serious Fraud Office | |
|---|---|
| Non-ministerial government department overview | |
| Formed | 1987 |
| Jurisdiction | England and Wales and Northern Ireland |
| Headquarters | Elm House, 10-16 Elm Street, London, WC1X 0BJ |
| Employees | Around 300 permanent staff |
| Annual budget | £36.35m (2011-12) |
| Minister responsible | Dominic Grieve QC MP, Attorney General |
| Non-ministerial government department executives | Richard Alderman, Director Phillippa Williamson, Chief Executive |
| Website | |
| www.sfo.gov.uk | |
| Footnotes | |
| General nature: Law Enforcement Specialism: Serious or complex fraud, bribery, corruption and proceeds of crime | |
The Serious Fraud Office (SFO) is an independent UK Government department that investigates and prosecutes serious or complex fraud and corruption. Accountable to the Attorney General, it has jurisdiction over England, Wales and Northern Ireland and assists a number of overseas investigations by obtaining information from UK sources Section 2 of the Criminal Justice Act 1987 grants the SFO special compulsory powers to require any person (or business/bank) to provide any relevant documents (including confidential ones) and answer any relevant questions including ones about confidential matters.
The SFO is also the principal enforcer of the Bribery Act 2010, which has been designed to encourage good corporate governance and enhance the reputation of the City of London and the UK as a safe place to do business.
The SFO’s director is Richard Alderman and its Chief Executive is Phillippa Williamson.
Contents |
During the 1970s and early 1980s a series of financial scandals in the City of London destroyed the public's trust in the way serious or complex frauds were handled. In response to this the Government established the Fraud Trials Committee in 1983. This independent committee, under the chairmanship of Lord Roskill, considered how changes to the law and criminal proceedings could lead to more effective ways of fighting fraud. The committee report, commonly known as 'the Roskill Report'[1] was published in 1986. Its main recommendation was to set up a new, unified organisation responsible for detecting, investigating and prosecuting serious fraud cases.
As a result, the Serious Fraud Office (SFO) and its unique powers were created by the Criminal Justice Act 1987. It opened for business in April 1988.[2] The SFO also enforces the new UK Bribery Act 2010.
Guinness Plc - in 1986. there were rumours that the Guinness takeover of the Distillers Company was tainted by an unlawful share support operation which involved Guinness offering secret indemnities (from its own funds) against losses to people ‘supporting’ the bid which resulted in a dramatic rise in the price of Guinness shares.
Having examined the bid, the SFO opened an investigation which led to the conviction in 1990 of the then chief executive of Guinness and three other defendants.[3]
BAE- in 1999 British Aerospace Defence Systems Ltd agreed a contract with the Government of Tanzania for the supply of a radar defence system. A local businessman in Tanzania was recruited to advise BAE on its negotiations with the Government on the radar contract.
Between January 2000 and December 2005 around $12.4 million was paid to the local businessman’s two companies. BAE has accepted that there was a high probability that part of this sum would be used to favour it in the contract negotiations with the Tanzanian Government.
The payments were not subject to proper and adequate scrutiny or review and BAE Systems Plc was subsequently fined £500,000 after admitting that it had failed to keep adequate accounting records of the defence contract with the Government of Tanzania. This outcome followed a settlement by BAE, as part of a global agreement reached in 2010 with the Serious Fraud Office and the US Department of Justice, concerning contracts in a number of countries. The settlement with the SFO relates to the Tanzanian contract. The terms of the settlement include an agreement by BAE to pay an ex-gratia sum (£30 million les any fine imposed by the Crown Court) for the benefit of the people of Tanzania.
BAE was also ordered to pay £225,000 costs to the SFO. [4]
The SFO is a specialist organisation that investigates only the most serious types of economic crime. As a result a potential case must meet certain criteria before it is taken on. These criteria include whether:[5]
Fraud is a type of criminal activity. It is defined as 'abuse of position, or false representation, or prejudicing someone's rights for personal gain'.
Boiler room fraud (share scams)
A boiler room is an operation, usually run from abroad, that sells shares to investors in companies which are usually fakes or are not successfully trading
Scammers typically cold-call people and use hard-sell tactics to sell shares in UK or overseas based companies that prove to be worthless. They profit either by just taking investors' money without providing shares or selling the shares to them at highly inflated prices.[6]
Vintage Wines of St Albans is an example of a boiler room fraud. The convicted defendants received custodial sentences of up to four and half years and were disqualified from being company directors for periods up to 15 years. One was also served with a serious crime prevention order preventing him from conducting any investment and financial management business for four years after his release from prison. [7]
Ponzi or pyramid schemes [8]
A 'Ponzi' or pyramid scheme typically involves an investment offer which promises to provide an abnormally higher rate of return – for example, a 30 per cent return on and investment might be claimed when a more realistic return would be five to ten per cent.
In the SFO’s KF Concept case a fraudster was jailed for10 years for running an unauthorised investment business and stealing investors’ funds through his £34 million KF Concept Scheme. The loss to investors amounted to over £17 million.[9]
Asset stripping - asset stripping is taking company funds or assets of value while leaving behind the debts. Company directors transfer only the assets of one company to another and not the liabilities. The result is a dormant company with large liabilities that cannot be met and it has to be put into liquidation.[10]
Fraudulent trading - fraudulent trading is where a company carries on a business with the intention of defrauding creditors or for any fraudulent purposes. This applies whether the company is trading, has ceased trading or is in the process of being wound up.[11]
And example case is Engineering with Excellent (EWE), later known as the InterGB group, the collective name for a number of companies that between 1996 and 2000 that extracted large amounts of money from three financial institutions by submitting over a thousand false invoices totaling more than £85 million. The fraud enabled the defendants to enjoy a successful business lifestyle, including corporate entertainment, good salaries and expensive company cars. The chairman of the group was jailed for seven years, while three associates each received two-year jail sentences.[12]
Share ramping – also known as 'pump and dump' or 'book ramping', is where criminals influence the share price of a company and then take advantage of it. It is commonly perpetrated by bringing a company to the market with false expectations of its profitability or alternatively by buying shares in a company when the price is low and then starting a rumour that the company is being taken over. When the share price rises, the shares are sold at a profit.[13]
Publishing false information – publishing false information is a type of fraud committed when a criminal creates, destroys, conceals or falsifies an account, record or report which deliberately misleads people about the company's financial position. This is usually done to mislead investors and creditors and to keep a failing company trading.[14]
Corruption is where the integrity of a person, Government, or company is manipulated and compromised for personal gain.
There are two main types of corruption:
Political corruption – is the dysfunction of a political system or institution in which government officials, political officials or employees look for illegitimate personal gain through actions such as bribery, extortion, cronyism, patronage and embezzlement
Corporate corruption – is where, for example, bribes are offered to agencies/ institutions/individuals in order to win a contract.
Innospec Limited, manufacturers of a fuel additive, pleaded guilty to bribing employees of an Indonesian state-owned refinery and other Government officials in Indonesia. In a settlement co-ordinated with action taken in the United States, the company was fined $12.7 million. It also agreed to pay the costs of an independent body to monitor its conduct for three years.[15]
As one of the Law Officers’ Departments, the SFO reports to the Attorney General of the UK.
The SFO employs around 300 people. The cost of running the SFO in the financial year 2010-11 was 64p for each member of the British public.
The SFO is unique in that its role is to both investigate and prosecute. Its case teams are therefore made up of investigators, lawyers, law clerks and forensic accountants.[16]
Over 80 per cent of staff are specialist caseworkers. When deciding what action to take, lawyers in the SFO must bear in mind the Prosecutors Code.[17]
The SFO has a dedicated International Assistance team which regularly assists law enforcement agencies worldwide with their investigations. In 2010-11 the SFO assisted over 30 different jurisdictions. [18]
Victims are at the core of the SFO’s strategy. They include any person, organisation, or Government both in the UK and abroad, which has suffered direct financial loss from the most serious and complex fraud, or corruption.[19]
The SFO tries to get justice for victims by recovering as much recompense as possible for victims and by placing criminals behind bars. In April 2011, £64 million of funds were, or were due to be returned to victims and the average jail sentence handed out in SFO cases was over 30 months.
For example, in 2011 three fraudsters running the online Xclusive ticket fraud (that failed to deliver tickets to the Beijing Olympics and various music festivals) each received prison sentences of up to eight years. The SFO had also started confiscation proceedings to recover money for victims.[20]
Al-Yamamah arms deal – the al-Yamamah deal during the 1980s was a large scale aircraft and weapons deal between the UK and Saudi Arabia. The deal was extended throughout the 1990s and saw thousands of UK citizens living and working in Saudi Arabia representing £40bn worth of business. BAE Systems Plc was the primary contractor.[21]
In 2004 the SFO began to investigate the contracts within the al-Yamamah deal on the grounds of suspected false accounting but the investigation was controversially dropped in 2006.[22] The decision was made following concerns about national security [23][24]amidst reports that the Saudi Government would stop sharing counter terrorist information with the UK if the investigation continued.[25] This drew criticism from number of sources, not least from the Organisation for Economic Cooperation and Development (OECD).[26] A High Court review in 2008 ruled that the SFO had acted unlawfully by dropping the corruption investigation[27] but was later overturned on appeal by the SFO to the House of Lords.[28]
|
||||||||||||||