Uncovering fraudulent activity is one of the most complicated areas of law enforcement. Fraud is designed to be hidden, and, in many instances, it is concealed very well.
Richard Abbey, the UK&I Leader at EY’s Forensic & Integrity Services, makes the point that “frauds are designed to avoid detection and are often complex or occur with management collusion. This means those responsible for detecting fraud sometimes must be as inventive as the fraudster to spot them.”
Sometimes a fraud case is so convoluted that there is only one course of action: to refer the matter to the Serious Fraud Office (SFO).
This blog explores how the SFO operates, its recent successes and future challenges, with insight from SFO Chief Investigator: Michael Gallagher
What is the SFO?
The SFO is a specialist prosecuting authority tackling the top level of serious or complex fraud, bribery and corruption.
Speaking at the recent Counter Fraud 2023 Conference, SFO Chief Investigator Michael Gallagher explained the agency’s role: “We’ve got a clear mission. It’s to fight financial crime and to deliver justice to victims, but it’s also about helping to protect the UK’s global reputation as a safe place to invest and do business.”
Wikipedia notes that the SFO is unique in that its role is to both investigate and prosecute. Its case teams are therefore composed of investigators, lawyers, law clerks and forensic accountants. As Chief Investigator, Gallagher is painfully aware of the challenges faced by the SFO.
Challenges faced by the SFO
“The challenge is stark because of the size and shape of the organisations that we find ourselves up against,” says Gallagher. “They have very deep pockets and can afford incredibly expensive and huge legal teams.”
Taking on major corporate fraud cases means the case must be water-tight, and this means hard graft. Gallagher shared that a current case has involved trawling through 48 million documents. It’s no wonder many cases take years to complete.
The motivation for Gallagher and his team is that fraud is not a victimless crime. The numbers involved can be eye-watering.
At the conference, Gallagher revealed the scale of the crimes: “Over the last year, we charged over 25 people for approximately £602 million worth of economic crime. The current three-year average of money that we pass as a government organisation to the Treasury is five and a half times what we actually cost. We have delivered £16 million back to victims over the last few years.”
The SFO’s success is best illustrated by recent case studies.
The SFO in action
Amec Foster Wheeler Energy Limited (AFWEL). AFWEL used corrupt agents in the oil and gas sector. In 2021, the SFO entered into a Deferred Prosecution Agreement (DPA) with AFWEL working closely with the US Department of Justice and the Brazilian authorities.
Under the terms of the DPA, AFWEL paid a financial penalty and costs amounting to £103m in the UK, forming part of a US$177 million global settlement. In addition, there was a payment of compensation to the people of Nigeria of £210,610.
Petrofac Group. In 2021, the SFO secured the conviction of Petrofac Limited for seven separate counts of failure to prevent systematic bribery of officials and to win oil contracts in Iraq, Saudi Arabia and the UAE. As a result, Petrofac Limited was ordered to pay £77 million.
GPT. In 2021, the SFO prosecuted GPT for corruption in relation to telecommunications contracts with the Saudi Arabian National Guard. The judge ordered GPT to pay £30 million.
Airbus. In 2020, Airbus SE agreed to pay a fine, disgorgement of profits and costs amounting to €991m in the UK. The fine amounted to €3.6bn as part of the world’s largest global resolution for bribery, involving authorities in France and the United States.
Not all cases involve corporate crimes. The SFO can also get involved in personal convictions.
Last year, the SFO prosecuted David Ames, who was behind a £226 million fraud involving celebrity-endorsed luxury resorts in the Caribbean. Ames was so convincing that he defrauded over 8,000 investors out of their pensions and savings. He was sentenced in September 2022 to 12 years in prison.
Andrew Skeene and Junie Bowers defrauded 2,000 victims, including pensioners, by fooling people into thinking they were helping save the Amazonian rainforest by planting trees. The pair believed that because it was so remote, the investors would take their word that the planting happened. Unfortunately for them, the Brazilian police were more than happy to go to the remote area of the rainforest and proved no such activity had occurred. They were both sentenced to 11 years and received a 10-year director disqualification.
The importance of global partnerships
From all the examples shown, there is a common factor. Major economic crime does not respect borders. The SFO actively works with agencies from across the globe. At the Counter Fraud Conference, Gallagher illustrated this point with the case of Balli Steel Plc. The SFO has secured a conviction for three new defendants as the result of 36 requests for evidence from law enforcement partners in 25 different countries. Gallagher exclaimed, “even for us, this was a new record!”
The SFO approach
According to Gallagher, there are three key areas that are the focus of the agency’s strategy:
“People. We place a high emphasis on training and interacting with wider law enforcement. Technology. We have our own in-house technologists. Strategy and policy. We always ensure that we have the powers and resources required. The laws are constantly reviewed to keep up with new challenges.”
This approach is endorsed by changes in the Economic Crime and Corporate Transparency Bill (a government bill intended to help tackle economic crime, better protect national security and enable Companies House to deliver a better service for UK individuals and businesses). The changes will allow cryptocurrencies to be seized and forfeited and will allow more effective investigations into crypt-related fraud.
As an agency, the SFO is always looking ahead. Fraudsters are always looking for the next opportunity, and the SFO must stay one step ahead. Every advance in innovation creates new possibilities for criminal activity. As a nation, we rely on investigators like Michael Gallagher to prevent and detect economic crime.
The stakes are high. In his concluding statement at the Counter Fraud Conference, Gallagher said: “Economic crime in London, in our financial system, supports international organised crime and has the capability to corrupt political systems globally. It’s not just about financial gain; it threatens peace as a consequence.”
GovNet’s Counter Fraud Conferences provide public sector counter-fraud professionals, and audit and finance leaders the opportunity to network, learn and collaborate to eradicate the threat of public sector fraud. Register for GovNet’s Counter Fraud Conference 2024 here.
Jessica Kimbell, GovNet