Serious Fraud Office

Since it’s birth the SFO has been mired in controversy. However public perception of it’s performance and effectiveness had greatly improved in recent years after the collapse and failure of several high profile prosecutions that tarnished it’s reputation in the 1990s.

The SFO was established in 1987 after the Roskil report recommended that the responsibility for investigating and prosecuting serious and complex frauds should be taken away from regional police forces and the CPS and delegated to a specialist unit.

The role of the SFO is to tackle only the most serious or complex cases of fraud and corruption generally involving a loss of over a million pounds, or cases that are politically sensitive or have a significant impact on our economy or a high level of complexity.

The SFO does not have it’s own police force and its employees have no direct powers, such as the power of arrest. Each SFO case is dealt with by case teams comprised of lawyers, forensic accountants and police officers seconded from police forces. It is estimated that the SFO normally has a caseload of 80 ongoing cases taking on around 20 new cases a year.

Currently the SFO is in a state of flux. Former Director Richard Alderman introduced a number of significant changes to it’s operation. It became a streamlined organisation, with the introduction of many new personnel. The number of “blockbuster” prosecutions undertaken with the Attorney Generals consent requiring additional funding diminished as the SFO came to terms with treasury driven demands for all government agencies to deliver more for less and more quickly.
Proposals to abolish the SFO formed part of the coalition agreement of 2010. The agreement included a commitment to “take white collar crime as seriously as other crime", by merging parts of the FSA, OFT and SFO into an Economic Crime Agency. These plans appear to have been shelved together with proposals for the new National Crime Agency to co-ordinate the work of these and other prosecuting agencies.

In 2012 the SFO was dealt a serious setback when it announced that it had discontinued it’s enquiry into the Mayfair property developer Vincent Tchenguiz. The Tschenguiz investigation is considered by some to be the largest investigation undertaken by the SFO since the collapse of the BCCI. In May 2012 Lord Justice Thomas labelled the SFO’s conduct as “sheer incompetence” at a preparatory hearing in the High Court and the search warrants were quashed in July. Mr Tschenguiz’s lawyers are said to be pursuing a claim for damages said to be in excess of £100m as a consequence of the raids.

The SFO’S budget for 2011-12 was reduced from £50m to £36m with a further reduction planned to £30 m in 2014. These cuts have caused judicial concern as to whether the SFO is capable of performing it’s job competently. In the Tschenguiz search warrant judgement the High Court said that if "proper resources" were not found for the investigations of serious fraud "it is clear that incalculable damage will be done to the financial markets of London".

Alderman’s successor, David Green, took office on 23 April 2012. Green’s appointment may mark another sea change in the operation of the SFO as he has announced an intention to strategically refocus it’s work. The SFO will adopt a “surgical” approach to investigation and case preparation and that it will be more selective in the type of cases it chooses to investigate.

Green has also questioned whether the SFO should be investigating smaller frauds (citing mortgage and boiler room frauds as examples) that could be pursued by the CPS or other state agencies. It is now therefore likely that the SFO will concentrate it’s efforts on prosecuting and investigating bigger fraud cases.

In what could be interpreted as an oblique reference to the future deployment of Deferred Prosecution Agreement’s, Green has also promised to redress any perception that “has emerged that we are more inclined to settle than prosecute … I think there is a need to rebalance the focus between prosecution and civil settlement."

In recent years the SFO has placed increasing reliance on the use of civil recovery orders as an alternative to prosecution. IN 2008 the SFO obtained it’s first civil recovery order against Balfour Beatty in the sum of £2.25m as a consequence of corruption allegations.

For the latest update on the work of the SFO visit Fraud Focus, our companion site for financial crime news and analysis.