Welcome to the new McGuireWoods London LLP fraud blog: The Fraud Board, which has taken over from our highly rated Bribery Library site. There are various reasons for the change, but the main rationale is that while the subject of Bribery remains very important in the economic crime landscape, and will continue to feature strongly in our blogs, other fraud and regulatory issues are increasing in significance.
The Serious Fraud Office is investigating a number of Bribery cases, some of them involving the Bribery Act 2010. All fraud lawyers and other professionals, including ourselves, are watching this space on behalf of clients, to see how the SFO will deploy the new provisions in the Act, in particular sections 6 and 7. How far will they go to prosecute corporations under the failure to prevent offence? How will the defences play out in practice? What level of detail will it be necessary to deploy to disprove an assertion that a corporation’s systems and controls were inadequate? How will the section 9 Guidelines work? How will the SFO use the new powers to negotiate Deferred Prosecution Agreements? What is the future of internal investigations after the SFO Director’s recent criticism of practices adopted during investigations, in particular relating to privilege?
Meanwhile, other economic crime issues have been grabbing the headlines. The Attorney General, speaking at last week’s Cambridge International Economic Crime Symposium, restated the Government’s intention of introducing legislation to prosecute firms for failing to prevent fraud offences generally, and therefore we may expect to see large fines deployed against businesses for allowing economic crime to flourish. This follows calls by the Director of the SFO for such an offence to be created, and is seen as a response to the allegations made in the Libor and Forex investigations, which will make it easier to take action against firms, at the same time as being an attempt to raise ethical standards. However, given that there has been a similar offence in relation to money laundering (now regulation 45 of the Money Laundering Regulations 2007) since 1993 which has never been used, it will be interesting to see how the ‘failing to prevent’ offences work out in practice.
Other new initiatives include a reinvigorated push to take senior management to task for their part in corporate wrong-doing and failures. Section 36 of the Financial Services (Banking Reform) Act 2013 is one sign of the impact that the work of the Treasury Select Committee is having in this area. Whether the attempt to criminalise reckless banking will work out in practice is open to question, but there can be no doubting that the gloves are off.
Working equally hard to make management accountable is the Financial Conduct Authority, with the Senior Persons Regime and other measures such as attestations designed to ensure that there is clear liability at board level for all aspects of financial firms’ activities. This will be given added impetus by the outcome of the enquiry into the FSA’s handling of the failure of HBOS between 2008 and 2012. The FCA has promised to be more aggressive in pursuing regulatory offences generally, intervening early to prevent mis-selling of financial products, and generally working hard to protect consumers. How will this work out in practice? Firms may well continue to be relatively content to settle their disputes with the regulator, but individuals are likely to continue to tough it out.
Civil fraud actions occupy an equally important space in the economic crime landscape, either in conjunction with prosecutions, or as an alternative where law enforcement does not have the resources or the capability to take action. Seeking redress for the victims of fraud, whether the wrong-doing is committed by financial institutions or criminal gangs or computer hackers, through litigation enables lawyers to take control of the process on behalf of their clients and to pursue remedies in increasingly imaginative ways.