In this analysis for IFA Magazine, Rachel Adamson, Head of Fraud and Regulatory at Adkirk Law, argues that poor resourcing in the SFO has emboldened fraudsters and cyber-criminals, creating our current shocking wave of fraud.
Whilst the Calvert-Smith report is certainly damning in its failings of the SFO and the agency’s leadership, it falls short of producing a solution to the agency’s woes, and while there is no clear solution to the problem, in Rachel’s mind the crux of the issue can be boiled down to a fundamental lack of resourcing. In her view, if the problem is not addressed, we have no chance of turning this tide of fraudulent activity.
With the report highlighting failures of leadership and issues around disclosure, Rachel emphasises that the agency needs to focus on bringing disclosure into the digital age; alter its approach to corporate criminal liability; and redistribute resources so there is a greater stress on front-line enforcement.
Despite the SFO’s impressive Annual Report and Accounts for the past year – with over £100m secured in confiscation orders, fine and cost awards – the agency is currently licking its wounds following a summer that saw it besieged with criticism. The publication of the long-awaited Calvert-Smith probe and the Brian Altman report highlighted the agency’s serious failings, particularly in relation to culture, mismanagement, inexperience, and technological capabilities.
As we head into the Autumn, the agency finds itself under strict scrutiny from the Attorney General, and it has been given only a short time frame to better itself, with Michael Ellis MP expected to give an update to Parliament in November. The SFO’s dirty laundry has been aired, but what can we realistically expect them to accomplish in such a tight-timeframe? The agency’s ailments go far deeper than quick fixes, and it will take time to fix the intrinsic cultural, resourcing and recruitment issues that have been constraining the SFO for years.
Coughing up the cash
A lack of resource is at the core of the SFO’s issues. The agency operates on a £50m budget, and both the Calvert-Smith and Altman reports recognised that both investigations in question were under-staffed, with the former noting that case handlers in the Unaoil case regularly worked late into the night, whilst on annual leave, or in one case, whilst considerably unwell. This situation is set to worsen if the Government’s recent proposals to reduce the headcount of both the NCA and SFO by 20-40% come to fruition. However, the failure of under-resourcing is not one that can be placed on the SFO’s shoulders, and the Government must back-pedal on recent proposals and channel additional funds into the agency. Only then can the agency hope to tackle the rising tide of fraud in the UK head on.
What’s more, the Government must recognise that investment into anti-fraud enforcement is one that will pay dividends. Economic crime is estimated to cost the UK £100bn every year. Agencies are already outgunned, so how can the Government promise to clamp-down on economic crime whilst also proposing to downsize the enforcers?
To the surprise of few, disclosure was at the very top of the SFO’s list of woes in both reports. The Altman report lambasted the inescapable inexperience of certain disclosure officers during the Serco trial alongside the embarrassment of disclosure guidance documents.
Problems with disclosure are nothing new. Yet, it is appalling that in a digital age, the agency only has a £4.4m allotted budget for technological investment. Thanks to the digitisation of information, enormous volumes of complex material can be easily stored, and all of it must be disclosed and reviewed. As high-profile cases often carry with them an insurmountable volume of disclosure, if the SFO does not address the problems it has with disclosure at its core they will simply be increasingly overwhelmed. To help paint a picture, in a previous case, with over 50TB of disclosure, we calculated that it could take a single person over 200 years to go through every item.
The SFO needs to follow the practical and actionable advice of the Altman review and invest in technology to improve the efficiency and accuracy of the disclosure process by designing case management systems that focus on the process and ensure that the remote working systems that are set-up are fit for purpose.
Trouble at the top
At the heart of the Calvert-Smith report is a failure of management and senior individuals at the SFO. There are clearly deep-rooted issues surrounding the SFO’s day-to-day operations, with a “damaging culture of distrust” highlighted between senior managers and case teams leading to a lack of information sharing between key teams on the same side.
With the Attorney General taking steps to ensure that all staff can raise concerns about cases, the relationships between investigators and prosecutors should improve. However, with a culture of disjointedness and a lack of standards for basic procedures, it is hard to see how the agency will be able to sufficiently change its ways in a matter of months.
Whilst the Calvert-Smith and Altman reports have not saved the SFO any blushes, the agency can still make a positive out of this embarrassing moment. By recognising where it is failing, it can look to make the improvements it badly needs. However, this will only be possible if the government also recognises its part in the SFO’s downfall and commits to supporting reform with proper funding.