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‘It has certainly shown its teeth’: Fraud specialists fear SFO budget cuts put agency’s progress at risk

The Serious Fraud Office’s (SFO) annual report has shown improvements on last year, both in its levels of activity and the number of convictions achieved but white collar crime specialists are worried that planned budget cuts of 34% will ‘put that progress at risk.’.

During 2014/15 the SFO opened 16 new investigations compared to 12 the previous year, including against Tesco, Forex and the Sweett Group, while the number of defendants convicted increased from 11 to 18 with the agency securing a 78% conviction rate.

The SFO’s work load now includes 30 defendants in seven cases that have been charged and await trial according to the report, including 12 featuring in the Libor investigation. The body’s director David Green QC, said the agency was also, ‘actively considering the possibility of Deferred Prosecution Agreements in a number of cases, and I am confident that this new tool will make a real difference in the SFO’s dealings with cooperative corporates.’

Speaking to Legal Business, Stephenson Harwood partner Tony Woodcock commented on the agency’s progress over the last year: ‘It has certainly shown its teeth – it’s a transformation from the way things were, and with good results. People are more tenacious than before. It’s a good message.’

The increase in investigations and ongoing-cases have seen staff numbers at the SFO pick up from 330 to 423. However, the body’s budget is set to take a cut of 34% next year from spending £69.1m in 2014/15 to a planned £45.1m for the 2015/16 financial year – back to levels before the office took on blockbuster cases like Libor.

Barry Vitou, Pinsent Masons‘ head of corporate crime, said: ‘The SFO’s slightly more generous budget over the last two years seems to have been bearing fruit in terms of more investigations and more convictions. The planned budget cuts for next year could put that progress at risk.’

‘While they may get additional funding as the result of successful investigations, there is no guarantee as to when or if this will come. Without that certainty, it makes it difficult for them to commit resources to the long and detailed work of unravelling the structures that fraudsters hide behind.’

Woodcock added: ‘It’s a bad idea to cut the budget – the enquiries related to Libor, et cetera, they take up massive resources, both monetary and staffing resource, and advisory and investigation costs. It’s an important function, and an important part of the UK financial sector to get this right. It’s been clear from Libor that funding hasn’t been sufficient and the SFO has had to go cap-in-hand to the government for funding – that’s not an adequate way to run an international serious fraud office.’

Another senior disputes partner at an international firm highlighted that it will mean the SFO will have to consider closely the cases it takes on: ‘It’s controlling to the extent of the investigations they carry out. It rather ties the hands of the SFO to be managed microscopically.’

On the personnel front, Green saw his pay packet increase to around £240,000 from £210,000 the previous year, boosted by higher pension benefits. The salary of the highest-paid individual in the SFO was £285,000-£290,000 on a full time equivalent basis – though this was on an interim basis – constituting 8.14 times the median salary of the workforce, which was £35,000.

Last year saw the high profile Tchenguiz brothers settle two lawsuits taken against the SFO for around £4.5m after both brothers claimed the agency made serious mistakes in its investigation of their role in the collapse of Icelandic bank Kaupthing, of which they were executives.