{"id":23471,"date":"2013-12-17T13:31:30","date_gmt":"2013-12-17T13:31:30","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=23471"},"modified":"2013-12-17T13:31:30","modified_gmt":"2013-12-17T13:31:30","slug":"the-uks-not-capable-of-holding-bankers-to-account","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/12\/17\/the-uks-not-capable-of-holding-bankers-to-account\/","title":{"rendered":"The UK’s not capable of holding bankers to account"},"content":{"rendered":"

My friend and co-author Prof Prem Sikka has the following blog on The Conversation website<\/a>. I share it with permission:<\/p>\n

Iceland has sent four former directors of its bank\u00a0Kaupthing<\/a>\u00a0to prison for fraud. But the chances of similar legal action happening in the UK are low, where fraud investigators have a poor record.<\/em><\/p>\n

The Serious Fraud Office (SFO) is the main agency for investigating and prosecuting major fraud. It was formed in 1988 after a spate of high-profile cases. A government-sponsored inquiry into share price rigging at\u00a0Guinness<\/a>\u00a0in the 1980s concluded that too many executives at major corporations had a \u201ccynical disregard of laws and regulations \u2026 cavalier misuse of company monies \u2026 contempt for truth and common honesty. All these in a part of the City which was thought respectable\u201d.<\/em><\/p>\n

But rather than changing corporate laws, amending personal liability of directors, or creating an effective enforcement agency, the government created the SFO.<\/em><\/p>\n

Last week, the SFO\u2019s case against businessman\u00a0Victor Dahdaleh<\/a>\u00a0collapsed because at the last minute it could not provide evidence of alleged graft. This is not the only case the SFO has botched. It spent between \u00a325-40m investigating price-fixing by\u00a0pharmaceutical companies<\/a>\u00a0supplying the UK\u2019s National Health Service (NHS), but the case collapsed because of errors in the interpretation of law.<\/em><\/p>\n

Previously, the SFO was very slow in taking action against\u00a0BAE Systems<\/a>\u00a0over allegations of corrupt practice. The SFO mislaid 32,000 documents relating to the case. It is currently facing a lawsuit for damages from the\u00a0Tchenguiz brothers<\/a>\u00a0after dropping a three-year investigation into the collapse of Icelandic bank Kaupthing.<\/em><\/p>\n

In 2012-13, the\u00a0SFO<\/a>\u00a0brought 12 cases covering 20 individuals, eventually securing 14 convictions and recovering \u00a311.4m from fraudsters. But it rarely went after the bigger beasts.\u00a0Money laundering<\/a>\u00a0and\u00a0sanctions busting<\/a>\u00a0by British banks did not appear on its radar. The SFO has hardly been visible in investigating and prosecuting the misdemeanours of bankers who brought the UK economy close to collapse.<\/em><\/p>\n

In mitigation, it might be argued that the SFO\u2019s failures are the outcome of the politics of government cuts. In 2008-09, the SFO had an investigations and prosecutions budget of \u00a352m. Despite the banking crash,\u00a0LIBOR rigging<\/a>\u00a0and other scandals, the UK government has drastically reduced SFO\u2019s resources.<\/em><\/p>\n

For 2013-14 its\u00a0budget<\/a>\u00a0is \u00a330m and will decline to \u00a328.8 million for 2014-15. That is a cut of over 44% since the start of the global financial crisis.<\/em><\/p>\n

Faced with a reduced budget and pay freezes, the SFO has been losing experiencing staff and outsourcing a lot of its legal work, often paying very\u00a0high fees<\/a>. Such practices make it difficult to build in-house expertise and an institutional memory.<\/em><\/p>\n

Other countries seem to assign higher priority to fraud investigation. The US equivalent, the Securities and Exchange Commission (SEC), has an annual budget of US$1.674 billion (about \u00a31.1 billion). It is therefore in a far stronger position to\u00a0take on the bigger beasts<\/a>. The SEC has its shortcomings, but it is more likely to get a result than the SFO.<\/em><\/p>\n

The SFO\u2019s failures are indicative of Britain\u2019s failure to build durable and effective institutional structures to fight financial crime. Rather than a single powerful and well resourced agency, there is an ineffective patchwork of institutions.<\/em><\/p>\n

These include the Financial Conduct Authority (FCA<\/a>), the Office of Fair Trading (OFT<\/a>), The National Crime Agency (NCA<\/a>) Her Majesty\u2019s Revenue and Customs (HMRC<\/a>), the\u00a0Crown Prosecution Service<\/a>\u00a0, the\u00a0London Stock Exchange<\/a>\u00a0and the\u00a0Financial Reporting Council<\/a>, to name just a few. The overlapping and often unclear boundaries result in duplication, waste, obfuscation, delays, poor accountability and outright failures.<\/em><\/p>\n

Any effective fight against globalised financial crime needs to streamline its institutional structures. In the age of globalisation the UK cannot fight financial crime on a shoestring, with puny organisations. Large parts of the patchwork should be replaced by a UK equivalent of the SEC.<\/em><\/p>\n

But a new organisation would not be able to combat wealthy elites or giant corporations without significant resources. This might be expensive, but it is an investment that would pay off.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

My friend and co-author Prof Prem Sikka has the following blog on The Conversation website. I share it with permission: Iceland has sent four former
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"class_list":["post-23471","post","type-post","status-publish","format-standard","hentry","category-corruption"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/23471","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=23471"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/23471\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=23471"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=23471"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=23471"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}