Current government policy on economic crime
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Speech by Attorney General Dominic Grieve QC MP: Responsibility for risk: staying on the right side of the law
“Thank you very much for inviting me to give the opening keynote address today. I’m delighted to be here because I have the highest regard for the Cambridge International Symposium on Economic Crime. The fact that the Symposium this year celebrates its twenty-ninth year is a remarkable achievement. It is a testament to not only the enduring interest in matters to do with economic crime, but also the talent of those who organise this annual event, that the Symposium has over the years enjoyed the support of so many institutions and experts from around the world.
“The programme for this year’s symposium, looking at the agenda for the week ahead, encompasses a fascinating range of interesting issues with the underlying theme of making those who deal in financial risk a little more responsible for their actions. Of course we all deal in financial risk to a certain extent and there are clearly a great many different types of risk, such as the personal financial risk of losing money as an investor; to the risk that financial institutions take when they lend money to borrowers; or the inherent risk of businesses trading in an uncertain economy.
“The risks taken will usually be entirely appropriate in a modern economy. But, as financial events in recent years have shown, there may also be excessive risk-taking. Those who take risks should be aware of the implications and, most importantly, act within the law. Unwarranted risks may have consequences that have dire economic effects on the individual, business or economy and certain behaviour may fall foul of the law relating to economic crime, including fraud, bribery and corruption.
“If criminal activity does occur - whether it is corruption, insider trading, money laundering or fraud - there needs to be a robust law enforcement response.
“What I’d like to focus on this morning is to look at the British government’s commitment to tackling economic crime and discuss a few recent developments including the enactment of the Bribery Act 2010 (which came into force on 1st July 2011) and the potential for new tools to combat economic crime.”
The government commitment to tackling economic crime
“As some of you will be aware, as Attorney General I’m the Government Minister accountable to Parliament for the work of the Serious Fraud Office (SFO) and the Crown Prosecution Service (CPS). The SFO commenced operation in April 1988, having been created by the Criminal Justice Act 1987, and the CPS was established in 1986 by the Prosecution of Offences Act 1985.
“Now, these organisations are not as old as the Cambridge Symposium in its 29th year, but nonetheless they have been around for over 20 years and also have much to be proud of in the fight against economic crime. These 2 independent prosecuting authorities will continue to play a vital role in tackling economic crime in the future but there are also a variety of other agencies that have an important role to play including the Financial Services Authority and the Office of Fair Trading.
“There has been considerable interest in how these and other agencies are going to work together in the future and I should like to say a few words about this matter in a moment.
“The government made clear in the Coalition Agreement the need to take white collar crime as seriously as other types of crime. We know that fraud is estimated to cost the UK £38 billion a year. This figure - which is a staggering cost - was published by the National Fraud Authority (NFA) in January this year in its ‘Annual Fraud Indicator’. The breakdown by sector includes fraud on the public sector of £21 billion; fraud on the private sector of £12 billion; fraud on individuals of £4 billion; and charity fraud of £1.3 billion. There are therefore many victims of economic crime and fraud not only has consequences for individuals, businesses and public services. This money can also be used to fuel other criminal activity such as drugs, arms and human trafficking. The link with organised crime is readily apparent.
“On 28th July 2011, the Government launched its new organised crime strategy, ‘Local to global: reducing the risk from organised crime’. The new approach and actions set out in the strategy - including strengthening enforcement action against organised criminals - will enable the risk from organised crime in the UK to be reduced. The strategy sets out clear proposals for bringing together the work of those in the UK with a responsibility for tackling organised crime.
“On 8th June 2011, the government also published its plan for the creation of a new National Crime Agency (NCA). The NCA will comprise a number of distinct operational commands: Organised Crime, Border Policing, Economic Crime and the Child Exploitation and Online Protection Centre. When fully established in 2013, which will be enshrined in legislation to be introduced next year, the NCA will result in a step change in the fight against organised crime and other areas of criminal activity included within its commands by creating the right structure at a national level. Accountable to the Home Secretary - and with a senior Chief Constable at its head - the NCA will be an integral part of our law enforcement community, with strong links to local police forces and other agencies.
“The Economic Crime Command (ECC) will be tasked specifically with drawing together and coordinating the UK’s efforts to combat economic crime. The ECC will continue the work of the Serious Organised Crime Agency, and will work closely with other agencies including the Financial Services Authority (shortly to become the Financial Conduct Authority which will have the FSA’s powers of criminal enforcement), the Office of Fair Trading and the Serious Fraud Office, recognising that all have a role to play in defeating sophisticated criminals.
“The ECC will ensure a coherent approach to tackling economic crime across the full range of agencies and make a major difference to the current fragmented response to economic crime. In addition, the foundations will be laid well before the establishment of the NCA in 2013 by the creation of an Economic Crime Coordination Board (ECCB) in Autumn 2011; membership will be comprised of all the key agencies that deal with economic crime and who will work together.
“The coordination board will have a strong role in identifying and closing gaps, sharing of best practice and avoiding duplication in our efforts to prevent, trace and defeat criminals who are active in the field of economic crime. All the agencies have committed to this way forward which will also result in an improved intelligence picture which is a key factor in the fight against economic crime. Plans are currently underway as to how the Board will operate in practice and more will be announced in the Autumn.”
The Bribery Act 2010
“The starting point for any efforts to combat economic crime is having the right laws in place and I’m pleased to say that in connection with tackling bribery the Bribery Act 2010 (‘the Act’) now achieves that for the United Kingdom. The rather antiquated law, based on the common law and Prevention of Corruption Acts 1889 - 1916, has now been rationalised and extended in a modern statute. The Act provides a modern and comprehensive scheme of bribery offences and enables investigators, prosecutors and the courts to deal with bribery effectively. The Act may have been rather a long time in coming - you may recall that the process began when the Law Commission published a report and draft Bill on Corruption in 1998 - but I’m delighted that the opportunity to reform the law was seized in the end, with Royal Assent being given on 8th April 2010.
“The major innovation of the Act is to create a new offence of failure by a commercial organisation to prevent bribery (section 7). However, the Act also provides (under section 7(2)) a clear statutory defence if a commercial organisation can prove - on the balance of probabilities - that it had “adequate procedures” in place to prevent persons associated with it from bribing. This recognises that businesses have a key part to play in the dissemination of ethical standards, in other words they have a responsibility too for reducing the risk of bribery offences being committed.
“The Ministry of Justice has published (under section 9 of the Act) guidance for businesses - 30th March 2011 - on adequate procedures to prevent bribery which is designed to assist commercial organisations in deciding what bribery prevention procedures are required. There is also MOJ guidance for small and medium sized businesses too, recognising that a proportionate and risk based approach to bribery prevention is required.
“The Director of the SFO and the Director of Public Prosecutions have published joint guidance for prosecutors on the Bribery Act 2010 - also on the 30th March 2011 - which sets out the Directors’ approach to prosecutorial decision-making in respect of offences under the Act. In England and Wales, proceedings for offences under the Act require the personal consent of the Director of Public Prosecutions or the Director of the Serious Fraud Office (as set out in section 10 of the Act).”
The potential for new tools to tackle economic crime
“Tackling economic crime also requires consideration of how the tools available to prosecutors might be further enhanced. For example, it has been suggested that the introduction of deferred prosecution agreements, similar to that in the United States, would provide a more effective approach to dealing with corporate crime in some cases. The government has reached no decided view on the merits of introducing deferred prosecution agreements, but the Solicitor General and I are currently engaging with the Ministry of Justice and others to explore the issues
“Deferred prosecution agreements (DPAs) are an established part of the United States response to corporate crime. DPAs encourage companies to self- report wrongdoing and discuss with the Department of Justice (DOJ) the possibility of an outcome which does not necessarily result in a criminal conviction. The United States Principles of Federal Prosecution of Business Organisations gives guidance to prosecutors on the factors to consider when contemplating such a course of action and include the nature and seriousness of the offence, whether there was disclosure of wrongdoing and a willingness to cooperate, and consideration of collateral consequences.
“If a DPA is negotiated between the parties then it will typically be predicated upon the filing at court of the agreement and ‘charging document’ and, if the court agrees, the prosecution may be deferred for a specified period of usually 2 or 3 years subject to compliance with the terms of the agreement including payment of a substantial fine. These terms have included requirements to improve governance structures, reimburse victims, pay large sums in civil penalties, and the appointment of an independent monitor (at the company’s expense) to review the effectiveness of any compliance programme.
“In the UK context, detailed consideration would naturally need to be given as to the benefits and drawbacks of introducing DPAs as an additional enforcement tool in the prosecutorial armoury of the future. However, this is certainly an issue that merits closer consideration. And since in many cases UK prosecutors will be working with their counterparts in the United States, the biggest financial market in the world, we need to ensure that we have arrangements in place that can cater for trans-jurisdictional matters, the effective gathering of evidence from abroad, and the issues of forum-shopping and double jeopardy.
“This is all very much work in progress. A crucial question for any comparable UK process would be the degree of judicial oversight and the mechanism for achieving that. However, if the UK can learn from the US experience and avoid some of the pitfalls the Americans have encountered then deferred prosecution agreements may offer a new way for the UK to deal with corporate crime in appropriate cases.”
“I hope I have given you a flavour of some important current issues for the UK in the context of tackling economic crime. We are fortunate in that I believe we are now moving in the right direction with a clear structure being developed around the forthcoming Economic Crime Command of the National Crime Agency, robust new laws in the form of the Bribery Act 2010 and the prospect of new tools for the future to deal with corporate crime such as deferred prosecution agreements. I am conscious of the time and the number of speakers to follow me. Thank you again for inviting me and I hope you all enjoy this week’s Symposium.”