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Harry Cassin
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Bill Waite
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Russell A. Stamets
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Eric Carlson
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SFO needs urgent fix to fight Covid-19 fraud

I thought I was going to be skiing down a mountain now. Instead I am sitting at my kitchen table in London pretty much hooked on BBC, the Wall Street Journal and the Financial Times.

I have spent the last couple of weeks reading about the fantastic support that individuals have been providing to the old, the infirm and those who society generally leaves on the pavement of life. I have also read of real bravery from the medical profession and support staff — the un-acclaimed cleaners, porters and rubbish collectors without whom no health service can function. However, I have seen reports of bad behaviors too. I do not mean shoppers clearing shelves — fear drives many actions — and the UK public having an extra £1 billion ($1.15 billion) of food in their cupboards is totally understandable if regrettable.

I do mean people trying to sell childrens drugs for hundreds of times their usual value on eBay and the inevitable attempts by some, through insider trading, to make huge financial gains out of a global medical emergency and the consequential economic crisis. Economic dislocation creates legitimate business opportunities. It also attracts the dishonest the amoral and immoral.

In the last few days governments around the world have announced unprecedented financial aid packages to individuals and companies alike to try and mitigate the effect of a global economic shut down. While the vast majority of people who apply for grants, loans and other forms of economic support will be honest decent people trying to keep their businesses going, supporting their workers and suppliers or just paying their mortgages, there will be some who will see this as a once in a lifetime opportunity to fleece “the system.” While this conduct can not be stopped — time will not allow for sufficient control mechanisms to be put in place — governments must make sure there is a real deterrent to dishonest conduct.

In England and Wales, I fear there is no such effective deterrent. The body that would ordinarily be charged with investigating and prosecuting serious and complex fraud is the Serious Fraud Office. In the period 2015 to 2018 its conviction rate for individuals was 60 percent, In 2019 it fell to 53 percent. For the 53 percent who are actually convicted in SFO trials sentences and financial penalties are low in comparison for example to the United States. Generally the SFO prosecutes very few cases each year. Neither the SFO nor the substantive laws or rules of criminal procedure are fit for current purpose.

To make matters worse, a 2019 Crown Prosecution Service Inspectorate review of the Serious Fraud Office leadership found that “its leadership needs to develop and communicate a more strategic approach to cultural change. . . . Most importantly, the changes need to be driven throughout the organization, with nobody excused from participation.”

If prospective fraudsters are to believe there is a deterrent and therefore be deterred, there must be change and it must happen now. So what is to be done?

First, the English Government should reiterate both that the SFO has the mandate and that it will be given the resources to investigate and prosecute all serious dishonest conduct relating to the current crisis. One can not look elsewhere because of time restraints in either transferring powers or creating a new prosecutorial body.

Second, the Director of the SFO should make it clear that prosecuting and convicting fraudsters who dishonestly make money from the current crisis is the SFO’s absolute priority. To reinforce this statement a special team of investigators and prosecutors should be formed with immediate effect. The intelligence unit within the SFO should be exclusively directed at identifying serious criminal conduct relating to the crisis whether it be fraudulently obtaining financial support from the government or market manipulation or any similar activity.

Third, there needs to be greater use of Section 71(4) c of the Serious Organised Crime and Police Act 2005 which allows the SFO to grant immunity from prosecution in circumstances where the SFO believes it is appropriate for the purposes of investigation or prosecution. This power needs to be widely advertised.

Fourth, the SFO needs to be given the power in these cases to negotiate plea deals within predetermined ranges agreed with the judiciary. Deviation from the range should be subject to express judicial approval.

Fifth, judges alone should sit in contested trials and trails should be expedited.

Sixth, sanctions should be increased and there should be unlimited economic sanction for those convicted after a criminal trial.

Seventh, if the prosecution establishes its case the burden of proof should shift to the defendant to prove on a balance of probabilities that they did not commit the offense. A failure to discharge the burden – by for example not giving evidence as to why a course of conduct was undertaken – would result in a conviction.

Eighth, if a director of a company is prosecuted and convicted fellow directors should made vicariously liable for a dishonest directors’ conduct unless they are the subject of a section 71(4) immunity.

Ninth, the Serious Fraud Office should make full use of Unexplained Wealth Orders against those where there is suspicion but no direct evidence of involvement in a criminal offense.

Armed with the mandate, resources, new offenses procedural and procedural changes the Director of the Serious Fraud Office should have little difficulty in creating a motivated and credible prosecutorial organization and therefore a credible deterrent.

For those that would say this is unconstitutional and un-British and will take too long to debate, legislate and implement, I would simply point to the events of the last seven days.

I have spoken exclusively as to the position in England and Wales. But as we all know, this is a global crisis. In addition to open door cooperation in respect of allegations of fraud, all governments should be looking at their deterrent structures to ensure they are effective. Where they are not they should be changed.

The analogy of war has been used by many world leaders in the last seven days. In this war, liquidity is ammunition and we do not want anyone stealing that ammunition unfearful of the consequences. Less Churchillian perhaps, our government owes it to the health care workers, whether consultants or cleaners on minimum wage who are risking their lives on a daily basis, that dishonest people are deterred from profiting out of this crisis.

To adulterate Dickens, These times bring out the best and the worst. And the worst should be investigated, convicted and punished.

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  1. Bill you are right, there will be many genuine applicants for funding and a significant number of fraudsters.We also need to follow some of the American systems for seizing assets.I suspect the true amount of assets seized and either returned to the victim or used in fighting crime is relatively small when compared to the amounts stolen/fraudulently obtained. Cooperation between the private and public sector is an important ingredient to fight crime.

  2. Bill. What an excellent summary of the past failures, current inevitability of the dishonest trying to gain the maximum selfish advantage and, unusually, offering solutions. We all hope Government is strong enough to grasp the nettle- and quickly.

  3. Bill, good and timely article. We are in the equivalent of a wartime environment for the next few weeks/months with lives on the line. In both the First and Second World Wars racketeering and profiteering from the misfortune of others was heavily stamped on and prosecuted with tough sentences. Police are already diverted to ensuring the lockdown is followed and in so must follow up on obvious racketeering. Perhaps efficient, quick prosecution, and heavy punishment under existing legislation is a good start? Thanks again and stay safe

  4. Never let a good crisis go to waste. These may be good ideas but the priority needs to be filtered down to other agencies too. A cardiologist rightly got roasted in The Times for profiteering on sales of genuine testing kits via a dodgily named company. But as the enduring popularity of Thr Third Man shows, it is counterfeit stuff that is far more harmful. The NECC is our new co-ordinating body and can play its part, but this should filter down through the over-stretched police and run-down Trading Standards to put into action. It’s a moot point whether all COVID-19 scams are worse than others, but perhaps a blitz might warn fraudsters off this area of morale damage. But with courts closing, we need imaginative processes.

  5. Bill they should put you in charge of dealing with it- very good piece and just so appropriate Leslie

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