In the last few weeks, the so-called ‘NatWest trio’ lost their Enron-related appeal against extradition to Texas, Ian Norris (former CEO of Morgan Crucible) lost the first phase of his defence against charges of price-fixing to avoid extradition to Pennsylvania, and another UK executive is already serving a sentence in the US for allegedly ‘conspiring to bribe’.

The principle that law enforcement agencies must have cross-border powers, including those of extradition, if they are to respond to the growing internationalisation of financial crime is entirely reasonable. Unfortunately, the mechanisms currently giving effect to this principle seem to lack the same degree of reasonableness.

There is a growing realisation that the old rules involving a level playing field are changing and that enforcement agencies will no longer be confined to their own borders in pursuit of those they suspect of financial crime.

Despite the bizarre situation that prima facie evidence is not a requirement for extradition, there is a requirement that the offence for which extradition is sought must be a crime in England and Wales. Therefore, although the stakes have increased and liability has been extended, the underlying cause for which prosecution can be sought has not changed.

In February, the FSA released a paper based on an assessment of how senior management were managing financial crime risk. It concluded, among other things, that firms could do more to effectively manage fraud risk, and warned that boards were not adequately involved in, and had unclear accountability, for the delivery of anti-fraud strategic plans and developments and unclear or inappropriate allocation of anti-fraud responsibilities.

It found fraud losses ‘hidden’ within bad debts, insurance claims and write-off accounts which prevent management from assessing the true fraud risk and taking appropriate mitigating action. It also found that firms that underinvested in anti-fraud systems, controls and processes suffered relatively high levels of fraud losses. Firms continue to assess proposed anti-fraud investments against the same return on investment criteria as marketing initiatives.

These findings seem to indicate that the full implications of the financial crime risks faced by firms (and their officers) are not being sufficiently considered and addressed.

In the absence of such consideration and investment to manage global fraud risks, UK firms and their senior management will continue to be left with an unmitigated risk, which is likely to culminate if further cases similar to those highlighted in the past few weeks.

These previously isolated events may easily become permanent features of our regulatory landscape.

David Sherwin is a partner in the fraud investigation & dispute services practice at Ernst & Young