Beating the fraudsters at their own game.
Serious Fraud Office embraces technology in a record crackdown.
Serious Fraud Office embraces technology in a record crackdown.
State-of-the-art technology may aid and abet criminals, but the benefits of technology do not exclusively lie on the shadier side of the law.
Just as a fraudster can transfer billions at the click of a mouse, so too can fraud investigators download incriminating electronic data at the press of a button.
All those personal emails you thought you had deleted from your inbox – think again.
They still exist in cyberspace. And if you have the expertise, as do fraud investigators and forensic accountants employed at the Serious Fraud Office, these emails are easily retrievable.
Using new technology has not only increased the speed at which cases are brought to court by the SFO, but it also speeds up legal proceedings once in court.
Rosalind Wright, director of the SFO, and now in her fourth year of a five-year tenure, oozes excitement over the fraudbusting organisation’s use of technology.
Handing over the annual report for 2000/2001, Wright quickly finds the page that illustrates exactly what the SFO is doing in the field of technology.
Cases involving large-scale corporate fraud, whether they are civil or criminal, usually feature huge volumes of paperwork – enough often to fill a whole side room of a court building.
And that is during the trial. Imagine the paper work involved in the investigation and the lead-up to the trial. State-of-the-art technology as far as case presentation is concerned is ‘very close to our heart,’ says Wright.
During a trial, the evidence of a fraud investigation is inevitably complex and mountainous.
Presenting this information in court to a lay jury is frequently seen as one of the biggest hurdles in any case.
The SFO has discovered that applying simple, clear graphics to illustrate complex commercial data or financial transactions can help a jury to understand highly intricate cases.
‘In the cases that we deal with, courts are always full of lever arch files, and the cases are terribly paper-intensive,’ says Wright. ‘It all prolongs the length of trials if everyone spends hours looking through files, or looking at the wrong file, for the same document.’
And this use of technology is not just for the jury’s benefit.
‘What we have now is computer screens in front of everyone in court. The other advantage is the real-time transcription of evidence as it’s being given, which is available to the judge and counsel, although not to the jury,’ she explains.
In this way the judge can fully focus on the case at hand instead of having to take down copious notes for summing up. All the judge has to do now is highlight the bits of data on the screen that he or she needs.
But all this is an expensive business, and one that is funded by the taxpayer. Because of a lack of funds, the size of its workforce and little time, the SFO has strict criteria to decide which cases it takes.
Not all cases referred to it will be taken on board.
Referrals of fraud suspicion or allegations are made by various sources.
But it is the police that are the biggest single source – they provide around 60% of referrals.
The Department of Trade and Industry and the Crown Prosecution Service also alert the SFO to cases of suspected fraud.
Financial institutions remain reluctant to report fraud, despite a survey from the Association of British Insurers showing that the cost of crime has reached #35bn, of which at least a third is fraud. Other research reveals that fraud costs the UK between #6.7bn and #13.8bn.
The European Human Rights Act and increased pressure from other sources has meant that the SFO must achieve more demanding targets.
But reductions in police fraud squad resources have done little to help.
A programme of staff recruitment has been implemented to fill the gaps.
And despite the staff shortfall, the SFO plans to increase its workload to take on up to 110 cases by 2004.
‘We took on 20% extra staff on last year. We’ll probably take on another 20% extra over the next three years,’ she says.
To compensate for the decline in police resources, the SFO is ‘supplementing this by employing our own investigators; retired police officers who know the procedures inside out’.
Last year the government did increase the SFO’s resources – #3.5m, #4.5m and #5.5m for 2001-2002, 2002-2003 and 2003-2004 respectively – on the proviso that it committed to deliver more cases more quickly.
Wright reaffirms the government’s support for the SFO and its work, and points to steps the SFO is taking to speed up its work, which include a programme set up by its senior accountant Steve Low.
The SFO’s annual report this year undoubtedly shows that improvement has already taken root.
The SFO achieved its highest ever conviction rate this year despite the sustained drop in police resources – 23 convictions out of 24 trials involving 57 defendants. The result is a 93% conviction rate for the year to date, up 25% on last year.
Last year the SFO dealt with eight trials involving 12 defendants. This year’s conviction rate is also higher than the average for the last five years which was 14 trials and 32 defendants.
However helpful technology is to the fraudbusters, it also accelerates the speed and broadens the scope of crime.
Billions can easily be transferred from one account to the other, but that transaction may involve several countries along the way. Cooperation between jurisdictions is crucial.
‘We’ve helped 22 countries in their investigations this year,’ says Wright, keen to point out that this cooperation will one day need to be reciprocated.
This year’s improved record in combating crime is good news to all those in society who have to pick up the bill – that is essentially all taxpayers.
Yet most frauds still go unreported.
The SFO’s goal is to achieve convictions. Financial institutions, where most fraud is committed, want to recoup any stolen monies and keep the fuss to a minimum to avoid any damage to their reputations. While these aims continue to exist all attempts to stamp out fraud can never be maximised and will always work towards helping the fraudster.
On appraising this year’s successes, Wright did show signs of understanding other priorities. ‘We even recouped quite a bit money stolen in some cases,’ she noted. Maybe it is time not so much for a review of priorities, but a merging of them.
The SFO’s website is at www.sfo.gov.uk
SCAMS OF THE YEAR: cases concluded in year to April 4, 2001
These are the subject of cases concluded by the SFO during the year, most of which resulted in lengthy prison terms for the perpetrators.
– Stock market rigging
– Housing properties
– Solicitor plunder of client accounts
– Legal Aid Board defrauded
– Investments in ostrich breeding
– Insolvency practitioner sells liquidated assets
– Street market traders defraud suppliers
– Forged grain warrants
– Whisky investments
– Travel agent diverts funds for personal use
– Bodycare products
– Invoice factoring
– Corrupt payments for cable laying contracts
– Luxury car hire fraud
– Contracts to build power stations in China
– Managing a business while an undischarged bankrupt
– Millennium champagne
– Equestrian set deceived
– Defrauding United Mizrahi Bank
– High yield trading programmes
– Defrauding company creditors
SFO CASELOAD (at 4 April 2001)
Cases under investigation: 50
Proceedings instituted: 1
Awaiting trial at Crown Court: 16
Trials part heard: 3
Total active case load: 70
FRAUDBUSTER-IN-CHIEF SPEAKS OUT
‘The SFO continues to maintain a certain prominence in the public eye and it is encouraging to see that newspaper reports have given us a fairer crack of the whip than in past years. Fewer derogatory headlines however do not indicate that we are any less active than before. On the contrary, the work is unremitting, increasingly complex and difficult and the demands on our resources are constant and heavy. A more favourable press is perhaps an indicator that we are seen to be progressing steadily and successfully, as I believe we are.’
– Rosalind Wright SFO director
A successful SFO prosecution: Australian Evelyn Burton, 57, a former brothel madam with her partner Lyla Andre, 50, is pictured outside London’s Wood Green Crown Court in February, before being jailed for five years.
Lyla Andre got three years eight months.
The couple wooed the ‘horsey set’, rubbing shoulders with the Queen, with tall tales of investment returns.
Giving the impression that they could provide attractive returns on investments, they duped ‘clients’ and creditors out of #3m. According to the SFO annual report: ‘They set out to dazzle, but the facade hid an empty operation built on greed and self-indulgence.’
Burton pleaded guilty to one court of conspiring with others to defraud investors, while Andre admitted she had dishonestly retained a wrongful credit and had also evaded a liability by deception.