2010 - a good year for financial crime?
Picking over the turkey carcass, this seems like the moment to look back over 2010. Has it been a good year for financial crime?
One would have to say that it has. SOCA has received a record number of Suspicious Activity Reports, over 240,000 of them, in the year to 30 September 2010. In the courts some very big cases have come to light. One alleged mortgage fraud case involves nearly £50 million (and will come fully to trial next year). But in some respects these developments are merely 'more of the same'.
There have been some departures from the past however. Notably there have been a couple of major prosecutions against commercial organisations which have taken place simultaneously in UK and US courts.
The first, in March, involved a company known as Innospec Ltd. That company was convicted in relation to the bribery of officials in Indonesia regarding the sale of lead based anti-knocking fuel additives (which were banned long ago in the UK and many other countries on health and environmental grounds). The bribes were intended to block any moves to ban the additive in Indonesia, and so to preserve a lucrative market for the company's product. (Innospec Ltd is a subsidiary of Innospec Inc, a company incorporated in Delaware, which was being simultaneously prosecuted by the US authorities.)
The second case in the UK courts, in December, involved BAE Systems PLC and the sale of a radar system to Tanzania. The company was convicted of failing to keep accounting records sufficient to show and explain the company's transactions. The suggestion was that large payments made to a marketing adviser acting for the company had been used in part to unfairly ensure that the company would win the Tanzanian contract. The monies were recorded as having been spent on 'technical services'. In the US courts BAE was prosecuted in relation to its activities in countries other than Tanzania.
Because each case involved investigations and activities inside and outside the UK and each case was being prosecuted in both the UK and US courts there was a difficulty to overcome arising from the difference in legal cultures. In particular, 'plea bargains' are well recognised in the US but there is no exact equivalent in the UK. The nearest thing we have (officially at least) are the 'Attorney-General's Guidelines on Plea Discussions in Cases of Serious or Complex Fraud'.
A cornerstone of UK jurisprudence is that it is the court, and only the court, acting in public view, which can determine the appropriate sentence for a crime of which the defendant is convicted. So the UK prosecutors cannot offer a binding 'deal' as to what the punishment will be on a guilty plea. However the prosecution and the defence are permitted, in certain types of case and in accordance with procedural safeguards, to make a joint submission to the court highlighting an appropriate sentencing range for the offence. This is not binding upon the court when sentencing.
In US federal courts however the prosecutor may make a recommendation to the court specifying the sentence to be handed down on the guilty plea. The court may reject that recommendation but, if it does so, the defendant then has the opportunity to change to a 'not guilty' plea - necessitating a full trial.
So a US prosecutor can say to a defendant, "If you plead guilty the sentence will be 'X'" - but a UK prosecutor can only say, "If you plead guilty we will submit to the court that the sentence should be in the region of 'A' to 'B' but the actual sentence may be higher".
In a major investigation the defendant knows that the prosecutor finds a guilty plea very attractive in terms of saving work and expense for the prosecution, as well as providing the certainty of a 'result'. So the offer of a guilty plea is a major bargaining chip. But the prosecutor in the UK is restricted in what he can offer in return to seal the deal.
What we have seen is UK prosecutors going to some lengths to offer as attractive a 'package' as they can to get that guilty plea. In the BAE case the 'deal' was that BAE make available £30 million for the benefit of the people of Tanzania and to pay any penalty imposed by the UK court. So the total cost to BAE was, in effect, capped. The court's role was limited to deciding how much of that £30 million was to be paid to the UK authorities and how much was left to go to Tanzania.
In the Innospec case the UK court was virtually presented with a fait accompli and it fell in with the arrangements negotiated covering both the UK and US jurisdictions.
In each case the UK judges grumbled - but there was not a lot they could do without wrecking years of work by prosecutors. We may see more such innovative deals in 2011.
Closer to home, my own firm has had a record year in 2010. We have dealt with a range of cases from benefit frauds, to thefts by employees, to financial aspects of road haulage offences, to organised thefts of high value cars, to multi-million pound confiscation cases. A real mixed bag - and very interesting too. And there are some tasty cases brewing up for 2011.
So, onward and upward!
Shock news for major company - your customer "William Shakespeare" is a fraudster using a false nameComments: 13