Fraudbusters gear up for a deluge of new cases in the wake of pandemic
Unprecedented amounts of help on offer to business will throw up big issues, says Michael O’Dwyer
Britain’s top fraud-busting squad could be facing its toughest test yet. The Covid pandemic has sparked a much deeper recession than the 2008 crisis, which gave rise to blockbuster cases such as the rigging of the Libor interest rate benchmark by staff at the world’s biggest banks.
Experts warn that an onslaught of new cases is inevitable for the Serious Fraud Office (SFO).
“I envisage that much more serious fraud will be uncovered in the next six to 12 months,” says Sam Tate, a partner at law firm RPC who specialises in white collar crime and investigations.
“The SFO will be even more relevant than it has been before, post pandemic.”
Under its current director, Lisa Osofsky, the SFO has opened only a small number of new investigations, including into Patisserie Valerie, the cake chain hit by an accounting scandal, and London Capital & Finance, the collapsed minibond firm.
Osofsky, a former FBI investigator, has said that the fresh probes “are going somewhere” but her two years at the agency have been associated more with closing existing cases then pursuing new ones.
The pandemic could provide the catalyst for the prosecutor to launch more cases and improve its mixed performance during recent months.
A record €991m (£895m) settlement with Airbus for “endemic” bribery was the largest of four such deals in the past year but the acquittal of all defendants in a long-running Barclays trial was a major blow.
Corporate lawyers see disputes and investigations as a counter-cyclical business. When the economy slumps, cases spike. Economic crashes often lead to previous bad behaviour being uncovered as lawyers, accountants and insolvency practitioners rake through the ashes of failed businesses.
Osofsky has signalled she is ready to grab pandemic-related cases with both hands, saying she is keen to take on cases where people have been harmed.
The crash of 2020 has been met with an unprecedented wall of public money in the form of business loans, grants, wage support and more, offering another incentive for fraudsters to take advantage.
“A lot of this fraud is going to relate to the misuse of our [taxpayer] money so there is a real public interest in investigating those matters and acting as a deterrent for future [misuse] of bailout funds,” says Tate.
The Department for Work and Pensions estimates that 7.6pc of the £18.4bn spent on universal credit in 2019-2020 was attributable to fraudulent overpayments.
In addition to tackling pandemicrelated fraud, some of which will fall to other agencies, the SFO will be eager to get results in existing cases.
The City is rife with speculation that mining giant Rio Tinto is nearing a deal to avoid prosecution over alleged
‘A lot of this fraud is going to relate to the misuse of our [taxpayer] money so there is a real public interest here’
bribery in Guinea though neither it nor the SFO has confirmed this.
Osofsky will also need to decide whether to persist with inquiries into Eurasian Natural Resources Corporation (ENRC). The investigation into the former FTSE 100 miner has been beset by legal challenges since it was announced in 2013.
One City lawyer says the case “has been a s---storm for the SFO”.
The SFO will also have to get to grips with Brexit. Without an agreement between the UK and EU, extraditing suspects from EU countries could be more difficult. The Euribor investigation was shut in June after France and Germany refused to send suspects to the UK.
It took a decade for alleged frauds from the 2008 crisis to reach a conclusion. Some, such as the Barclays trials, ended in painful and very public defeat for the prosecutors. If it is to avoid a repeat this time around, the SFO will need to move quickly.