Jennifer Craven: We need to work together to tackle the rise of financial crime



Jennifer Craven

Jennifer Craven, lawyer and civil fraud and asset recovery expert at law firm Pinsent Masons, writes on the rise of financial crime in the UK.

It is estimated that fraud costs the UK economy £190bn a year according to The Annual Fraud Indicator 2017, while a report by PwC found that the number of UK businesses which had experienced bribery and corruption in the last two years had jumped to 23 per cent from just six per cent in 2016.

For those of us advising businesses on how to counter bribery and corruption, we look forward to the findings of a House of Lords Select Committee which is examining whether the Bribery Act 2010 has led to stricter prosecutions of corrupt conduct, higher conviction rates, and a reduction in such conduct, and importantly the impact the Act has had on small and medium enterprises (SMEs).

The Act has undoubtedly generated headline grabbing prosecutions and facilitated agreed settlements with major businesses which have paid out multi-million-pound fines. Indeed, Scotland’s Crown Office & Procurator Fiscal Service (COPFS) has proven no slouch when it comes to recovering significant sums of money through the self-reporting mechanism, by which companies that have failed to prevent bribery enter into an agreement to pay over any profit earned from a bribe in return for avoiding a criminal prosecution.

However, the Act has also been criticised for being uncertain and causing confusion, especially for SMEs which may not have easy access to advice as to what may constitute “adequate procedures” to prevent corrupt conduct – which are key to avoiding being held liable for an agent’s payment of a bribe.

The COPFS recently received £3.6m of additional funding to recruit more prosecutors to handle increasingly complex cases. Any additional funding is to be welcomed but the reality is that across the UK, law enforcement bodies face major budgetary pressures. Bribery and financial crime cases require significant resources because the investigations are complex, document heavy and cross-border in nature. Obtaining admissible evidence from overseas is challenging and building a criminal case can take years of work and significant funding. For example, the Serious Fraud Office received £21.4m extra funding to investigate Libor rigging and it regularly receives “blockbuster” funding of £2.5m or more to investigate individual cases.

As well as criminal enforcement, in the UK courts there are a range of civil law remedies available to businesses which are victims of bribery. Civil redress is often quicker and more effective than waiting the outcome of a criminal investigation and prosecution.

For example, an organisation which has been a victim of a bribe may be entitled to damages and can employ methods to follow or “trace” the bribe into a recipient’s hands. The organisation may also have better rights to recover it even where the agent may have become insolvent. In addition, a claim against the person who paid the bribe or the business for which he acts, could also be pursued.

Often when a business identifies that a bribe has taken place, it will incur extensive investigatory costs as it engages forensic accounting specialists and legal advisors to examine email trails, documents, computer systems and infrastructure, to pinpoint how the fraud took place and to avoid a repeat. It may be possible to recover some or all of such costs (often millions of pounds) through a civil action.

The Select Committee report will hopefully prove to be a definitive assessment of how effective the Act has been in reducing incidents of bribery and corruption over these past seven years since it came into force. But alongside that, increased awareness and implementation of civil law remedies would increase the number of culpable individuals who are held to account (and the number of victims who achieve a form of redress). Businesses and public prosecutors can and should work together to tackle the rise of financial crime, thereby ensuring that the UK remains a clean and safe place to do business.