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MAR
04

The Bell Tolls for the SFO – by Siobhain Egan

This Thursday's Public Accounts Committee hearing should be an interesting one for all serious fraud defence lawyers. The SFO's former Director, Richard Alderman, and the Current Director David Green QC are likely to be "on the rack" and will face some tough questioning about a range of issues, not least the seemingly generous and the allegedly "unauthorised" severance payments to senior members of staff. Though I doubt that I am alone when I express some cynicism that these payments were as "unauthorised", as we have been led to believe.

The history of the SFO has been a sorry one; it began with so much promise. Those of us who have been defending SFO cases for some time will remember how the legal profession regarded a position at the SFO as a prestigious one. Things seemed to go wrong when they failed to recruit senior experienced criminal lawyers but rather preferred to attract corporate/commercial lawyers from the City, often on secondment. Most of the SFO directors, until the appointment of David Green QC, also hailed from City commercial backgrounds which meant that the SFO leadership knew very little of the cut and thrust of criminal law and how to deal with good, aggressive, successful defence lawyers (a breed apart).

It is this leadership weakness which is responsible for the problems that the SFO now face. I have heard many reports from those who have worked there of poor management, poor leadership, poor communication... there seemed to be very little team work. Various specialists such as the lawyers, accountants and financial investigators refused to speak to one another. Much of the decision making was "risk averse".

As a result there was a constant stream of talented experienced staff defecting from the SFO, which has to have contributed to the string of high profile prosecuting failures, not least the appalling treatment which the Tchenguiz brothers suffered.

The Tchenguiz brothers have comfortably and confidently launched a claim for damages in excess of £300 million, reportedly. This means that, it is likely that the failures of the SFO will be exposed, again, in a high profile trial, albeit a civil one.

Richard Alderman looked to our American cousins for a possible solution to the SFO's dismal prosecution record and he found that the US authorities have been experiencing great success with Deferred Prosecution Agreements. This meant that those deemed to be Corporate crime offenders could avoid an expensive criminal prosecution as long as they self reported, paid eye watering sums and promised to behave properly in the future after installing state of the art compliance systems. Mr Alderman was very keen on this, and we now find that DPAs are to be enshrined soon in statute (s32 sch 16) Crime and Courts bill, and will be used when the SFO, primarily, investigates corporate offending, including bribery/corruption, money laundering and fraud.

It is suggested that a large portion of any fines paid under DPAs will be used to support the SFO's work.

David Green QC, when appointed, decided to take a slightly different approach, stating in last Autumn that despite DPAs coming into force, criminal prosecutions for this type of offending were not off the table. He remained silent on the issue of self reporting.  Private Eye in January 2013, stated that they believed that there were 20 bribery investigations on the desks of the SFO, none of which have been deemed suitable for prosecution. It is suspected that these will be dealt with using DPAs.

The problem which the SFO will have is that they are no longer perceived as a real force amongst seasoned defence practitioners because essentially that their budget has been slashed to £33 million in 2013 and again in 2014 their budget will be further reduced to £29 million. These sums sound huge, but in reality go nowhere when dealing with allegations of offending by multinational companies across numerous jurisdictions.

So many of the large corporates will be asking themselves why bother self reporting if there is little to fear from a crippled prosecuting agency without the money to prosecute.

Adding further insult to injury, there have been various inquiries into whistle blowing complaints made by SFO staff, namely a Cabinet Office inquiry which did not find any wrong doing and a more recent inquiry by Treasury Solicitors (TSOL). The latter inquiry again focused on whistle blowing evidence, according to reports in the Financial Times (03/03/2013) alleging that the SFO's digital forensic unit was not fit for purpose, that the SFO management were aware of this and that information relating to the quality of this evidence should have been disclosed to the defence. It is suggested that this may open the door for appeals against conviction for the relatively few that have been convicted by the SFO or who pleaded guilty. It will certainly have an impact on any confiscation orders made in those cases. According to Caroline Binham's article in today's Financial Times, it is unlikely that the results of that internal inquiry will be published. I would strongly suggest that the defence profession will be clamouring to see that report in order to ascertain if it will affect their client’s case, and that it will probably see the light of day, eventually.

What lies ahead for the SFO? Very likely it will be absorbed into either the new National Crime Agency or the CPS, though I do not see many largescale corporate crime prosecutions in the future. More likely, these agencies will follow the DPA route should they find any corporates willing to engage with them.

For more information on SFO prosecutions & investigations contact our serious fraud solicitors in London now - click here.

 

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MAR
01

Tax Evasion Agreement with the Isle of Man – by Siobhain Egan

The Government recently agreed action with the Isle of Man to clamp down on those who try to hide their money offshore.

The move forms an integral part of the Government's offshore anti-evasion strategy which will be published later this year. The package includes an automatic tax information exchange agreement and the setting up of a disclosure facility.

The disclosure facility will allow investors with accounts in the Isle of Man to come forward and settle their past affairs before information on their accounts is automatically shared.

Under the automatic exchange agreement, a wide range of financial information on UK taxpayers with accounts in the Isle of Man will be reported to HM Revenue & Customs automatically each year. It closely follows the UK/US agreement to 'Improve International Tax Compliance and to Implement FATCA' (a US law called the Foreign Account Tax Compliance Act) in order to minimise burdens on financial institutions.

"The Government is committed to tackling tax evasion and this agreement will greatly enhance HMRC's ability to clamp down on those who try to hide their money offshore," said Chancellor of the Exchequer, George Osborne. "I welcome the progress made with the Isle of Man and look forward to working on this new standard in the automatic exchange of tax information."

For specialist legal advice regarding tax evasion or defence against any criminal charges relating to tax crimes please contact Jeffrey Lewis or Siobhain Egan on 020 7387 2032.

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FEB
28

Money Laundering Scam Spreading in the UK

Money laundering is often thought of in terms of big business or property transactions, but new figures released this week by Financial Fraud Action UK (FFA UK) highlight the spread of a scam which dupes ordinary members of the public into becoming ‘money mules’.

The scam takes the form of fake job offers, often made online using titles such as ‘Money Transfer Agent’ or ‘Payment Processing Agent’. The recipient of the offer is invited to receive money into their bank account and transfer it to another account, retaining a cut for themselves.

In reality, the money received is stolen, often the result of fraud on accounts, and is then laundered to overseas bank accounts.

This activity is illegal and carries a number of consequences, including a prison sentence of up to ten years.

The research shows that these offers are received by around 15% of adults in the UK – with fraudsters specifically targeting people on low incomes. Of those who have received such an offer, a fifth (21%) admit to having considered accepting the work, and 6% went on to volunteer.

When extrapolated these figures mean that as many as 380,000 people could become unwitting money launderers.

According to DCI Dave Carter, Head of the Dedicated Cheque and Plastic Crime Unit, the scam is the work of determined international criminals, aiming to turn the public into an unwitting army of accomplices to fraud.

Contact our money laundering legal team in the UK

For further information on our money laundering criminal defence services please click here or for our AML business advisory and compliance services click here. To speak to our solicitors, please contact Jeffrey Lewis or Siobhain Egan on 020 7387 2032.

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FEB
27

So what has HMRC been up to lately? – by Siobhain Egan

Well, it seems they have been very busy.

1. They have published a list of "tax dodgers" or deliberate defaulters.

This is the first time that such a list has ever been published. It is a list of individuals who owe at least £25,000, most of whom are sole traders/small companies, a number of whom hail from the North West. These individuals/companies will remain on the list (published pursuant to s.94 of the Finance Act 2009) for 12 months.

However, most of the media reaction to this questioned why it seemed to be only sole traders/small companies on the list and not more high profile individuals or companies? They have also asked why HMRC grant anonymity to those whom they believe have defaulted deliberately and failed to declare tax liabilities on offshore accounts for years and benefited from historic high interest rates. They also accuse HMRC of "naming and shaming" easy targets... hardly the "shock and awe reaction" that HMRC had envisaged.

It’s unlikely that publishing such a list will have any deterrent effect, and frankly, the public are probably more concerned about tax deals that wealthy so called "non-domiciled" individuals and multi-nationals have secured. To label easy targets such as a small hairdressers/building companies, who often provide necessary services to their local community, in such a manner would appear to be very heavy handed. This may backfire on HMRC in time.

Deliberate defaulters will now find themselves within the Revenue's programme "Managing Deliberate Defaulters" (MDD) which means that they will be red flagged for 5 years, subject to surprise visits from HMRC and intense scrutiny.

2. A new Manx Disclosure Facility (MDF) 19/02/2013 has been agreed, which is available for those tax payers with assets in the Isle of Man who have not disclosed their assets/liabilities to the Revenue.

To be frank, the LDF (the Liechtenstein Disclosure facility) has markedly less restrictions and is more favourable. Most experts will be advising their clients to use the LDF.

With MDF the tax payer makes full and complete disclosure to the Revenue, pays the full amount due, and HMRC will then have 9 months to review the disclosure.

It will exclude anyone who has previously been investigated by the Revenue or by virtue of the UK/Swiss tax agreement. Additionally, unlike the LDF (and indeed other disclosure facilities) it does not provide immunity from prosecution.

3. According to the Financial Times (22/02/2013), the LDF has proved to be incredibly lucrative for HMRC; taxes collected through this scheme have doubled, though far short of the £3 billion target that HMRC set itself for 2016 when the LDF scheme finishes. Experts expect increased tax collection from those turning away from the UK/Swiss agreement, and indeed the Manx agreement, because the LDF terms are so favourable.

4. The Revenue successfully prosecuted two Manchester businessmen last week at Liverpool Crown Court, both of whom pleaded guilty to tax offences relating to either non or partial disclosure of monies held offshore. They were sentenced to immediate terms of imprisonment and ordered to pay the missing £500,000.

5. Finally, the next domestic targets are residential landlords either for missing CGT or failing to declare rental income. Expect an aggressive letter soon on your doormat if you are such a landlord!

Need any advice? Worried about the prospect of a HMRC investigation or prosecution? Contact Jeffrey Lewis or Siobhain Egan.

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FEB
18

Slim Pickings for Bribery Enforcement – by Siobhain Egan

The Serious Fraud Office completed only four bribery and corruption cases in the past year (two criminal and two civil settlements), says Ernst & Young’s newly published UK Bribery Digest. The Scottish authorities completed one case.

According to the accountancy firm, no prosecutions have yet been made against businesses under the Bribery Act – despite the law coming into force 18 months ago.

These findings come despite indications from Ernst & Young’s Global Fraud Survey that bribery and corruption has risen over recent years - with 15% of executives saying they would contemplate unscrupulous behaviour including providing personal gifts or cash to secure business.

The survey of over 1,700 CFOs, heads of legal, compliance and internal audit, also showed that the numbers who felt that providing personal gifts to secure business could be justified more than doubled in two years.

“However,” warned Jonathan Middup Ernst & Young partner and UK leader of Anti-Bribery and Corruption services, “the SFO has said it has 11 active bribery and corruption cases and a further 18 under consideration. Given that we are also assisting with a number of issues on behalf of clients we expect that corporate Bribery Act cases will be brought into the public arena this year.”

“Organisations would be unwise to hold back on their compliance programmes just because the courts are currently quiet,” he said.

For specialist legal advice and representation from our solicitors for SFO charges or investigations, bribery and corruption compliance or investigation legal advice, please contact Jeffrey Lewis or Siobhain Egan on 020 7387 2032.

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