Serious Fraud Office
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Director Ephgrave’ speech at RUSI 13 February 2024

On Tuesday 13 February 2024, Nick Ephgrave QPM gave his first public speech as Director of the Serious Fraud Office (SFO) to an audience which included representatives from the media, the UK criminal justice sector and law enforcement partners, at the Royal United Services Institute (RUSI) in London.

Speech by the Director of the Serious Fraud Office (SFO), Nick Ephgrave QPM

Royal United Services Institute, 13 February 2024

Thank you for attending this my first official engagement as the Director of the SFO. I am delighted to be at the Royal United Services Institute (RUSI) for my first public speech.

I am going to set out the geography of the evening. I will speak for about twenty minutes: I will talk about the history of the SFO, about what the SFO does well – we do a lot of things rather well – and reflect on some of the challenges we face as an organisation. And then, the big reveal, the bit that most of you are interested in, I will set out what I will do as Director of the SFO.

Unlike all my predecessors, I am not a lawyer, rather I am a law enforcer. That has been my professional life for over 30 years, and it has been very rewarding. I am incredibly proud to have been appointed to lead the SFO at this moment – in this challenging time – and I must say that I have been absolutely bowled over by the professionalism, dedication and enthusiasm from my team, from the moment I walked through the doors. Everyone has been absolutely welcoming.

I also want to tell you this, something about me: whenever I read a victim statement, whenever I am briefed on the damage done to this country or the misdeeds of large corporations, I have a visceral reaction to it. My hackles rise. I have this urge to bring them in, and bring them to justice securely and quickly. That’s how I feel about it. Maybe you feel this way too. I think it’s a really important message to get out there: I am absolutely committed to the SFO’s mission. That approach – that visceral reaction to criminality – will inform the sort of approach I take as Director.

Complex fraud is not new. The first recorded example I could find, dating back to at least the year 300 BCE, was when a Greek merchant took out a large insurance policy known as “bottomry”. The merchant borrowed money against his vessel and cargo but secretly intended to offload one and sink the other, thereby doubling his money. Unfortunately for him, the plan failed because he was discovered by his crew.

Not all fraud is so easily solved, and the opportunities presented by the modern world for fraudsters to do their business present a real challenge for law enforcers, whoever they are, whether it is the SFO, National Crime Agency (NCA) or domestic police forces. It presents real difficulties for us all to keep up – if not get ahead – of the criminal.

This is not recent, and this is not an issue of the digital age. This is long-running issue. So much so that the government, in the 1980s, was so concerned about the ability of this country to tackle serious and complex fraud, that it set up the Serious Fraud Office, and matched it with a unique set of powers. And our team has evolved over the years, so not only do we have lawyers, investigators, forensic accountants, we also employ data experts, crypto experts and so forth. And ever since it was founded, it has been true to say that the SFO has been at the cutting-edge of tackling fraud, bribery and corruption, and it has brought some of the biggest cases of fraud, bribery and corruption this country has ever seen.

The SFO has brought justice to tens of thousands of victims, and I’m not just talking about high-rolling city investors or blue-chip companies. I am talking about hardworking people who thought they were making safe and sensible investments to protect themselves in their old age, perhaps to look after their family, so they could live in some comfort after working for forty years; these are the people the SFO is looking after.

We’ve currently got a case on our books with over 40,000 individuals who have lost their money; and in the Buy2Let car scheme, £88m worth of ordinary people’s money was invested and then lost.

And it’s not just individual victims that we look after, we take on a cases where the UK itself is the victim. And the case I’m thinking of here is one we charged in September, Patisserie Valerie, a bakery chain. That was 70 shop fronts empty around the country, 900 jobs lost. This is serious stuff.

Then you go to the other end of the spectrum, where we also operate. Over the last four years, we’ve had some significant successes from companies. We agreed the biggest ever deferred prosecution with Airbus, worth €1bn. We successfully prosecuted Glencore. It paid £280m in total. So we are operating at that end as well.

But even that these cases do not show the full breadth of the SFO’s impact. Behind the scenes, we are always looking at ways to pursue fraudsters even beyond conviction. Our Proceeds of Crime team is currently looking at recovering £500,000 from a fraudster based in Lebanon to return it directly to victims. Only a couple of months ago, we successfully prosecuted a former solicitor who was tipping off his client in relation to a money laundering investigation he thought his client should know about, and, finally, we prosecuted a fraudster who was breaching an order by changing his name in an attempt to conceal his history.

In the last five years, we have generated £1.1bn for HM Treasury. That is a return on investment of 317%. For every pound put into the SFO, we give back three. If there wasn’t a better argument for investing in the SFO, I’m not sure what this is.

But we face increasing challenges. The SFO doesn’t win every case, nor should we in a robust justice system. It would be wrong if we did. If you think about the prosecutor’s maxim ‘the prosecution enjoys no victories, suffers no defeats’, that’s how we have to look at these things. Our job is to investigate, and if we think there is enough there to bring charges we take it to court, in front of a judge and jury. The jury does the rest. And that’s how it should be. However, the scale and complexity around us, the costs that are wrapped up by us, and the people who are defending cases against us, means that the consequences of failures are potentially very significant to us – both reputationally and financially. I want to say at this point that, whilst that risk is very clear and ever-present, that does not diminish our appetite one drop to take on defendants with big pockets. If the evidence is there, we will build a case and take it to court, irrespective of how rich or well-resourced you are, because that’s the right thing to do.

The second point I will talk about is time. That’s understandable when you consider our teams must comb through – what is often tens of years of financial records – they have to trace the movements of money across the globe, and extract information from far-flung jurisdictions. All of this takes time and of course the passage of time tends to degrade evidence, memories fade and willingness to participate diminishes. So we must do all we can to try and contract the time between investigation and prosecution. This is a real challenge for us.

Thirdly, and this will come as no surprise to you, our cases generate enormous amounts of data. The largest case at the moment, an active investigation, that involves at the moment 48m documents, or 6.5 terabytes of data. You can imagine what that kind of disclosure burden this presents for us, with the constant pressure of court timeframes, ongoing defence requests and the spectre of making a mistake hanging over us. One mistake, and all of a sudden, the ship will be dashed. We estimate that the cost of disclosure – just disclosure – gobbles up around 25% of our operational budget. That is an awful lot.

Having said all of that, and having been in post for only four months, I must say I am very optimistic about our future. We have the right team of experts and people with great experience, great knowledge and a great breadth of legal team, a fantastic investigative team, wonderful forensic people and fantastic logistics support. If anyone can take these challenges on and make a success of it, the SFO can. I am absolutely convinced of that.

Under my leadership, the SFO will play a greater role in the national effort to tackle fraud. I am already looking at ways in which the SFO can support the Government’s Fraud Strategy. We are active partners in the Government’s ‘Stop! Think Fraud’ campaign that was launched this week, and I am sending my staff to the National Economic Crime Centre (NECC) to look at how we can better engage with them, perhaps embed our people over there, as it’s really important that our experience and our insight informs the national strategic threat assessment, and that the SFO is writ large in the ambitious control strategy that are generated from that assessment.

Under my leadership, SFO cases will be faster. I have already described how our cases are complex, multijurisdictional and have huge volumes of data. That doesn’t mean there though that there aren’t things we can do to crunch the timeline. I know how dangerous extended timelines can be, both financially and for victims. I have already brought in measures to try and address some of this.

The first is the introduction of the introduction of a rigorous and intrusive review process on our active cases, to make sure that we are continually focusing in on the core issues of our cases and not allowing ourselves to wander off. I am introducing a wider range of investigative techniques that is commonplace elsewhere and takes us straight to the evidence. Thirdly, something we are piloting already, is something called “technology assisted review”, which is a form of machine learning to assist our disclosure obligations and try to provide a speedier review process.

Under my leadership, the SFO will be bolder, more pragmatic, more proactive. This means we won’t be afraid to shut down investigations, if it is increasingly apparent it is never going to reach the threshold for charge. We can redirect those resources to cases that have momentum, where there is a greater chance of us getting the person in front of a jury. That has got to be a good use of resources if you ask me. We have to be bold and make these decisions, that’s my message to you.

This is a hard message to you, but we have to do it, otherwise we end up in decade-long investigations. This means more dawn raids and swifter action – we have already gone through more front doors in the last three months than in the last three years. Why? This provides momentum to the investigation, it gets people in an interview room, you look them in the eye and start asking questions, put them under some pressure, search the house, crack the evidence, why wait?

We need to be bolder and explore new ways of doing things. I have already talked about the technology assisted review, and I want to be the first to prosecute someone under the new provisions of the Economic Crime and Corporate Transparency Act. There are great new tools, let’s be bold about using those.

Under my leadership, SFO will become the collaborator of choice for other agencies. When the Met came to us very recently with the Axiom Ince case, I agreed that this was exactly the kind of case that we would lead on, with our expertise, experience and specialism. But only if the Met would help us with the arrests of suspects – so that’s what happened. We took on job, the Met did the arrests, we used their police stations for the interviews, and we are the leading the investigation. That’s what happens with you bring two organisations together, you get a result. This approach is a great example of bringing the capacity and capability of more than one organisation to bear, that neither organisation could achieve on its own. One organisation did not have the people and the other the expertise.

And more recently we got involved in a joint endeavour with the NCA taking on organised criminals conducting fraudulent activity in a foreign jurisdiction. Outside this jurisdiction, we haven’t got all the capabilities to pursue that, while the NCA don’t have the forensic accounting skills. It’s another example of bringing the capacity and capabilities of two organisations together.

In summary, under my leadership, the SFO will become an organisation that is characterised by its strength, its dynamism, its confidence and its pragmatism.

If we are serious about SFO cases being quicker, then we need to focus on intelligence, and the information that we gather at the outset. We get referrals from all sorts of sources. But our cases that take five or six years, how much quicker could they be if we could access “smoking gun” evidence. Evidence that was actually there when it happened. Have access to the documents that prove the case. How might we do that? I will give you two possible suggestions.

RUSI, our hosts tonight, are conducting research on the idea of incentivising whistleblowers. I think we should pay whistleblowers. If you look at the example of the United States of America, their system allows that, and I think 86% of the $2.2 billion in civil settlements and judgments recovered by the US Department of Justice were based on whistleblower information. Since 2012, over 700 UK whistleblowers have engaged US law enforcement. This is not just about the SFO. I would invite us to think about whether or not we want to consider incentivising whistleblowers, it has many benefits.

Similarly, looking to one eye across the Atlantic, we have fantastic legislation here which allows us to encourage assisting offenders to progress our investigations. In the US, it is done without any question. My own research suggests that over here the use of the Serious Organised Crime and Police Act is not well-developed. We seem reluctant, culturally, to do it. It is not used very often and yet the benefit are enormous, both to the defendant, who could get a reasonably decent reduction in sentence, and to us, as it can provide us with the evidence we need to prosecute a case more quickly.

Put those two things together, the incentivisation of witnesses and better use of the assisting offenders legislation, and we have the building blocks for a much quicker and more efficient way of dealing with big cases.

I am really dedicated to the mission of the SFO. Under my leadership, the SFO will not only be really effective, by fast and rigorous prosecutions, but also be a major contributor to the national intelligence picture so we can better understand our security threat. But of course we will put our weight and our expertise also behind prevention initiatives. I aspire for us to be the collaboration partner of choice, both in this country and abroad. In that role, if we do those things as an organisation over the next three or four years, I think that is the way in which we will fulfil our mission, which is to protect the country’s economy and reputation, and bring justice to those victims who have suffered from callous and deeply unpleasant fraudsters.

 

Channel website: https://www.sfo.gov.uk/

Original article link: https://www.sfo.gov.uk/2024/02/13/director-ephgrave-speech-at-rusi-13-february-2024/

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