The British Are Coming: The Redcoats Get Serious About Prosecuting International White-Collar Crime

United States financial entities and their individual employees should be aware that a new sheriff is in town. Last week, the United Kingdom’s Serious Fraud Office (SFO) brought criminal charges against three American bankers in connection with its ongoing investigation into the rigging of the interest rate benchmark known as LIBOR. The SFO’s press release was two sentences in length: “Criminal proceedings by the Serious Fraud Office have commenced today against three former employees at Barclays Bank Plc. . . in connection with the manipulation of LIBOR. It is alleged they conspired to defraud between 1 June 2005 and 31 August 2007.”

The brevity of the SFO press statement pales in comparison to the page-long press releases and public announcements typically issued stateside by the Justice Department, which similarly has been pursuing wrongdoing in connection with manipulation of the LIBOR. In true American fashion, federal prosecutors aggressively have pursued financial institutions since the financial crisis of 2008. Ironically, these efforts are sometimes criticized as too much by American lawmakers who believe that over-regulation of the financial markets will cause American-based corporations to relocate to the United Kingdom where regulators are “more collaborative and solutions-oriented.”

To date, even though the LIBOR scandal originated across the pond, British prosecutors have been slow to react, mostly piggybacking on actions initiated by United States prosecutors. These coordinated efforts are not limited to LIBOR cases, but include the investigation of violations of the Foreign Corrupt Practices Act and money laundering statutes. Recent events, however, suggest that British authorities are no longer satisfied simply to support other nations’ law enforcement officers in their efforts. As British prosecutors take a more active role in white-collar investigations, they also appear to be abandoning their more conciliatory approach for an American model.

English: Reenactors in the uniform of the 33rd... (Photo credit: Wikipedia)

The SFO is an arm of the United Kingdom government accountable to the Attorney General.  It is responsible for the investigation and prosecution of suspected cases of serious or complex fraud where £1 million or more are involved or where more than one nation is involved. For years, the SFO suffered from poor management and the agency was the subject of controversy in February 2012 when it was forced to concede fundamental errors in a search warrant used in the agency’s largest investigation of the past 10 years.

In May 2012, David Green, a former prosecutor and criminal defense attorney, took over as director of the SFO, vowing to change the organization’s strategy and operation. He stated, “A perception has emerged that we are more inclined to settle than prosecute. . . I think there is a need to rebalance the focus between prosecution and civil settlement.” In his role, Green has worked closely with the Justice Department, particularly in connection with the LIBOR investigation. Together, United States and British authorities have charged a number of individuals and fined various financial firms to the tune of more than $2.7 billion for manipulation of interest rates. Green also has initiated a highly-publicized bribery investigation against the automaker Rolls Royce and recently announced the freezing of $23 million of assets in the United Kingdom in connection with a money laundering investigation arising from suspicious activity in the Ukraine. Noteworthy, however, is that many of the investigations listed on the SFO website were undertaken in conjunction with the United States and other nations.

In addition to working closely with American prosecutors in the investigation of white-collar crime, British prosecutors are adopting American prosecutorial practices. In February 2014, a law was implemented in the United Kingdom to allow for the use of deferred prosecution agreements. Commonly used in the United States, particularly in prosecutions related to the financial crisis, the new British law allows prosecutors to rely on DPAs in connection with the prosecution of companies in economic crime cases. Green observed that the use of DPAs would allow British prosecutors to avoid “collateral damage” to employees and shareholders that occurs when a company goes out of business after prosecution.

Despite good intentions and purposeful actions, the SFO still suffers from a lack of resources, which may hinder its ability to team with the Justice Department in attacking financial crime. In January 2014, the agency requested £19 million from the British government “to meet an urgent cash requirement on existing services” and to “settle material liabilities.”

Policing the highly sophisticated financial machinations in complex fraud cases is a task that demands a tremendous amount of resources and manpower. According to the SFO, “The challenges we face in pursuing proceeds of crime are not funding issues. We are involved in the pursuit of some of the most financially sophisticated criminals in the UK who go to great lengths to distance themselves from their assets and thereby to frustrate the process as much as possible.” Whether the SFO and British prosecutors will be able to become the prosecutorial powerhouse they strive to be remains to be seen. At the very least, it increasingly is likely that international business and individuals will face multinational investigations and prosecutions for financial wrongdoing.

Topics:  Banks, Criminal Prosecution, FCPA, Financial Companies, Interest Rates, Libor, UK

Published In: General Business Updates, Criminal Law Updates, Finance & Banking Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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