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17 Oct 2017

Peter Binning and Ben Henriques discuss white-collar crime enforcement in the UK in Financier Worldwide

White-collar crime enforcement in the UK

Although often characterised as a victimless crime, white-collar criminality is no such thing. Rather, it is illicit behaviour that can have the direst of consequences for businesses and individuals alike.

Yet despite its gravity, white-collar crime often goes unpunished. In the UK, this has historically been the case, with authorities more inclined to avoid prosecuting corporate entities in favour of a settlement, an approach that was especially common in the aftermath of the financial crash. However, in the years that followed, regulators and prosecutors have demonstrated a greater willingness to fight cases involving dishonesty and breaches of integrity, a stance held, it would seem, until fairly recently.

Indeed, according to data compiled by Pinsent Masons, the number of white-collar crime prosecutions in the UK fell by 12 percent over the past year, despite an increase in reported cases. Drilling down, the data shows that prosecutions fell from 9489 in 2015 to 8304 last year. At the same time, the number of reported offences increased 4 percent to 641,539 in 2016 up from 617,112 in 2015.

Over the past 12 months, the most commonly-reported offence in the UK was online fraud which, according to a recent National Audit Office report, cost private sector businesses an estimated £144bn and individuals £10bn.

“The UK’s Office of National Statistics (ONS) recorded a 5 percent rise in reports of fraud to the police in 2016/17,” adds Ben Henriques, an associate at Corker Binning. “The number of reported frauds has been increasing for the last five years. The ONS also estimates that there were 3.4 million frauds in the UK in 2016/17, accounting for about a third of the total number of crimes, around 11 million.”

“The simple truth is that, like many other government bodies, UK prosecutors are underfunded,” says Peter Binning, a partner at Corker Binning. “The SFO often has to seek case-specific blockbuster Treasury funding for its bigger investigations, while the Crown Prosecution Service (CPS) has been overstretched for years and has no specific focus on white-collar crime.”

Also important to note, suggests Mr Henriques, is that a cultural shift towards self-reporting and cooperation with the authorities may have resulted in fewer prosecutions being brought. “Companies seek to avoid prosecution for reputational reasons, while self-reporting can relieve the pressure on prosecutorial budgets. The advent of the DPA in the UK, whereby corporate entities avoid a conviction in return for full cooperation, has been a major influence on how companies deal with criminal investigations. There have, to date, been relatively few DPAs, but this may well change as lawyers, courts and companies adjust to the new system.”

While financial constraints remain the likeliest cause of the fall in UK white-collar crime prosecutions, budgetary stringency itself is the result of deeper political factors, suggests Mr Binning. “According to a study conducted for the ONS, white-collar prosecutions peaked at 11,261 in 2011 – two years after the financial crash. After the financial nightmare of 2008/2009, various regulatory settlements made with banks provided the evidential springboard for the prosecution of individuals. There was a perceived political imperative to prosecute individuals found to have been criminally responsible for the financial crash and bring the banks to heel. Those cases demanded huge resources. Over time, however, the attention of prosecutors has turned to other matters; especially international corruption.”

New approach or not, Mr Henriques believes that, overall, white-collar crime is still an important priority for prosecutors. “The activity of markets, regulators and prosecutors has never been greater and companies see the threat of criminal prosecution as one of the biggest risk areas facing business,” he suggests. “Perhaps as important as the views of prosecutors is the attitude of the media, which continues to demand high levels of corporate accountability and this will not diminish.”

At present, however, the reality of white-collar crime enforcement in the UK is defined by agencies that are under-prepared, under-resourced and underfunded to truly get to grips with the enormity of the issue.

Read the full article in Financier Worldwide here

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