Centre for Legal Research


Just showing posts from July 2016

Just when you thought it was all over? 

Posted by Lauren Rees | 0 comments

Dr. Nicholas Ryder, Professor in Financial Crime, Department of Law
It has been just over two weeks since the United Kingdom decided to leave the European Union (EU) in one of the most controversial political campaigns in modern history.  The decision to leave the EU has resulted in an unprecedented level of political and financial instability, yet one important point that has been dramatically illustrated has been the accountability on those who supported the ‘Leave’ and ‘Remain’  campaigns.  There have been casualties on both sides.  The Prime Minster; David Cameron has tendered his resignation along with Nigel Farrage.  However, both of these were spectacularly overshadowed by the decision by Boris Johnson not to run for the leadership of the Conservative Party.  It is extremely rare, for such a high number of political casualties to fall on their swords in a short period of time.  So, how is this relevant to the financial crisis and financial crime?  There has been a consensus amongst commentators, my self-included, that there has been a distinct lack of accountability for those in the financial services sector who contributed towards the most recent financial crisis.  City Regulators have responded to breaches of the rules and regulations by imposing huge financial penalties on a wide range of financial institutions.  For example, the Financial Services Authority, now the Financial Conduct Authority, have continued to adopt what has been referred to as a ‘credible deterrence’ approach.  In 2007, the FSA imposed a total of £5.3m financial penalties on firms and individuals.  A year later, the FSA reported that the figure had increased to £22.7m.  In 2009 the total amount of financial penalties imposed by the FSA had risen to £35m.  The figures for 2010 and 2011 illustrated an increase to £89.1m and £66.1m.  By 2012, the total amount of financial penalties imposed by the FSA, totalled £311.5m.  This amount of fines paid in 2013 increased to £474.2m.  However, these figures were dwarfed in 2014, when the FCA announced it had collected fines totaling £1.47bn.  This amount of fines imposed in the UK by the FSA and FCA since 2011 have been heavily influenced by the imposition of a series of record fines due to the LIBOR, FOREX and gold rigging scandals.  For example, a £59.5m fine on Barclays, £160m fine on UBS, £87.5m fine on RBS, ICAP £14m, Rabobank £105m, Barclays £26m, Lloyds Banking Group £105m, UBS £223.8m, RBS £217m, JP Morgan £222m, HSBC £216m and Citibank £225m.  It could be suggested that these figures represent ‘media friendly’ sanctions that failed to prevent future misconduct.  The United Kingdom’s approach towards prosecuting alleged white collar criminals has come under intense scrutiny since the association between the financial crisis and financial crime has become clearer.  In particular, the role of the Serious Fraud Office (SFO), an independent government department that investigates and prosecutes serious, complex fraud and corruption.  The SFO was heralded at the UK’s answer to the FBI, due to its combined investigative and prosecutorial powers.  However, the SFO has led a troubled life and is perceived by many commentators as a failing organisation.  Its reputation has been tarnished by a several high-profile failures including for example Guinness, Blue Arrow, Maxwell, Levitt and Azil Nadir.  More recently, the SFO has been in the headlines for its handling of the bribery allegations against BAE Systems and its abandonment of the investigation into arms sales in Saudi Arabia.  The weaknesses of the SFO have been highlighted by several reports including the de Grazia Review, HM Crown Prosecution Service Inspectorate in 2008 and 2012.  However, it is important to note that the SFO has increased the frequency of its investigations and prosecutions against its tainted track record.  For example, in 2007 the SFO reported that since 2001 it achieved a conviction rate of 61%.  However, this figure increased to 71% in 2006/2007.  In its next Annual Report, the conviction rate had increased to 68%.  In 2009, the SFO achieved an impressive conviction rate of 91%; however, the figure fell to 84% in 2010, 73% in 2011 and 70% in 2012.  The SFO responded to the drop in conviction rate and achieved an 85% conviction success rate in 2013.  However, the SFO has been able to secure several important convictions in the last 12 months.  For example, in 2015 Tom Hayes was the first person convicted of manipulating the LIBOR rate and was sentenced to 14 years imprisonment after being convicted of conspiracy to defraud.  The sentence was reduced to 11 years by the Court of Appeal in December 2015.  More recently, on Thursday July 7th 2016, four former city traders were also convicted of manipulating the LIBOR and were sentenced to a total of 16 years imprisonment.  The SFO has also announced that it intends to retry two other traders, after the jury could not reach a verdict.  These convictions could be described as a ‘landmark event’ history of the SFO and represent an increased level of accountability for the financial crisis.



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