The Institute of Economic Affairs has published a paper asserting the Serious Fraud Office (SFO) should be replaced with a new body dedicated to combating economic crime with greater emphasis on prevention.

In the paper, the IEA says the SFO has been plagued by a series of high-profile failures, ‘including ethical misconduct and incompetence’. In cites examples, including from 2021 when a high-profile bribery conviction of a former Unaoil executive was overturned due to the SFO’s failure to disclose key material relating to its director’s ‘inappropriate’ communications with a Unaoil advisor during the prosecution.

Economic crime academics Professor Mark Button, Dr Branislav Hock, and Dr David Shepherd are now calling for the SFO to be abolished and the establishment of a Serious Economic Crimes Office (SECO).

The new body would keep powers to prosecute serious fraud, but would also have new responsibilities to deter fraud before it occurs. The office would be expected to develop good practice advice on prevention in closer collaboration with the private sector. 

According to the report authors, the criminal justice system is incapable of addressing the intricate, technical and complex nature of cases involving serious fraud. This is leading to costly delays and, often, failed prosecutions.

The SECO would instead be encouraged to embrace alternative justice mechanisms, including Deferred Prosecution Agreements and using larger fines. There would also be expanded powers to set standards and impose regulatory sanctions. This would include ‘Ethics orders’, which would require corporations to implement ethics and compliance programmes.

The authors also envisage the creation of a register of serious economic crime offenders, modelled on HMRC’s list of individual and company tax defaulters. A spot on the register could result in prohibition from being a company director or selling financial products.

The report suggests enhancing collaboration with private investigators specialising in economic crime. This could involve staff exchanges or outsourcing partial or full investigations to experienced firms such as Kroll, KPMG, or EY.

The paper says that the SFO’s focus on high-profile prosecutions has diverted resources away from other important areas, such as crime prevention and the support of small and medium-sized enterprises that are increasingly susceptible to fraud. 

The proposed SECO would address these gaps by prioritising a more balanced approach, combining enforcement with preventative measures. 

Professor Mark Button, Co-Founder and Co-Director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth, said: “Serious economic crime is at record level and set to continue to rise. The existing structures and approaches are failing to have a significant impact and this report sets out a wide range of innovative reforms and actions to cope with this increasing challenge.”

Dr Branislav Hock, Co-Editor in Chief of the Journal of Economic Criminology, said: “Segregated serious economic crime policing structure in the UK requires new enforcement authority that operates above the surface of institutional and procedural complexities.”

Dr David Shepherd, economic crime researcher and Senior Lecturer at the University of Portsmouth, said: “The SFO is hamstrung by its focus on criminal justice and courts that are not fit-for-purpose. Breaking these constraints with a revitalised agency, a new identity and a broader range of regulatory-style powers would better serve the public good.”