New Clause 8 - Financial Crime Unit

Part of Financial Services (Banking Reform) Bill – in a Public Bill Committee am 2:00 pm ar 16 Ebrill 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 2:00, 16 Ebrill 2013

I beg to move, That the clause be read a Second time.

It is a pleasure to join you, Dr McCrea, in this Committee. The proposed new clause seeks to instruct the Secretary of State by order to create a new financial crime unit as part of the Serious Fraud Office, which is currently tasked with dealing with what is called in shorthand “white-collar crime”; that includes financial fraud and corporate fraud more broadly.

The reason for tabling the new clause is obvious. Andrew Bailey, the new chief executive of the Prudential Regulation Authority, was reported in the papers today as saying that it was “odd” that nobody had been locked up as a result of the banking crisis of several years ago. The flaw in the system is obvious. We do not have strong enough investigatory and prosecuting capability to ensure that, where we do have laws to capture serious or systemic misbehaviour, prosecutions are properly brought to fruition.

It is not just a question of the law not being tight enough or not sufficiently well defined. It is important to recognise that when it comes to this sort of offence, pinning down responsibility and making sure that we gather the evidence of causation to the level of proof beyond reasonable doubt is a very difficult task, especially when the investigators are hampered by a lack of resources.

The new clause would create a new unit in the SFO. We have to increase the resources available for tackling financial fraud. As financial products become ever more complex, the new clause would enable the building of expertise in an area where the financial incentives for criminal activity are absolutely enormous but prosecutors and investigators do not have the same level of capacity for capturing exactly what is going on. The total fines that Barclays paid for the LIBOR scandal, although small for Barclays, could pay for the entire budget of the Serious Fraud Office for 10 years; that is the extent of what is happening. The Minister should consider using some of the proceeds of penalties paid to the FCA to help rejuvenate the SFO.

Hon. Members may well have spotted during the spending review announced by the Chancellor back in 2010 that, sadly, the SFO appears to be pencilled in to lose 25% of its budget over the spending review period. Things are going to get tougher for the SFO. In fact, many hon. Members will remember that the Home Secretary originally had plans to abolish the SFO altogether, but was eventually forced to perform a U-turn on those proposals. Now that we know that the SFO is here to stay, let us ensure that we can build it up and enhance it, giving it the powers and resources that it needs. It would be more than self-sustaining if it were able to identify fraud and yield fines income at a level even higher than that which is already, sadly, flowing through.

Fraud is estimated to cost Britain around £73 billion a year, according to the National Fraud Authority. It is a significant area of criminality, but we are not properly equipped to deal with it. LIBOR showed that misconduct in financial services can have ramifications for traders, the industry, shareholders, the reputation of the City, and the criminal law. It is already a criminal offence to attempt to fix LIBOR, but the Government, and the SFO in particular, have struggled to go after those responsible. It is vital that the SFO has the resources necessary to tackle that scandal and any future ones. Our new clause would give Parliament the chance to discuss the creation of a new division in the SFO, sending a firm message to those who might be tempted to engage in criminal conduct in financial services.