Activists Worry Britain’s Financial Watchdog Is Losing Its Zeal

(Bloomberg Businessweek) -- About seven years ago, the U.K. agency set up to prosecute errant executives and publicly traded companies started taking on some meaty cases. The Serious Fraud Office investigated everything from derivative traders to top brass at blue-chip darlings Barclays Plc and engine maker Rolls-Royce Holdings Plc.

Now some academics, anticorruption activists, and lawyers are wondering whether the SFO’s zeal for the biggest cases has waned over the past two years. “It’s focusing on small cases, and you’re left asking, ‘Where is the ambition?’ ” says Susan Hawley, executive director of Spotlight on Corruption, a transparency group. “It feels a bit like it’s lost its mojo.”

The concern goes beyond the SFO to other investigative agencies and prosecutors. In one of the SFO’s most sensitive cases—involving allegations of bribes to Saudi royals by employees of a military contractor—the attorney general has yet to approve charges or reject them after two years. White-collar crime enforcement in the U.K. is “a total disaster,” says Bill Browder, a London-based hedge fund manager turned anticorruption campaigner. “This is the best city in the world to live in if you’re a white-collar criminal, because you’ll never be prosecuted.”

A turning point for the SFO came in 2017, when then-Prime Minister Theresa May made an election pledge to fold the SFO into the broader National Crime Agency. She ultimately didn’t do that, but with the office’s future under review, the U.K.’s attorney general delayed replacing the outgoing director.

In the spring of 2018, senior staff approached the interim head of the SFO, proposing it investigate commodities trader Glencore Plc for alleged corruption in Congo. Glencore was the biggest-ever initial listing on London’s stock exchange, so it would make sense for a U.K. agency to take it on. The SFO decided to leave the case to the U.S. Department of Justice. Glencore has said it’s cooperating.

That was the environment Lisa Osofsky stepped into when she started as director of the SFO in late August 2018. Osofsky’s résumé includes stints as a U.S. prosecutor, at the FBI, and with Goldman Sachs Group Inc.—and the confidence that goes with it. About a year into a five-year term, she has time to deliver. New cases range from a suspected property fraud in northern England to whether London Capital & Finance, a little-known marketer of unregulated mini-bonds, misled investors. Observers argue that while these cases are worthwhile, they lack the complexity or global reach that was once the SFO’s hallmark.

Osofsky takes issue with this portrayal. “I have every interest in prosecuting big-ticket cases,” she says. “We want to take bad guys off the street, whether they have a blue-chip name attached to them or not. I am 100% sure that London Capital & Finance is a top-tier case. If we’ve got thousands and thousands of people losing their life savings, what could be a more valid reason to investigate?” Administrators for LC&F, which collapsed this year, declined to comment.

The SFO has a budget of £54 million ($69.5 million), about the same amount the government is spending to prepare athletes for the next Summer Olympics. The SFO is also able to get ad hoc funding for big cases to support its staff of 450. But the task before any financial regulator in London is enormous: The U.K. believes about £150 billion of dirty money is cycling through its system annually.

The U.K. has toughened its laws since the financial crisis. Companies are now accountable for bribes paid by their employees. Investigators can freeze the property and cash of wealthy individuals who can’t account for their riches. And the three offshore British crown dependencies this summer promised to reveal the true ownership of firms registered there.

Osofsky has said that, where warranted, she’s willing to use plea deals involving financial settlements with corporations. Since these agreements became a tool in 2014, the SFO has concluded six. It’s working toward more. The test, for some, is whether the agency can settle with companies but also hold individuals responsible.

To contact the editor responsible for this story: Pat Regnier at pregnier3@bloomberg.net

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