Whistleblowers silenced? SFO takes on just 12 cases from 2,500 reports
Lack of funding and resources blamed for fraud unit’s low-key performance over the 2013 to 2014 financial year
The ability of the Serious Fraud Office (SFO) to carry out its required duties is under scrutiny, with figures obtained by law firm Pinsent Masons showing that a very low proportion of whistleblower reports led to full-scale investigations during the 2013 to 2014 financial year. According to the firm, the SFO took on just 12 cases out of 2,500 reports submitted over that period, sparking concerns that the organisation’s reach has been limited by insufficient resources.
In 2011, a special whistleblower service, SFO Confidential, was established to provide anyone with suspicions of serious fraud or corruption with a clear and direct point of contact for raising concerns. But Pinsent Masons partner Barry Vitou feels that cuts to the unit’s funding have led to management uncertainty in recent years.
“It is surprising that so few whistleblower reports have translated into SFO investigations,” he said. “Obviously not all reports will contain sufficiently high-quality information needed to justify a full investigation – some may be without foundation – but the data does suggest that the SFO may lack the resources to pursue all the leads on criminal cases that are available, and that it is having to prioritise cases. Funding problems mean it is unlikely that the SFO is able to carry out comprehensive checks on all information received. It is possible that very large numbers of credible cases are effectively being shelved.”
News of the SFO’s dwindling capabilities has capped off a dismal start to the year for the organisation. In January, it emerged that the unit had to drop its probe into Hewlett Packard’s takeover of Autonomy, even though the US Department of Justice is continuing its own investigation of the matter. Just one month later, the SFO was ordered to pay multi-million pound legal costs to the opposing side, following the failure of its case against six businessmen in the open-cast mining sector. The group had been accused of defrauding the Coal Authority and a clutch of Welsh local councils, but a lack of compelling evidence led the case to run aground.
Pinsent Masons also unveiled research indicating a steady rise in reports of fraud and other white-collar crimes to the City of London Police, who assist the SFO in the investigation of serious corporate wrongdoing. Since April 2014, the force has been managing Action Fraud – a national fraud and cybercrime reporting centre – which received more than 210,000 reports in 2013 to 2014: a 17% increase on 2012 to 2013. However, the law firm warned that the force has also been unable to avoid the damaging effects of substantial funding cuts.
Vitou added: “Both the City of London police and the SFO need stable and frankly, increased, funding if white-collar crime is to be tackled effectively. The sheer volume of reports to SFO Confidential and police in the past year make it clear that employees, business contacts and members of the public are coming forward to provide potential leads. What is now needed are the means to undertake effective investigations.”
As Insights reported in February, whistleblowing has been highlighted as an increasingly vital means of helping to drive cultural change in complex organisations. Following Sir Robert Francis QC’s Freedom to Speak Up review, the NHS is set to appoint “whistleblower guardians" who will promote the ability of staff to flag up poor working practices to avoid a repeat of recent scandals, such as the damaging decline of standards at the Staffordshire Trust.
In the recent Chartered Management Institute (CMI) report The MoralDNA of Performance, financial-planning firm Towry revealed how whistleblowing was a crucial element of an overhaul of the firm’s ethical culture and practices in 2013. Towry former Head of Employee Proposition Alex Rickard explained that the firm was responding to an era in which ethical obligations had been lost in its particular industry. “The driver for the financial institutions had become how much money they could possibly make, as opposed to what is the best thing for the client,” Rickard said. “We wanted to look at it from the client’s perspective. We were looking to build a long-term business built on trust. There is much scepticism and mistrust in brands and businesses. We work on the basis that people want to trust but you’ve got to give them a reason to do so.”
As well as evolving its Code of Ethics guidelines, the company changed up its whistle-blowing policy. Extra staff members were added to the process, creating a wider and more diverse group of people to whom staff could escalate issues. Rickard explained: “Change doesn’t happen overnight, but it is tangible in that it is part of our dialogue in the business, which is most certainly a success. The changes we’ve made and keep making are a continuation of what we’ve already put in place, which, ultimately, will mean that clients will stay with us and recommend us because they like how we do business. The customer perspective is key.”