Friday, 8 May 2009

Disrupting fraud as it happens

When the director of the UK's Serious Fraud Office (SFO) Richard Alderman comes out all guns blazing saying that his office is becoming more proactive, intelligence-led and plans on making better use of powers at its disposal, one cannot help but think, shouldn't you haven't been doing that all along anyway?

Much of the burden for detecting, policing and enforcing anti-fraud measures has historically fallen on the shoulders of banks, other financial service providers and individual victims. But with the Securities & Exchange Commission (SEC) in the US and many other regulatory bodies and government agencies caught napping in the wake of the $50 billion Madoff scandal, they are eager to challenge the publicly held notion that they are essentially 'toothless tigers'.

At the Sweet & Maxwell conference on the changing face of fraud trials, Alderman stated that the SFO was moving towards becoming an "intelligence-led organisation", assessing where the fraud risks are during this economic downturn and working with other agencies to disrupt fraud as it happens. That means the SFO is going to have to capture reliable and sophisticated intelligence if it is to stop fraud before it even happens and I am curious to know how they are going to do that.
The SFO has extended an olive branch to so-called City whistle blowers and says it is going to look more closely at hedge funds, but is that going to be enough to uncover major frauds? Take the alleged Bernard Madoff Ponzi scheme for example. There were plenty of whistle blowers warning the SEC that something was amiss, but on the whole they chose to ignore this information or did not investigate it thoroughly.
"We intend to take full advantage of all the powers that are available to us and that have been neglected by the SFO over the past years, but we also need to consider what further powers we need to make the SFO a more efficient organisation,” said Alderman. It begs the question why has the SFO neglected to use its powers and what has so fundamentally changed within the organisation that it is going to seize those powers now to keep fraudsters at bay?

Is this recognition finally that the powers that be are finally taking fraud more seriously and that the onus for detecting, policing and preventing fraud is no longer the onus of banks and individuals but intelligence-led policing? I'm not sure we can all breathe a collective sigh of relief just yet.

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