Understand Your Rights. Solve Your Legal Problems
GDPR is currently in full force, and we’ve already seen businesses like Facebook and Google come under fire for potential non-compliance within days of its advent. Only a month before the deadline, a Crowd Research report declared that 93% of respondents were not yet “in full compliance” with the regulation. Here Natasha Bougourd, TSG’s Lead Applications Writer, specialising in IT support, Office 365, Dynamics 365 and business intelligence, talks Lawyer Monthly through the ongoing intricacies of GDPR compliance and the priorities ahead.
GDPR has been long-awaited, but it hasn’t been explicit in what is required from businesses. The good news is that 80% of those surveyed identified GDPR as a key business priority, and compliance is more of an ongoing journey than a task that could be marked as completed on 25th May 2018.
As both data controllers and data processors, law firms in particular must ensure strict adherence to the new regulation. What are the areas you should be prioritising in order to maintain compliance with GDPR?
Businesses hold and process more data than ever before. And a significant portion of that will be Personally Identifiable Information (PII); this is the data that matters under the GDPR.
Many businesses that don’t store customers’ personal information make the mistake of thinking this doesn’t apply to them; however, all businesses will at the very least hold employee information. Therefore, all businesses must put measures in place to safeguard that digitally-stored data.
When it comes to the best method of securing your data, encryption comes out on top. Not only is it a robust way to keep your data inaccessible to cyber criminals, it’s recommended throughout the full GDPR documentation. Should any PII data you hold fall into the wrong hands – whether deliberately or accidentally – encryption will render it unintelligible. Encryption can operate at a file, folder, device or even server level, offering the level of protection most suited to your business needs.
Under the GDPR, you must implement policies that detail how you’ll process, access and protect PII data. It also states that data controllers must “adopt internal policies and implement measures which meet in particular the principles of data protection by design and data protection by default.” When you act as a data processor, you must abide by the data controller – your client – and their restrictions. All new policies, whether specifically related to GDPR or not, must be compiled with a ‘privacy by design’ model. Existing policies, including your data protection policy, privacy policy and training policy should also be reviewed in light of GDPR.
An element of the GDPR that hasn’t received a lot of media coverage is complying with subject access requests. Individuals can request access to the data you hold on them, verify that you’re processing it legally and in some cases, request erasure of their data – also known as the ‘right to be forgotten’. Under GDPR you’ll have only a month to respond to these requests, otherwise you’ll be at risk of non-compliance. More guidance on this can be found on the Information Commissioner’s Office (ICO) GDPR guide.
It’s something no business wants to think about, but you need to know what to do in the event of a data breach; not reporting this to the ICO could be considered a bigger infraction than the breach itself. Businesses must report it to the Information Commissioner’s Office (ICO) within 72 hours of discovery. It’s especially important to note this, as failing to meet this obligation could be considered a bigger breach of the GDPR than the data leak itself. Both Uber and Equifax have come under fire in the past year for covering up breaches, reporting them late and keeping the extent of the breaches under wraps.
Empowering consumers is at the heart of the GDPR, not making an example out of businesses. Whilst there has been a lot of confusion around exactly what has been required, it’s clear that cyber-security is imperative, as is clueing up on your reporting and response obligations. It’s important to note that simply experiencing a cyber-attack or data breach won’t automatically result in financial punishment; the GDPR clearly states that, should you prove you put in place measures to protect your PII data, you won’t be hit with the most severe fines.
FIFA, soccer's ruling body, is trying to shake off an image of corruption, but the investigations continue thanks in large measure to a now-deceased American whistle-blower. Bloomberg QuickTake explains how it happened.
As the use of litigation funding continues to grow, an increasing number of lawyers and business leaders are beginning to realise the obvious benefits afforded by legal finance solutions. Below Lawyer Monthly hears from Andrew Jones, Managing Director at Vannin Capital and Tim Allen, Partner at PwC, on the many advantages of financing legal operations.
The financing of claims by professional funders not only shifts the risk of adverse litigation outcomes away from the claimant but it can also improve access to justice for impecunious claimants and reinforce the quality of the legal team and expertise offered to a claimant. Whilst many will be familiar with these advantages, litigation funding also has a number of other benefits that are arguably just as important to well-capitalised corporate claimants.
Litigation funding offers significant benefits in terms of financial reporting and operations. Funding solutions can create immediate improvements in EBITDA and cash flow, bring greater certainty over forecasts of legal expenditure and divert valuable resources into revenue-generating areas of the business. Critically, third-party funding can enable a corporation to pursue claims that it would not otherwise pursue due to budget constraints, at zero risk and at zero cost.
Transforming legal departments from cost to profit centres
There are many good reasons for a corporation to employ a legal team within its organisation – to ensure legal and regulatory compliance, to advise on contracts and transactions, to defend the organisation against claims and, when necessary, to bring claims. In spite of the important role a legal department plays within an organisation, it is rarely profit-generating and is typically viewed as a necessary cost associated with running a successful business. Litigation funding can help turn this logic on its head.
We see many organisations that may decide not to pursue a meritorious claim because of a lack of available budget. This is entirely understandable. The holders of the corporate purse-strings do not wish to commit millions of pounds in legal fees over a number of years where the outcome is uncertain – which it always will be even for the strongest of cases. The use of third party funding to pursue such claims can thereby create revenue that would not otherwise be generated, with no impact on cash flow or EBITDA. With third party funding also providing a catalyst for driving early and more valuable settlements, the legal department can be turned into a profit centre rather than a cost centre.
Litigation funding therefore unlocks value and enables a corporate to monetise its litigation portfolio in a way not previously possible.
The risk associated with bringing a claim also changes when using third party funding, as the entire financial risk shifts from the claimant to the funder. In addition, the funder’s interests as provider of non-recourse finance are fully aligned with those of the claimant. The funder will only receive a return on its investment if the claimant actually recovers proceeds from the litigation – whether through a judgment, arbitral award or negotiated settlement. If the claim is unsuccessful, the claimant pays nothing, and the funder’s investment is written off. In the case of adverse costs being awarded, the claimant still has nothing to pay because a funding package will invariably include ‘After The Event’ insurance.
Improving EBITDA and financial reporting
The self-funding of claims is usually inherently unattractive to a CFO or Finance Director, as they create significant costs (including adverse costs risk) over a substantial period of time, in return for the pursuit of uncertain benefits.
Self-funding a claim will impact on cash flow and EBITDA and, depending on the scale of the costs involved, will depress the company’s market value.
Litigation funding eliminates these impacts by removing costs from the P&L and the contingency from the balance sheet, and providing greater certainty and predictability over future cash flows. Further, it can drive profitability in the business more widely through the diversion of funds away from legal costs and into core business activities that will generate profit and produce a higher return on capital employed. Because the costs required to finance a legal claim are recorded within a firm’s operating profit/EBITDA, whereas rewards resulting from claims are recorded as below the line exceptional items, legal funding bolsters EBITDA by eliminating the costs of a claim from financial reporting. As a result, this can lead to in a higher level of profitability and a higher market value for the business.
Legal funding: a world of possibilities
Whilst an increasing number of Heads of Litigation or GCs of large businesses are realising the benefits that litigation funding has to offer, there are also tremendous benefits that CFOs and FDs ought to consider. By making the most of these advantages, the financial operations of a company can be further improved and in today’s competitive environment, such margins really matter.
NHS Shared Business Services (NHS SBS) has re-launched its Legal Services Framework, which is expected to save the public sector around half a million pounds in the next four years.
Enabling organisations in both the NHS and wider public sector to access legal services in areas such as contract and commercial law, NHS governance and public law and employment law, the free-to-access Framework provides a fully compliant route for public sector purchasing and legal teams to access both generalist and specialist legal support.
New for 2018 and beyond is Lot 11, which focuses on firms capable of providing multi-disciplinary project support for briefs that are likely to have requirements in many different legal areas, such as major capital projects. There is also an increase in the number of firms capable of providing support in the area of IT and data, recognition of the drive towards digitalisation in the NHS and wider public sector.
With 11 different Lots, the Framework includes more than 25 suppliers, ranging from large national firms to more niche specialists.
Designed to provide the flexibility that public sector procurement managers need, the Framework allows organisations to award contracts directly or hold a mini competition, with organisations entitled to an initial free of charge consultation of up to 45 minutes ahead of formal instruction. Legal support can be provided via the Framework on an ad hoc, project or ongoing basis.
For organisations using the Framework, NHS SBS procurement specialists also provide guidance in areas such as drafting Service Level Agreements (SLAs) and contracts.
In order to maximise value for NHS trusts and other public sector organisations, value-for-money tariffs were ensured at the time of the initial competition for hourly and blended rates. Volume discounts are also available based on annual fees and aggregated annual spend.
Suppliers have also gone through a rigorous assessment process in which experience, expertise, quality assurance, capacity for innovation and financial information were all scrutinised before appointment to the Framework.
To support the NHS and wider public sector organisations using the Legal Services Framework, NHS SBS will also be running a number of free seminars on current legal issues, such as the newly-introduced General Data Protection Regulations (GDPR), with the first event likely to be held in the autumn.
Phil Davies, NHS SBS Procurement Director, said: "Our Legal Services Framework will enable procurement teams across the NHS and public sector to quickly access legal expertise in a fully OJEU-compliant, hassle-free way.
“With the legal landscape always changing, we’ve listened to our partner organisations and ensured the Framework incorporates the specialisms they are most likely to need in the coming years – such as IT and data experts. It ensures that there are a range of supplier types, from the big legal firms with an office in every major city, to smaller companies with very specific expertise.
“Ensuring value for money without compromising on quality is a must for all public sector organisations, so we’ve also thoroughly assessed all firms on the Framework, with only the most robust, with the best credentials, winning a place.
“The Framework will allow our NHS and public sector partners to get it right first time when appointing legal services, something that can only be good news for stretched NHS and public sector budgets.”
(Source: NHS SBS)
China is on course to overtake the US as the world’s leading source of foreign trademark applications by 2020 according to new research released by CompuMark, the industry leader in trademark research and protection solutions. Trademark-filing trends are a powerful indicator of economic activity. In the past two years alone, the number of Chinese trademark applications to foreign registers has doubled, with Chinese applicants filing nearly 120,000 foreign trademark applications in 2017.
The report Chinese Brands Go Global was compiled by CompuMark, analyzing 62.6 million active trademarks across 186 trademark registers in over 200 countries. It assessed domestic and foreign trademark applications by Chinese brands, made between 2014 and 2017.
The number of US trademark applications made by Chinese brands has increased by 800% since 2014. Of the 120,000 foreign trademark applications made by Chinese brands in 2017, more than 50,000 applications were filed in the USA. This equates to around 10% of all applications made to the US trademark registers in one year, indicating that the USA is now the major market for Chinese brands and marking a shift in focus away from the traditional target markets of mainland China’s close neighbors in Southeast Asia.
Trademark applications contain information about markets (registry country), time (filing date), source (applicant country) and business activity (classes and specifications). The report goes on to reveal where in the world Chinese trademark applicants are filing, where in China applicants are from, and which Chinese industries are fueling the growth in global trademarks.
Domestically, the Chinese trademark register also continues to grow at a phenomenal rate. With more than 1.4 billion consumers, the Chinese market is seen as a key target for international brands so global brands flock to register trademarks there. As a result, China’s domestic trademark register is the largest in the world, accepting more than five million new trademark applications in 2017.
Globally, 60% of trademark applications in 2017 were on the China register. More applications were submitted in a week in September 2017 than were submitted to the European Union register in all of 2016. And the proportion of global trademark applications filed in China is still growing.
Jeff Roy, President of CompuMark explained: “Trends in trademark applications can serve as powerful indicators of economic activity. China is a great example of this. By filing volume, our report shows that in just 4 years Chinese brands have jumped from number 10 in the world to number two. These applications tell a story that may reveal or even serve to forecast the trajectory of regional or global commerce. If current trends continue, Chinese brands are likely to challenge US brands for global supremacy in the near future.”
Rob Davey, Senior Director, Managed Solutions & Global Markets at CompuMark, said: “China, with its allure as the world’s largest single market and a population with growing purchasing power, has featured prominently on the radar of global brand owners. But our exclusive analysis by CompuMark’s data-analytics experts shows that Chinese trademark applicants are having a significant impact on the world's trademark registers. Trademark registers outside of China—especially those in the US and Europe—are seeing Chinese applicants playing a far greater role in their markets.”
(Source: Compumark)
As more and more executives strive to gain citizenship abroad, in particular by investment, Portia Vincent-Kirby at Hudson McKenzie explains how the future could look different when it comes to national and international citizenship.
With ‘passport shopping’ on the rise amongst international elites, how long will it be before the traditional concept of the nation-state becomes a shadow to the new developing sun of globalisation?
Accessorizing oneself is no longer a matter of designer handbags, luxury cars and yachts – the latest trend amongst the global wealthy is the accumulation of passports.
As an aid to this nationality-acquiring process, “Citizenship by Investment Programs” (CIPs) allow those with the funding to do so, to be able to proceed along a “golden visa” route.
This route allows high-net worth individual to obtain citizenship of a specific country, providing that they can economically invest to a substantial degree. For instance, in some countries, investors are rewarded with residence permits which can lead to citizenship after five years.
Thus, the birth of the “global citizen” is on the up-rise, as a fashionable status to be recognised worldwide. With economic citizenship becoming rapidly a popular pursuit, as if nationality was a commodity to be acquired in its numbers, many high-net worth individuals showcase their status as a ‘global citizen’ by being a citizen of several countries, rather than just their original country of birth.
However, could the rise of the global citizen lead to the eventual demise of the nation-state altogether?
For example, it could be questioned that if citizenship can be bought at ease based upon a price that a person is willing to invest, what integral foundations does the concept of being a ‘national citizen’ have? Is nationalism and the idea of being a ‘national citizen’ now only reserved for the poor?
With Citizenship-by-Investment programs booming, as nationality statuses continue to be bought at a price rather than inherited, global immigration is likely to face dramatic changes in times to come.
You’ve always wanted to make an impact — whether it’s in your neighborhood or on a much bigger scale. And of course, making a little money while you do it is always nice. What’s the easiest way to do both?
If you’re thinking it starts with education, you’re right. If you’re thinking it involves grueling commutes, four-hour night classes or a campus-style life, you’re wrong. There’s an easier way to advance your career in law. It’s affordable, convenient and timely, and best of all, you only have to do is follow a couple easy steps to advancing a career in law.
Getting Started
If you want to make six figures and help out people in need, there’s no better starting point than a degree in labor law. Ensuring that those who work every day to put meals on their family’s table are safe and properly compensated is no small task. Law grads are landing jobs at a higher pace than in previous years, and there’s no reason for you to miss the boat. With almost 75 percent of law degree graduates finding gainful, long-term employment, now is the chance to jump on board — especially when taking online labor law courses is so simple.
Perhaps the most significant perk of learning labor law online is the convenience. Forget having to make the long haul to the nearest university — your classroom is on your couch. If you’re looking to cut out campus-related distractions to focus on what matters, your education, look no farther than online education. Still, you should know that you’re interested in this field before you enroll, so let’s highlight the advantages to practicing labor law and the best way to get started.
Helping Others Starts Small
If you’re easily perturbed when someone is treated unfairly, the labor law field is for you. Seeing people in power take advantage of those who have few or no options is frustrating. This is your chance to fix it. Providing protection for the working class is admirable and self-fulfilling. It doesn’t carry the glamour that some other law occupations might, but you’ll go home at the end of most days feeling accomplished.
As big businesses grow even larger, employees, who compose much of those firms, increase in number. Those at higher levels are most interested in keeping overhead down and making as much of a profit as possible — which sometimes results in unfair working conditions. People having a voice to fight for them has never been more important, and now that voice can be you. This happens all over the world in markets large and small, but the best way for you to break into the field is by starting at a smaller firm and taking on progressively larger cases.
Show Me the Money
If you enter a field like labor law, you’re most likely not doing it for yourself, but it doesn’t hurt that labor lawyers make a pretty good chunk of change themselves. Labor law strikes that nice middle ground where you’re spending reasonable hours helping others while collecting a nice paycheck. How much you earn will depend on where geographically you practice, your firm, and your proficiency in the field, but most can expect to make upwards of $90,000 per year.
Now Hiring
Perhaps the most important factor when looking at a major is job prospects is required training. It is frustrating to devote time and energy to study that doesn’t impact your career, but a labor law degree will certainly pay off. With the field continually growing, you should feel confident there are plenty of available positions for graduates.
Labor law is not a niche field. There is a need for labor lawyers all over the United States — and around the world. You should also be enthused by the prospect of online education, which allows you to continue practicing while you enhance your career. Along with a healthy compensation and rewarding sense of helping others, staying close to home (or opting to get away from home) is just another advantage. That sounds like a lot of pros for the labor law field, so what is holding you back from enrolling in classes today?
Recent legal battles have drawn attention to gig economy workers, and the All-Party Parliamentary Group today published a report urging the government to address these issues. Below Nigel May, Tax Partner at MHA MacIntyre Hudson, comments on the report’s recommendations.
Recommendation 1: The difference between the definition of “worker” for employment purposes and the definition of “employee” for tax purposes should end.
“The characteristics of a worker and an employee have been reinforced following years of debate, case law and other legal proceedings. There’s a case for many people to be classed as genuinely self-employed, a status and level of flexibility that is much needed in the UK. To cast aside these rulings and considerations and apply new definitions or ‘badges’ would need very significant thought and a careful approach and application, that may still lead to ‘inequality’.”
Recommendation 2: The Government should narrow the gap between NIC (National Insurance Contributions) paid by employees and NICs paid by the self-employed.
“This is a process we’ve seen HMRC already start to implement in relation to the primary (employee) rate. However, with the secondary (employer) rate being 13.8% it’s not clear what the proposals would be to address that gap, and how that could be implemented. A move to increase self-employed national insurance would likely exacerbate the use of company structures by the self-employed so as to benefit from national insurance free dividend income.”
Recommendation 3: We call on the Government to rigorously enforce of existing law to avoid abuse of self-employment tax benefits.
“Bringing an end to the abuse of self-employment tax benefits isn’t that simple. HMRC is undertaking activities to introduce new laws, including IR35 in the private sector, but many of the issues relating to the gig economy relate to workers’ rights, which are being actively pursued by Unions and via Employment Tribunals, but don’t themselves address the tax issues.”
Recommendation 4: We urge the Government to clarify urgently the employment status of gig workers and to provide more information to those operating in the gig economy.
“Employment status and whether an individual is employed or self-employed is based on a number of tests and specific circumstances built up over time. These specific circumstances need to be considered on their merits, and a blanket status for business considered to be in the gig economy, as opposed to any other sector, may unintentionally create an uneven playing field. From an HMRC resource viewpoint, dealing with the question of employed or self-employed status is onerous because it’s fact-specific to each case. HMRC already provides an online tool to help identify whether an individual is in their view employed or self-employed.”
Recommendation 5: We urge the Government to press for further international action to fairly tax revenue earned in the gig economy, as well as acting more assertively in finding UK-based solutions.
“This recommendation is hopelessly vague. The explanation provided in the report is that there are charges of £1 billion levied to customers by 40,000 Uber drivers. It goes on to state that if the Uber UK subsidiary was seen as providing transportation services, it would have to account for this £1 billion revenue in the UK. The report suggests that Uber’s tax bill would likely to be hundreds of millions of pounds. This suggestion is made without any supporting backup and with a corporation tax rate of 19% and deduction for attributable costs, the suggested tax yield appears beyond over-optimistic.”
Recommendation 6: We call on HMRC to be more robust in enforcing UK law.
“The report states that “there are numerous business models in the gig economy and each has different implications for corporation tax and VAT. HMRC needs to scrutinise all of these and impose UK law consistently across all companies, regardless of their size and importance.” HMRC has always operated with a general approach of looking at time and yield. The suggestion that they should devote resources to everything regardless of size and importance given the extent and complexity of the tax code is simply naïve.”
Today’s global legal landscape is one that affords attorneys enormous opportunity early in their careers. Meaningful work, career growth, international casework, and financial stability are well within reach for committed associates. But with any opportunities comes challenges. As part of this week’s Law School & Careers features, Lawyer Monthly discusses with Angela Ferrante, Senior Vice President at GCG, the particular challenges women can often encounter, especially in the early stages of their legal career.
The challenges women face early in their law careers are distinct from their male colleagues. Despite progress, there still exists an unconscious bias in many law firms. These preconceptions that involuntarily influence attitude, behavior, and decision-making may be responsible for the inequitable division of opportunities among men and women, particularly in the early years of practice. It may also contribute to the fact that there are significantly fewer women in law firm leadership. In fact, a 2016 report by the National Association for Law Placement, Inc. (NALP) found that representation by women in private practice falls from 49% at the summer associate level to just 22% at the partnership level.
The following is a review of some of the most ubiquitous early career challenges women will face as well as strategies for overcoming them in the early years of practice.
Choose the Right Firm Structure
There is no one-size-fits-all law firm structure, so it is important that law students and recent graduates carefully weigh their options when determining what structure is the best fit: boutique or biglaw.
While boutique firms may offer more flexibility and opportunities for client interaction out of the gate, biglaw affords young lawyers impeccable training that may outweigh short-term sacrifices. No matter the type of firm or direction one chooses to go in, it is critical to leverage the employment interview to ask pointed questions that illuminate the firm’s decision-making structure and uncover unconscious bias.
Ask how decisions are made, how assignments are delegated, and how bonuses are awarded. Request details on the configuration of the management committee and what the firm is doing to promote and retain women. The responses will help women make more informed employment decisions, and the questions themselves will convey the candidate’s expectations to firm leadership.
Establish a Relationship with a Mentor
Mentorship is critical for the development of young professionals and remains a chief driver of employee loyalty. According to a 2016 Deloitte report, Millennial professionals who have a mentor are twice as likely to stay with their current employer for five or more years.
Unfortunately, many firms do not have formalized mentoring programs, and lower representation by women in law firm leadership may make it difficult for women to find a mentor within their firms. Those hurdles, however, should not be deterrents. Women can look to law school professors, former classmates, successful colleagues in other fields, even family or neighbors for advice and guidance. The key is to find someone they respect and admire, whose opinion they value, and who is equally committed to fostering the relationship over the long term.
Get a Seat at the Table
With a significant%age of women leaving the field of law prior to partnership, leadership may – intentionally or not – see male attorneys as better long-term investments and, consequently, award them more challenging work. If this happens, women should ask why.
It is incumbent upon women to be their own advocates, proactively seeking out opportunities to represent their firms. Challenge unconscious bias by requesting to participate in client meetings, hold speaking roles on conference calls, and attend conferences or events on behalf of the firm. When faced with these opportunities, women should confidently voice their position and insights, recognizing that their firm and clients will benefit measurably if they embrace, rather than minimize, their unique and diverse perspectives.
Work-life Balance
A 2016 Gallup poll found that nearly 60% of Millennials believe work-life balance is ‘very important.’ While the challenge of achieving work-life balance is not unique to women in law, some may find it more difficult to achieve, believing they must prioritize work demands over personal obligations to overcome unconscious bias.
A work-life imbalance can be a catalyst for burnout, so it’s crucial that women find balance early in their law careers. First, they should define personal expectations, review those with firm supervisors, and evaluate their progress regularly. They should also actively engage their colleagues, men and women, in conversations about work-life balance and the procedural or structural obstacles that inhibit its achievement by all members of the team. Collectively, positive and concrete suggestions for structuring or restructuring how work is done should be well received as work-life balance is a goal almost everyone has struggled with at one point or another in their career.
Though female representation in firm leadership remains low, women attorneys – now more than ever – are empowered and uniquely positioned to spur a course correction in the broader law firm environment. By advocating for more inclusive policies for all attorneys, hosting panel discussions on unconscious bias, celebrating the achievements by women in the firm, speaking openly about policies that perpetuate stereotypes, and refusing to compromise who they are, women can thrive in law firms, as first-year associations, partners and at every stage in between.
Many of the Serious Fraud Office’s ongoing cases seem to see no end and the future of the organization as a whole is still in debate. With recent upheaval at the SFO in both the directorship and their funding arrangement, Dominic Carman, noted legal commentator, discusses the current situation and the overall effectiveness of the organisation.
A dynamic new Director and a 50% uplift in funding should provide a much needed boost to the Serious Fraud Office. Those were the conclusions drawn by recent media headlines. But not everything is as it seems. Against a background of increasing fraud and decreasing prosecutions, new research form Pinsent Masons shows that the SFO faces a future that seems set to be defined by more heavy fines for some errant companies with interminable investigations for others with no resolution in sight.
True, the new SFO Director, Lisa Osofsky, is set to take over on September 3rd - after a five-month period of limbo during which the interim Director Mark Thompson will keep things ticking over, although he cannot make binding decisions. Meanwhile Osofsky’s public pronouncements have undergone a complete volte face since last year when she endorsed Theresa May’s long-held ambition to merge the SFO with the National Crime Agency (NCA). She told the Telegraph that this would give the prime minister “the biggest bang for her buck”.
Following the announcement of her appointment as Director in June, Osofsky argued the diametric opposite: “I’ve always supported an independent SFO and I still support an independent SFO,” she said. “I’m assured by the attorney-general he’s right by my side on this one. I didn’t take this job to report to the NCA. Do I see myself having a role where I’m here to diminish the very agency I’m getting hired to represent? Absolutely not.” Quite how this change of heart will affect what Osofsky does in practice remains to be seen.
The other headline grabber - the much heralded new funding arrangements for the SFO - are entirely cosmetic. What was a hybrid of core funding and blockbuster funding (sizeable top ups for specific cases that require large scale additional resources) has been fully combined to become just core funding. As the SFO itself points out on its website, “the changes (announced in April) are cost-neutral.” Overall expenditure will remain exactly the same next year at £52.7m.
Arguably more significant is how successful the SFO has been in its fulfilling core mandate, namely prosecuting serious fraud, bribery and corruption. The wider picture is calamitous: the number of white-collar crime prosecutions has declined by almost a third in six years according to research by Pinsent Masons. The 2017 Annual Fraud Indicators shows that fraud costs the UK economy £190bn per year (roughly 10% of total GDP), with the private sector bearing an estimated £140bn of that cost. Official figures also reveal that the number of prosecutions for white-collar crime - fraud, money laundering, cybercrime, bribery and insider trading - fell from 11,261 in 2011 to 7,786 last year, a 31% decrease.
Simultaneously, the number of fraud incidents has grown dramatically, primarily because of the surge in cybercrime. Between 2012 and 2017, Action Fraud, the national fraud and cybercrime reporting centre supervised by the City of London Police, experienced a 35% increase in reported cases from 202,200 to 273,600. These figures reflect only part of the problem. The NCA estimates that less than 20% of all fraud incidents are ever reported to the police.
The SFO focusses on the biggest fish: large, complex cases involving multinationals and their employees, or scandals such as LIBOR rigging. No published data is available for this category of fraud, but in terms of value and volume the 40 investigations currently being undertaken by the SFO are thought to comprise less than 10% of the overall total in that category. Big fraudsters are generally smarter and SFO resources of just over £50m a year can only begin to scratch the surface of a multi-billion-pound annual problem.
Their pragmatic solution has been deferred prosecution agreements, commonly known as DPAs, whereby a large fine is paid by a company instead of it being prosecuted and convicted in a criminal trial. To date, there have been four DPAs, of which Rolls-Royce (£497.25m) and Tesco (£129m) have paid by far the largest fines. These big numbers have created some relief for the SFO, although it cannot adequately counter the criticism it has received from senior judges in the courts and from informed commentators for its poor judgment and inept procedures.
Osofsky is keen on DPAs so we might expect more of the current caseload of investigations, a number of which stretch back more than five years, to result in a slew of DPAs over the next 18 months. Osofsky recently described the decision to charge as “a death sentence” on the company concerned. But a glut of corporate heavyweights has effectively been sitting on death row awaiting sentence without any recourse to the damage done to their reputation.
Sir Cliff Richard is currently seeking more than £600,000 in damages from the BBC over its coverage of a search of his home that was undertaken by the police on August 2014. No charges were brought against him and the investigation was dropped by the CPS in June 2016. Companies subject to an SFO investigation that is dropped have no such recourse. For several of them, the damage has been even more sustained and more enduring with the reputational damage already running into tens, or even hundreds of millions of pounds.
The SFO therefore needs to speed up its procedures, dramatically, by introducing sensible time limits. If the agency cannot find sufficient evidence to charge a company within three years of commencing an investigation, then it should be dropped. As SFO Director, perhaps Osofsky might bring some American efficiency with her and do just that. Continuing to allow SFO investigations to fester and bleed scarce resources does not deliver justice to anyone.
