Economic Policy

Demolishing The Political ‘Half-Way House’ Of Fraud Enforcement

Ian Ross presents a case of how politics has subsumed justice in the investigation of fraud and corruption, creating both dangerous, even illegal consequences.


“Shall we indict one man for making a fool of another?”

Lord Chief Justice Holt passed this landmark judgement in the English case of R v. Jones in 1703. Even though [it] was decided over 300 years ago, that judgment has had a massive influence on attitudes to fraud investigation since. It loudly amplifies the neo-con ‘top-down’ diktat of who fraud ‘victims’ and fraud ‘criminals’ are; according to this uppity convention, whereby the corporate imbues with the legal.

For example, in 2008 a (very unhealthy) precedent was set by Bernard Tapie, former owner of Olympique de Marseille football club – and Adidas- ‘matchfixer’ and convicted fraudster. Despite two prison sentences, Tapie’s ‘career’ took a favourable turn, landing himself a ‘payout’ of £403 million of tax-payers money. Tapie sued Crédit Lyonnais bank, but that civil court battle was lost, so Tapie went cap in hand to Christine Lagarde,MD of the International Monetary Fund (IMF, who served in the French government at the time). Lagarde, for reasons known to herself and (probably Tapie as well) supported Tapie, rode roughshod over an arbitration panel and Tapie was paid. Therefore, this was a non-judiciary person overturning a court. Legarde ordered that obscene payout personally, and ‘voila’, Bernard Tapie was a politically-engineered victim of fraud.

“Have You Reached Your Verdict? Do You Find The Defendant ‘Guilty’ or “Very Guilty?!”)

The current High Court case against the UK Post Office may seem a de-minimis example to cite, but the magnitude of the implications behind it are noteworthy.

In the case brought in 2017, over 200 sub-postmasters from across 11,600 branches. are suing the ‘PO’ alleging that a faulty IT system directly led to sub-postmasters being accused of fraud and false accounting. One sub-postmaster alone was accused of stealing £74,000.

The Post Office (not to be confused with the Royal Mail) has full authority to prosecute its own cases (without leave of the Crown Prosecution Service) and being publicly owned, intuitively spent £5 million of tax-payers’ money to defend the case, and that amount was only at the beginning.

This case will continue in March 2019. If the High Court case against the post office is proved. That means the post office had full knowledge of critical faults in the IT system as far back as 2010, thereby flinging allegations of fraud around with 537 cranky prosecutions just to run with some dodgy IT system.

In one ‘investigation’, it was alleged that the gritty little trick was used to ‘persuade’ a (sub-postmaster) defendant to plead guilty to a ‘lesser charge’ to avoid prison (and guess what- she went to prison anyway). Another party alleges a visiting PO auditor falsified her records to indicate fraud. Conduct tantamount to planting evidence. Other issues concern staff being made to pay shortfalls, and dismissed if they refused. One claimant was told the “system will sort itself out”

If proven, what will gush out of the findings is a full-on Kangaroo Court approach by the post office; a gratuitously inquisitorial set up. The ‘investigation’ by the post office in 2015 into its own prosecutions was laughable. Even the forensic accountants were stonewalled. The ‘rebuttal’ memo circulated after to the sub-post masters to ‘make them have it’ presents more evidence of a top-down accusatory culture.

Decent people used as enforcement guinea pigs. People’s lives wrecked because of it. Two have taken their own lives!

Irrespective of the court findings, should the legal autonomy enjoyed by the post office be removed? As was stated, “this litigation isn’t just about money, but about lives being destroyed”

The Banks, And Lessons (Definitely Not) Learned

Topically, the ever-sounding current case of Danske Bank has attracted cavernous political opportunism, and a glut of ‘expert’ bandwagon-jumping commentary.

Alleged money laundering happening at Danske Bank between 2007 and 2015 is not a short time-frame. Neither is over £200 billion a small amount. But what is odd about this is that a law firm permanently engaged by Danske ‘cleared’ the now departed CEO Thomas Borgen, and Chairman Ole Andersen of individual liability concerning money laundering. A marvelous answer to a question nobody asked. But a law firm? There is something odious about a conflict of interest, given that it is usual for law enforcement to decide who shall be investigated. Not your own lawyers.

On the flip side of fraud investigation, we see fear! Raw fear of investigating hierarchy; a striking example of politicization overriding objectivity.

The presumption of innocence until proven guilty is recordable back to the Justinian Digest (530–533 AD) so the ‘naming and shaming’ of 10 Danske employees by a public prosecutor and the timing of it, is nothing less than deplorable. No-one had even been charged, yet 10 people had their names smeared globally with this case in the spotlight. All should be subject to a full fact-checking investigation, not looking for scapegoats just to suit a political agenda.

To thicken the mess, one ex law enforcement officer amazingly (if not unwisely) told the world on social media of an entrenched way of thinking and practices in law enforcement. Such as, ‘in today’s world, law enforcement ‘have to go for the easiest wins’, and ‘life isn’t fair’. These and other inane comments were not so much alarming as they were politically nauseous.

The fall out is senior executives, who can simply place themselves above investigation in this oily nepotistic set up. A hierarchical driven conformist regime set by corporate seniors and slavishly followed by law enforcement.

In November 2018, HSBC’s Global Head of Financial Crime Threat Mitigation, Jennifer Calvery, announced the launch of a new cloud-based system for anti-money laundering (AML) risk management for 2019. With $2 trillion being laundered each year globally, of course a bank as massive as HSBC needs to have effective AML systems (yes, effective) but there are glaring flaws with this. It seems very progressive, with Google Cloud involved; big data, and using data analytics as part of the development work.

But, stand by for even more false positives and more ‘rules based’ carnage. Meaning if HSBC was to ‘assign’ a financial crime “score” to each customer and ‘single out’ those customers with a ‘higher probability’ of committing crime’ perhaps they should start ‘in-house’. A bank under criminal investigation more often than Bernie Madoff ever was.

But what gives any bank the right to self-define criminal propensity, just because a “computer says yes”. Despite the impressive ultra-technical coding etc. the whole concept is baseless from an ethically investigative perspective.

Who Is Kidding Who?

Turkish journalist Pelin Ünker has been jailed for 13 months for her ‘participation in reporting the Panama Papers’ (January 2019). The conviction in an Istanbul court is of “defamation and insult” about companies in Malta owned by former Prime Minister Binali Yıldırım.

Turkey has a reputation for jailing journalists (with 68 in prison in 2018) but it’s inclusion here is not about Turkey, or its judicial system. But rather it is exposure of tax evasion, money laundering and corruption on a gargantuan global scale.

Transparency International (‘TI’) has been active in the aftermath of the scandal, and inextricably involved with setting out and influencing strategic anti-corruption measures therefrom. Yet, where are the convictions? No-one has gone to jail – until now.

TI then set up a new Anti-Corruption Award in 2018. The winner, posthumously awarded, was Daphne Caruana Galizia, the Maltese journalist, assassinated/murdered on 16 October 2017.

But after a glitzy awards evening in Copenhagen to (rightly) honour Ms. Galizia, Transparency International remained stony silent about Pelin Ünker. Not a scintilla of support for a journalist in prison for telling and proving the truth about serious levels of corruption that TI campaigned so hard against. Yet TI is happy to milk the PR off a murdered journalist, who was investigating exactly the same causes as Pelin Ünker. Why are these two superb investigators being treated differently?

In their political half-way house, Transparency International, being a global organization, could do better by showing public support to Pelin Ünker.

Removing The Final Bricks: A Matter Of Bias

For investigators, investigation pit-falls appear just as nature creates volcanoes. It’s just a case of who falls into them, or better put, which investigators chooseto jump into them.

One example from many is that 2018 again saw law enforcement playing political games with evidential disclosure by withholding or suppressing defence related evidence. Investigative malpractice protagonists hiding behind excuses of ‘cuts’ and ‘lack of training’ do not present a convincing response.

Political moves, trying to convince us that fraud in the UK is at last being taken seriously (since Lord Holt’s time?), have appeared in the form of a new ‘task force’ made up of banks, the National Crime Agency (NCA), senior representatives from UK Finance, the Solicitors Regulation Authority, Accountants Affinity Group and the National Association of Estate Agents.

Whilst it looks good on paper, it smacks of a political stunt. Meaning the ‘partners’ pull in different directions once the meetings are over. ‘Partners’ who can’t even agree on what fraud is with massive differences in enforcement approaches. ”Organised crime” seeping into the dialogue, with that NCA stereotypical profiling stamp on it. There isn’t a ring of leadership or direction sounding here. Even the fraud-loss figures quoted in the apolitical statements increase. As does the irony.

And so ….

We commenced with a court judgment, so let us conclude with one:

“It is abominable to convict a man behind his back”

(The Queen v. Dyer (1703), 6 Mod. 41.)

Ian Ross has 30 years’ experience in the detection and prevention of financial crime. He is a former UK police officer, and now well established in the corporate sector. Mr. Ross is also an accredited counter fraud specialist and international money laundering investigation project advisor, especially dealing with sophisticated fraud and corruption cases. He supports government regulators, the telecoms industry, national banks, multi-national corporate entities, national police forces and the military. His latest projects include addressing cyber-related fraud.

Please note that opinions expressed in this article are solely those of our contributors, not of Political Insights, which takes no institutional positions.

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