Proposed restructuring of UK agencies dealing with economic crime and fraud continues at pace

This post was also written by Simon Hart.

In advance of the much anticipated consultation in the United Kingdom on the creation of the proposed Economic Crime Agency (“ECA”), which is due to take place this spring, the Home Office announced this week that it plans to take a greater role in the fight against economic crime by having the ECA fall within its remit rather than that of the Treasury. On 17 January 2011 it set out plans to merge the Serious Fraud Office (“SFO”) into the soon-to-be-formed, all-powerful National Crime Agency (“NCA”). It also suggested that the ECA could become part of the NCA.

When it was originally proposed in July 2010, the NCA was heralded as a way to build on the powers of the existing Serious Organised Crime Agency and other law enforcement agencies to tackle serious organised crime and strengthen border security. The ECA, operating separately, was to be given the combined powers of criminal prosecution of the Office of Fair Trading (“OFT”), the SFO and the Financial Services Authority (“FSA”). This would include the FSA’s power to bring prosecutions for insider dealing and market abuse. What was left of the FSA’s powers were to go to its successor- the Consumer Protection and Markets Authority (“CPMA”).

Reform of the regulatory system for financial services and the structure of the agencies which fight serious economic crime has for some time been a key issue for the Coalition government. In a speech in June 2010, the Chancellor of the Exchequer, George Osborne, reiterated a pledge that the ECA would be set up to end the multi-agency approach to the policing and prosecution of economic crime. However, warnings of the dangers of separating civil enforcement from criminal prosecutions in the context of the financial markets have been heeded and the government accepted that the FSA and its successor, the CPMA, should keep its ability to police insider dealing. This stripped the ECA of some of its proposed powers before it had even come into existence.

Having already lost its powers of criminal prosecutions over market insider trading, and with a proposal that the SFO be merged into the NCA, the remit of the proposed ECA is narrowing, left as it will be with only the OFT’s powers of criminal enforcement. Questions are being raised about the viability of the ECA as a strong and powerful prosecuting body. We will report further once the consultation is underway.