Fraud office to step up covert surveillance

Business people suspected of fraud face surveillance such as e-mail monitoring and phone tapping, a senior investigator has warned.

The alert was the latest effort to counter criticism that Britain is soft on financial crime.

Keith McCarthy, head of anti-corruption and proceeds of crime at the Serious Fraud Office, said the organisation would use "all available tools" to improve its intelligence-gathering.

His remarks came amid fears that flawed practices, laws and institutional frameworks have left investigating agencies ill-equipped to deal with the frauds expected to be rev-ealed by the financial crisis.

Mr McCarthy - a former Revenue and Customs investigator who joined the SFO late last year - said plans to boost the use of surveillance were part of an effort to address intelligence failings and make the organisation "more like a law enforcement agency than we were in the past". He said in an interview: "We will undertake criminal investigations in the way that any other law enforcement agency in the UK will undertake its investigations. To me, that's a significant step forward for the SFO."

Mr McCarthy said the surveillance would be conducted via police forces under the 2000 Regulation of Investigatory Powers Act. The law - which has been criticised by civil liberties campaigners for the wide discretion it allows public authorities - enables the use of techniques such as covert human surveillance, phone tapping and mail interception.

Former SFO investigators said the agency had used surveillance only rarely, as most of its probes concerned already-executed frauds rather than "live" crimes that lent themselves to phone tapping or other kinds of surreptitious monitoring. One former staffer said: "It's old crime that's being reported. It's not real-time crime."

Jeremy Summers, a financial crime specialist at Russell Jones & Walker, the law firm, said more surveillance might help detect consumer crimes such as share-investment "Ponzi" scams but could only be of limited use in large business frauds, where evidence was often document-based and historic.

"This approach suggests that the SFO is seeking to take a more proactive approach and so cut fraud off at source, rather than simply reacting after the horse has bolted. Whether that's realistic given the investigative resources they have . . . and the mass of legitimate business communications they would have to sift through, remains to be seen."

The surveillance push is part of an attempt to bridge the gap between Britain's record on pursuing fraud and that of the US, where prosecutors' powers include the ability to threaten suspects with decades in jail unless they plead guilty and incriminate others.

Mr McCarthy insisted the SFO was in a position to bring forward some big corporate cases over the next few months, in spite of internal turmoil that has seen the departure of many senior staff over the past year and a half.

Opponents of Richard Alderman, the director since last year, said his regime put too much effort into small-scale consumer crime and perceived gimmicks such as the agency's new slogan, "One SFO", ins-cribed on trinkets ranging from pens to place mats.

Mr McCarthy said the motto was part of a worthwhile attempt to break down old divisions between lawyers and other investigators in the organisation, which has had a mercurial two decades tackling large and complex frauds. "We are one SFO," he said.