Why the financial regulatory regime in the UK has been so useless and how we could ensure that these people can no longer let us all down again in the future!

A number of readers of my recent blogs have commented upon my observations about the way in which the financial sector is regulated, and have asked why, if the organised criminality of the City is so blatant and so obvious, should more of the most egregious criminals not be prosecuted with more dynamism and effectiveness?

Viewers who watched my interview on the critical Max Keiser Report will recall Max Keiser's genuine annoyance at the way in which the criminals in the City appear to get away with the most serious offences, because the police are prohibited from going after them.

Max referred to them as 'financial terrorists', and challenged me to share his views. While I can sense the outrage in his arguments, I am a lawyer by training, a fraud detective by inclination still, and a financial criminologist through academic  discipline, and I know that phrases such as 'terrorist' and 'terrorism' have academic and juridical definitions which we mistake and mis-use at our peril.

For these reasons, I could not share his use of the phrase, but I am still happy to adopt the use of the phrases 'organised crime' and 'organised criminals' to define the people who engage in this institutionalised level of gross criminality within the financial sector! They behave in the same way as any mafia or organised crime enterprise, they obey the same codes of 'Omerta' and they have strictly hierarchical structures which tend to insulate the upper reaches of the organisation, and remove them from the more blatant exercises of criminality, allowing them deniability, while permitting them to profit from those excesses. For all these good reasons, I have no qualm in calling them what they are, taken together they are organised criminals; their institutions are mafias, and their top executives behave like gangland bosses.

Watching 'Roberto Diamante', Godfather of Barclays, giving his nauseating evidence to the Select Committee, while backed up by his consigliore's, getting all chummy and personal with the Committee Members, calling by their first names, and telling them how much he loved his banking 'family', reminded me of nothing so much as a scene which could have come direct from the 'Godfather'!

William Chambliss, an American criminologist put it this way;

‘...One of the reasons we fail to understand business crime is because we put crime into a category that is separate from normal business. Much crime does not fit into a separate category. It is primarily a business activity...’

When dealing with such people, it is necessary to confront them with the correct and proper tools and resources, and that is why I say that the present regime of financial regulation is useless, because in this country we have traditionally failed to adopt the proper mechanisms and employ the right people to go up against these criminals. And this is why we consistently fail!

For some reason which I have never understood, there is an accepted wisdom within the British administrative psyche that teaches that the only people who should be allowed to have any responsibility when it comes to dealing with those from the upper socio-economic class, are people who come from the same class and cultural background!

Quite how this piece of inspired lunacy was allowed to become embedded in the British sub-culture is hard to understand, but there it is,  as immutable as the laws of the Medes and the Persians!

As Edwin Sutherland, the original author of the phrase 'White Collar Crime' once put it so succinctly;

"...The behaviour of persons of respectability, from the upper socio-economic class, frequently exhibits all the essential attributes of crime, but that it is only rarely dealt with as such. This situation arose, he said, from a tendency for systems of criminal justice in Western societies to favour certain economically and politically powerful groups and to disfavour others, notably the poor and unskilled who comprise the bulk of the visible criminal population..."

So, when the agencies of social control like the Civil Service, the financial regulators or the agencies which provide for financial self-regulation come to hire their staff, they perennially hire people like themselves, 'one of us', a 'safe pair of hands', someone who isn't going to rock the boat.

The financial sector culture demands that they be treated wholly differently from ordinary criminals. indeed, in my experience, the financial sector and its compliance officers completely reject the concept that theirs is in any way a 'policing function'. They will deny on a stack of bibles any suggestion that their role is intended to provide any sort of policing control mechanism, and they refuse to adopt policing tactics. To make things worse, very few of them have any experience or knowledge of the definitions or workings of the criminal law.

This of course is a huge mistake, because the banksters they are regulating are behaving like criminals in every sense. If the people who are required to supervise their compliance with the law. don't know the wider law, then they are never going to be competent or capable at dealing with these professional criminals.

But they will never, ever, stop to consider hiring former senior detectives to be posted to these roles. It is something that just will not happen, because the police and the way in which they want to deal with the criminal class, doesn't fit nicely with the accepted way of dealing with these banksters and their satraps.

Detectives don't differentiate between classes of criminal, people who deliberately go out of their way to break the criminal law are viewed as criminals, regardless of the cut of their suit!

I experienced this first hand when I was head of investigations and enforcement at one of the UK's early self regulating organisations. I was hired by the chief executive who had known me when I was a detective, and he was very happy to employ my skills. But they were deeply resented by the other members of the Compliance Department, who were always accusing me of treating our members with scant regard for their status.

I couldn't have given a flying fuck for their status, I saw my function as protecting the interests of the investing public and if these criminals were intent on getting in my way, then my intention was to disabuse them of that idea pretty quickly. I used my professional detective skills to get the evidence we needed to discipline these criminals, and this became deeply resented, not only by those I put out of membership and thus out of business, but by my colleagues who felt that I was not giving them as much leeway as they felt that their membership allowed them.

When I pointed out that these people were stealing their client's money or cheating them out of what they were lawfully owed, offences which I always reported to the police at every occurrence, and for which I would give evidence, once they were charged, because I would have already acquired the necessary evidence, it became clear that my policies were considered to be unfair, and because I was adopting 'policing tactics', the other members of the Compliance Executive looked for ways of getting rid of me.

How we change this state of affairs, I do not know. I do know that employing lawyers whose only experience is in civil litigation is not the right way to go about acquiring the necessary skills needed to be able to deal with professional banksters.

Civil litigation is an entirely different set of skills from criminal prosecution, so hiring civil litigators is a waste of time, because they simply do not have the mental state of aggression needed to take on the biggest criminals. What we need are efficient and previously successful  prosecutors who have a deeply engrained knowledge of the criminal law, supported by former detective investigators who have the experience and skills for going after criminals, the more elevated, the better, and who enjoy taking them down and locking them up. But a broadly based knowledge of the criminal law and its implications is the primary requirement.

Look at the rubbish promulgated by Martin Wheatley and the FSA about the supposed absence of relevant criminal legislation to deal with the LIBOR scandals! As I have previously written, there are enough laws to go after the criminals for LIBOR offences, for PPI fraud, and for a whole raft of criminality, so let's get on with it.

If the Government were to adopt these proposals, bring in a retiring criminal Judge as CEO of the FCA, hire a leading criminal barrister as the Head of Enforcement, and bring in some decent former fraud detectives, none of whom would be frightened of going up against Chief Executives of banks, then we would begin to see a real change.

No sooner would rumours of bank scandals begin to surface, then these investigators would be in the banks, using their powers to seize evidence, arresting potential suspects, and undertaking searching and aggressive investigations. There wouldn't be any 'deferred prosecutions' or convenient little sweetheart deals, just paying a few fines while all the gangsters retained their profits and their dividends.

There would be aggressive charges laid to which the alleged perpetrators would be invited to nominate pleas at an early stage to mitigate the length of prison sentence they were going to serve if they were convicted. There would be huge personal fines, pension funds would be frozen and used to capitalise compensation or asset recovery actions.

In this way, the Government could begin to demonstrate a real commitment for going after city criminals and doing something proactive to start to put the City back on a fair and even footing.

None of this requires any change in the law; none of it requires any alteration of the existing regime. It just needs an exercise of the will to see the job done!