Sunday, March 03, 2013

To bring down the biggest banksters you need the specialist skills that criminal detectives possess!

My friend Timon Molloy, Editor of Money Laundering Bulletin, often poses thoughtful questions on 'Linked-In' and invites financial and compliance professionals to respond to them.

Most recently he posed such a question about the best way to punish banksters and asked a question to a senior UK Financial Services Authority manager: '...Why don't you levy much higher fines..?' The Answer was: '...We'd then be out of line with penalties imposed by the courts & liable to judicial review...'

I responded to this question by suggesting that increased fines were irrelevant for banks because they did not really pay them because they fell on the shareholders of the bank, but I made an alternative proposal that prosecuting senior bankers for their crimes would have a much more effective outcome.

Timon replied by saying; '...I did put the point about prosecuting individuals to the FSA manager and to a senior US prosecutor, who was at the same event, but they both said that getting the necessary evidence to make out a criminal case against a specific person had (so far) proved just too difficult...'

This observation was responded to by former detective John Horan who stated; '...Too difficult? Weird concept, how about instead of the lawyers ruminating over this they give it to actual investigators, There would be no convicted murderers /rapists/ robbers/ terrorists (need I go on) if that was the criteria used. "...Sorry, would love to investigate the death of your loved one, madam but it is just too hard..." Makes me want to weep...'

John hits the nail on the head, and I decided that it was time to spell out the distinction, as made by John, about the qualifications of proper criminal 'investigators', because I believe that this is one of the major obstacles that stands in the way of effective financial investigation and explains a lot about the way the FSA fails to deliver its Statutory obligations.

Prior to the passing of the Financial Services Act 1986, the City and the Financial Sector was effectively administered by its own practitioners. The guiding hand on the tiller came from the office of the Governor of the Bank of England, but there was very little call for the involvement of the Police. Any minor scandals were hushed up, the victims paid off, and everything was allowed to return to normal as quickly as possible. There were no major scandals, or at least, none that would be admitted, and any serious transgressions were dealt with by the City fathers themselves, which used to involve being blackballed from the City club.

In the period after Margaret Thatcher came to power, her determined policies to open up the City to foreign competition, to abandon restrictive exchange controls and to make London part of the 24/7 global traded financial market, meant that the old ways of managing the players in the game changed utterly, and we began to see allegations of the kinds of frauds which we had hitherto not experienced coming on to our desks at the Fraud Squad.

We began to find ourselves making regular visits down into the Square Mile to interview bankers, accountants, lawyers, company formation agents, to establish the bona fides of companies which had been set up to trade financial products but which had disappeared, taking their clients money with them.

One of the first things we discovered was that the City and its practitioners did not like talking to detectives, and particularly detectives who were not from their own tame City Police Force. I lost count of the times I heard one of these people say '...Of course, I am not suggesting for one minute that anything criminal has been going on..,' to which my response was inevitably; '...Well I certainly am...'

What became clearer, as time went by, was that we were dealing with a question of a class-based 'culture' shock, which went very deep indeed into the fabric of the City and its practitioners. These people genuinely did not see themselves, their professional colleagues or their clients as engaging in any criminal activities. Criminals were easily identifiable because they broke into your house and took jewellery, stole your car, mugged your wife or assaulted your chauffeur..

When I began to appreciate this discriminatory attitude towards crime, I began to read the works of Edwin Sutherland, the American sociologist, who confirmed for me my deeply-held suspicions. When talking about the phenomenon of 'White Collar Crime' a phrase he coined in a book of the same title, published in 1949, Sutherland said;

"...The thesis of this book, stated positively, is that persons of the upper socio-economic class engage in much criminal behaviour; that this criminal behaviour differs from the criminal behaviour of the lower socio-economic class principally in the administrative procedures which are used in dealing with the offenders; and that variations in administrative procedures are not significant from the point of view of causation of crime...."

Other elements of his work continued to assist me in my realisation that white collar crime was essentially a class-based issue.

"...He was the author of the leading text 'Criminology', published in 1924, first stating the principle of differential, that the development of habitual patterns of criminality arise from association with those who commit crime rather than with those who do not commit crime. He remained convinced that social class was a relevant factor, inventing the phrase white-collar crime in a speech to the American Sociological Association on December 27, 1939. In his 1949 monograph White-Collar Crime he defined a white-collar crime "approximately as a crime committed by a person of respectability and high social status in the course of his occupation."

My reading and understanding of Edwin Sutherland's work, and later analyses of his theories by his students, helped explain to me what became known as 'the crimes of the powerful', and indeed, it is these criminogenic phenomena which fascinate and engage me now.

This is why I am content to describe the actions of banksters who defraud their clients in PPI scandals; who engage in drug money laundering in Mexico, using banks which are controlled from Canary Wharf, or who manipulate LIBOR rates for their own enrichment, as common criminals, indeed, organised criminals at that.

As a trained detective, you begin your investigatory career learning about your craft from the very lowest rung on the criminal ladder. Your job, as an old detective explained to me, and before you exercised any of your powers of restraint compulsion, search or arrest, was to have in your mind's eye exactly what was your end-game outcome, and that was that moment when the foreman of the jury stands up and pronounces the defendant 'guilty'.

Your responsibility therefore was to think through every possible likelihood that might stand in your way towards that goal, so that you could surmount all the challenges. We learned, for example, that just arresting a defendant and getting the evidence was merely the beginning of the process. We had to have in mind the tricks and the stunts that the defence would try to pull on us as soon as we let it be known we were investigating the defendant's affairs.

In one case, I was sued almost before the knowledge of my involvement in an investigation was public, on the grounds that the public knowledge that police were investigating the case had meant that the investment proposal could no longer trade unimpeded, because the suspicion that it was looked on as a fraud meant that no-one would now invest in it.

You had to know the limits of your powers so that when clever defence counsel and solicitors started demanding that the Director of Public Prosecutions insist that you deliver your prosecution evidence to the defence before any charges were laid so that they could have a chance to answer the allegations without a charge being brought, you could tell them and the DPP to take a hike. (I got sued for that one as well)!

The point of these vignettes is that in order to be successful in bringing charges against the rich and powerful before the criminal courts, it was necessary to have a great deal of knowledge, skill, cunning, deviousness, moral and physical courage, as well as a Ph.D in human understanding of the way the criminal mind will work when the chips are down.

Those are the skills of the way of the detective, and you don't get them by attending a two-day course in Anti Money Laundering procedure and practice run by one of the Big 4 Consultancies.

But the Regulatory Agencies assume their pedigree from their civil service heritage. The DTI, and the other civil service departments were never willing to view us mere policemen as being on a similar intellectual or social level as themselves. They viewed us as the horny handed sons of toil, useful to be used as whipping boys from time to time when it suited, but never to be admitted to their rarefied levels of policy making.

Like the FSA with the SFO, the DTI would not share evidence with us in certain enquiries, despite its undoubted usefulness. They were merely an obstacle to progress and a barrier to the truth, because they simply could not align their traditional prejudices towards police as being anything more than a bunch of Plods.

How traditional this image is in the minds of the middle class. Have you ever noticed how in a certain kind of detective fiction, Agatha Christie, Dorothy L Sayers, Josephine Tey, the poor old bumbling police have to be helped out by some elegant upper-middle class spinster or tame academic, who solves the crime from behind the Crossword of the Daily Telegraph. Colin Dexter did much the same with his creation of Morse. He was a detective but an Oxford-educated detective who didn't conform to the stereotype of the rest of his class of humble coppers!

It is class which creates the distinctions in the minds of those regulators who think that they know better how to deal with the problems of the regulated sector. They simply cannot bring themselves to believe that someone who has the skills to deal with ordinary criminals might do the investigative job that John Horan identifies, better than all their solicitors and accountants pulled together. They cannot do this because their belief in the superiority of their class and its training must somehow provide them with greater wherewithal to be able to succeed, in the regulated sector.

The FSA have openly now denied their responsibilities to investigate fraud and other criminal activities. As they say themselves in their rebuttal evidence to the H.M.Treasury Select Committee criticisms on their handling of LIBOR;

"...The FSA has extensive powers to investigate specified offences, both regulatory and criminal (as set out in FSMA). These powers of investigation do not, however, extend to other offences not specified in FSMA such as theft, fraud and false accounting. The police and the SFO do have powers to investigate these offences so we cannot use our powers specifically to obtain material relevant to these offences..."

So, the chances of our ever seeing the FSA bringing meaningful prosecutions against banksters is pretty illusory, and we should not be holding our breath.

We have to go back to Sutherland to really appreciate the reluctance shown by those who run the upper echelons of the FSA to undertaking any meaningful and effective investigations.  As he said in 'White Collar Crime';

"...There is a consistent bias involved in the administration of criminal justice under laws which apply to business and the professions and which therefore involve only the upper socio-economic group..."

That bias is shown repeatedly by the FSA when they repeat the shibboleth about how hard it is to find the evidence necessary to convict individuals in these bankster cases.  They can't find the evidence because they don't know where to look, and they don't know where to look because they do not possess nor have they ever been trained in proper investigative skills, so is it any wonder they can't find the evidence.

Only when the Government wakes up to the realisation that a significant amount of the wrong-doing that is being perpetrated in the City of London and its banks is indistinguishable from organised crime of the most dangerous and vindictive, will they begin to wake up to the enormity of the task they have before them to clean up the financial sector.

They certainly won't succeed, all the time they use people who refuse to provide themselves with the skills necessary to deal with such organised criminals. Far better they insist on the recruitment and retention of men and women who really do have the trained skills to go after this criminal milieu. However, the likelihood of such a course of events emerging is too good to be true, and so we must resign ourselves to the likelihood that London will remain the fraud and money laundering haven it has become in recent years, because there is no one available to police this market effectively!

Proper criminal financial investigation is a skill which is constantly being learned and attested to. You don't get these skills as an adjunct to taking solicitors' examinations, you learn them the hard way, and it is about time that the regulators started to appreciate that there are men and women out there who possess those skills and know how to use them. However, if they don't want to prosecute City banksters for any crime, as they have already stated, they might just as well not bother!  .


Thatkuiio said...

'Your job, as an old detective explained to me, and before you exercised any of your powers of restraint compulsion, search or arrest, was to have in your mind's eye exactly what was your end-game outcome, and that was that moment when the foreman of the jury stands up and pronounces the defendant 'guilty'.'

There was me thinking the police were supposed to follow the evidence.

Thatkuiio said...

'Your job, as an old detective explained to me, and before you exercised any of your powers of restraint compulsion, search or arrest, was to have in your mind's eye exactly what was your end-game outcome, and that was that moment when the foreman of the jury stands up and pronounces the defendant 'guilty'.

There was me thinking the police just followed the evidence!

paulholly said...

We need many more men and minds like yours to tackle this evil that plagues our land, I often say to friends of different races that any working class englishmanm knows all about racism we just call it the class system, and boy do these bastards examplify it.

Rowan Bosworth-Davies said...

Whoever Thatkuiio is, they clearly do not understand the way of the true detective. Your job is to follow the evidence, wherever it leads, and make sure that it is properly acquired, properly collected, properly presented and properly disclosed so that there can be no opportunity for any loophole in the system (of which there are very many and which every barrister will exploit if so permitted)to allow the guilty person to escape through. At the same time, the evidence must be properly analysed in order that the innocent person does not get charged in the first place.

And your point was what exactly?

Unknown said...

Social unrest comes not only from income disparity, but perhaps more so from disparity before the law.

Rowan Bosworth-Davies said...

Thank you Peter, this is exactly the point I am trying to make. If one social group which is regularly marginalised and subject to police attention, observes another social group getting away with vast amounts of criminal actions but with no adverse attention, it will lead to social unrest.

city said...

thanks for share...