My draft working paper assessing Ireland’s white-collar crime oversight agencies and 14 recommendations for reform can be accessed here - Fit for Purpose
Our system of fighting financial corruption needs to be completely overhauled
Sunday Independent 30 June 2013
I spent three years of my life writing a book about the history of scandal in Ireland since the foundation of the State. The only theme that runs through it is this sense of impunity and the absence of consequence. We are remarkably good as a country at establishing inquiries, publishing reports and ultimately complaining that nothing has changed.
The debate on the Anglo tapes is dominated by the clamour for a banking inquiry. Absent in all this is how to stop such a scandal from ever happening again.
The deaths of Sunday Independent journalist Veronica Guerin, 17 years ago last week, and Detective Garda Jerry McCabe, convulsed cross-party political will to establish the Criminal Assets Bureau (CAB) – one of the most innovative criminal investigatory organisations in the world.
We need to take this type of action again.
Ireland has failed to tackle white-collar crime. The outgoing financial regulator, Matthew Elderfield, bluntly told the Public Accounts Committee this month that our system for confronting financial crimes was not fit for purpose.
The number of white-collar prosecutions has fallen dramatically despite an increase in the number of offences. Just 178 convictions were recorded in 2010 compared with 579 in 2003. The chair of the Revenue Commissioners, Josephine Feehily, noted that although 289 cases of illegality were identified in relation to the largest tax evasion scheme in Irish history, not one person has been prosecuted over the Ansbacher tax scandal.
Why?
Although the workloads of the agencies tasked with the prevention, detection, investigation and prosecution of fraud have increased as a consequence of the fallout from Ireland’s economic collapse, their resources have been cut.
CAB’s budget was chopped by almost 15 per cent from 2008 to 2012. There are only three forensic accountants within a team of 70 officers. Every white-collar crime investigation is heavily dependent on the specialist skills of forensic auditors.
Likewise, the capacity of the Garda Bureau of Fraud Investigation to investigate white-collar crime is limited somewhat given the absence of solicitors or barristers on its staff – and it has just two full-time forensic accountants on its books. Its budget was slashed by 21 per cent between 2008 and 2011.
The ODCE, responsible for the Anglo investigation, has had 11.6 per cent in cuts from 2010 to 2013. Mr Justice Peter Kelly remarked last year that notwithstanding the complexity of the Anglo case, the investigation was nevertheless taking “a very, very long time”. He expressed his surprise that just 11 gardai were seconded to the ODCE to work with eight ODCE officials on the “largest and most serious” investigation in the State’s history.
The Garda Siochana’s budget was cut by €39m in 2013. The Director of Public Prosecutions’ finances fell by 18 per cent between 2009 and 2011. And so on.
Privately, senior officers from different agencies have confided that diminished resources are “strangling” their ability to do their job effectively. The Croke Park Agreement means that in reality a “six-year gap between recruitment drives” now exists.
Breaking the Croke Park embargo to recruit vitally needed specialists is not the only answer. Four key reforms are also necessary: an independent audit; the creation of a new taskforce; the introduction of deferred prosecution agreements; and paying whistleblowers.
An independent audit of the capacity of oversight agencies, as a matter of urgency, must be conducted. This would consist of an overall appraisal of the operational ability of CAB, ODCE, Garda Bureau of Fraud Investigation, Central Bank, Revenue, National Bureau of Criminal Investigation, Competition Authority and so forth. This is what the UK’s Serious Fraud Office has done since the financial crisis.
Such a review has been achieved with the Department of Finance. The 2010 Wright expert report noted that the department was “not fit for purpose” and “often operates in silos, with limited information sharing”. The Wright report’s criticisms echo that made by the ODCE in its submission to the Department of Justice way back in 2010.
The ODCE noted that a disparate set of agencies have responsibility under one legislative code only – be it company, competition, revenue or financial law, etc. But white-collar criminals do not conduct illicit activity within the confines of one piece of legislation! So multiple agencies may need to be involved, but information sharing is not always possible because of confidentiality requirements. That’s madness.
In response to why an Anglo tapes investigation is difficult to conduct, the Minister for Finance said, “There are tea chests – hundreds of tea chests – full of documents, and then there are tapes as well.” Michael Noonan went on to say, “So it’s very difficult to put the book of evidence together.”
That is unacceptable. The fact something is difficult does not mean it should not done.
Political will right now is distracted by the heat generated with statements of “the axis of collusion” and “political thug and boot-boy” nonsense. Compare that to the swift response back in 1996 when a national crisis prompted the establishment of CAB after only a few weeks.
Ireland does not have a police-led multi-agency taskforce with a singular focus on white-collar crime. This is left to CAB which centres on the proceeds of crime. Such a body, with a ring-fenced budget, would be populated by officials from the Central Bank, Revenue, Fraud Squad, ODCE, the Department of Justice and other appropriate agencies.
The ODCE and Transparency International have both proposed the introduction of Deferred Prosecution Agreements. In the US, DPAs are common. Companies are encouraged to report wrong-doing in order to avoid prosecution.
The US introduced the “Office of the Whistleblower” in 2010. The UK is considering something similar. Whistleblowers are paid between 10 and 30 per cent of the money collected in cases where high-quality original whistleblower information leads to an enforcement action of over $1m in sanctions. Controversial, but it works.
Let’s fix the problem, not keep talking about it.
