Money laundering. Drug smuggling. Illegal arms dealing. Bribery of world leaders. A vast cover-up. That’s just a short list of crimes associated with the Bank of Credit and Commerce International (BCCI) in the 1990s. Agha Hasan Abedi, a Pakistani financier,
founded BCCI in 1972 with dreams of creating a multinational banking empire out of the Arab states’ oil money. The institution, headquartered in Luxembourg and the Grand Caymans, became known as the “bank of crooks and criminals.” For example,
BCCI laundered money for Pablo Escobar’s Medellin Drug Cartel, which probably controlled 80 percent of the cocaine trafficked to the U.S. at the time. (See The Worst of All Possible Banks,
by Joseph Finder, The New York Times, May 2, 1993, and “A Full Service Bank: How BCCI Stole Billions Around the World,” by James Ring Adams and Douglas Frantz, 1991, Simon & Schuster Ltd.)
The U.K. Serious Fraud Office (SFO) eventually began investigating operations of the bank. The U.S. Department of Justice (DOJ) Criminal Division sent one of its best operatives in the fraud section, Lisa Osofsky, to the SFO in 1992 to scrutinize
BCCI. Osofsky’s first investigatory stint in the U.K. sparked an interest that led to her eventually settling in the country, working at several high-level anti-fraud positions and becoming the SFO director at the end of August last year.
Feet on both continents
As the first American-born SFO director, Osofsky has dual citizenship and extensive experience in the prosecutorial systems of both the U.K. and U.S.
"I'm really interested in a very proactive vision of how we work with our cases. We need to ask what sort of techniques certain criminals are using to target our citizens. In the U.K., we need to be thinking ahead of the curve about what’s coming
in, and we need to think about some of the tools we’ve got." — Lisa Osofsky, director of the U.K.'s Serious Fraud Office
She’s been a Chicago prosecutor; senior FBI official; manager at the company, Control Risks; a U.K. barrister; a money-laundering reporting officer at Goldman Sachs; and regional chair of Europe, the Middle East and Africa, at Exiger — a company she
helped build.
Many have said that she’s already given the SFO a shot of vigor since she became director. And the agency could use some renewed fervor after enduring a checkered background.
Iron fist in a silk glove
The U.K. public in the late 1970s and early 1980s weren’t happy with the country’s failing fraud investigations and trials. So, in 1983, the government devised an independent committee to examine all aspects of the investigation and prosecution of
fraud.
In 1986, the Fraud Trials Committee Report — known as the Roskill report, named after its chair, the Right Honourable Lord Roskill, P.C. — made 112 recommendations.
The Roskill model recommended the creation of a new organization with sweeping new powers to compel companies to disgorge information. Since the SFO’s creation in 1988, the agency has had eight directors. The agency, in its early days, garnered criticism,
but now it’s seen as the foremost U.K. investigative agency. (See Trials and tribulations of the SFO, by Iskander Fernandez, Financial Director, Jan. 21.)
Osofsky has been described as an iron fist in a silk glove, so when Fraud Magazine went to meet her in her London office, it was no surprise to find that she intends to use proactive techniques, global cooperation and the latest financial tools
to make the U.K. an inhospitable environment for fraudsters.
Osofsky will receive the Cressey Award at the 30th Annual ACFE Global Fraud Conference, June 23-28, in Austin, Texas, where she'll be
a keynote presenter.
The ACFE annually presents the Cressey Award to a professional for their lifetime achievements in the detection and deterrence of fraud. Dr. Donald R. Cressey (1919-1987) was one of the foremost anti-fraud experts and a founding father of the ACFE.
FM: With your law degree in hand, what were your aspirations in the beginning of your career? Had you intended on becoming a prosecutor? Investigator?
Osofsky: Before I went to law school, I worked for a year in the Manhattan district attorney’s office helping out on all the sex crimes, which meant I was helping with the cases and testing the evidence, talking to the victims or alleged victims
and then handing the cases onto the district attorneys who were qualified. I wasn’t qualified because I was pre-law school. When I was at law school, they had a provision where you could try cases as a law student. In my third year at law school,
I was the acting district attorney under special rules for Middlesex County DA’s office. So, even before I had my law degree, I was doing prosecutorial and investigative work. Then for my first job after law school I clerked for a judge, which
is something unique to the U.S. Then my first real solid job was as assistant U.S. attorney — a prosecutor — in Chicago. So, I was definitely focused on that role even before law school.
FM: You’ve worked in the center of the U.S. Department of Justice, which alone makes you a unique U.K. anti-crime leader. How have your various jobs in public and private sectors prepared you to be the SFO director?
Osofsky: I think the prosecutorial experience is great because we are a prosecuting agency. We use the Roskill model in that we both investigate and prosecute. The fact I had experience in the U.S. where we have a single system — not a bifurcated
system — meant from the early days of being a prosecutor I would do investigations with the full range of federal and local agents such as the FBI, Drug Enforcement Agency and Internal Revenue Service. That really helped when I was in the senior
management of the FBI, really focusing on our criminal investigations.
I think a lot of my experience has funneled me in this direction because I also served as the money-laundering reporting officer for Goldman Sachs here in London. I also helped run investigations at Control Risks in London. I have spent the past five
years building a company, Exiger, which offers solutions to criminal, compliance, governance and risk challenges. When I left, there were about 550 employees — almost exactly the size of the SFO. The work I did was relevant in that our signature
assignment, when I joined, was serving as the corporate compliance monitor of HSBC bank. So, when I first started at Exiger, our first job was going into HSBC banks all over the world and checking to make sure that money-laundering and sanctions
compliance were up to scratch. I ended up helping other clients investigate problems they were having in their organizations with fraud or corruption matters. I did a lot of work in addition to the HSBC case, but it started with that, and it evolved
into doing what I had done most of my life, which is investigating cases.
FM: With your wide international experience, are there any tools available in the U.K. that you would like to see in America or American tools you think would be useful in the U.K.?
Osofsky: In the U.K., there is no statute of limitations, so we can investigate crimes where the U.S. has already had the door shut due to time lapses, and that’s good in our area of white-collar crime because those cases tend to be long and involved.
We also have the “failure to prevent offence” law doctrine, which we don’t have in the U.S. The reason that is so great for us here is because it’s a strict liability offense, so it puts the onus on the company to show that it has adequate procedures
in place to prevent the crime. New legislation in Part 3 of the Criminal Finance Act extends this by creating a “corporate offense of failure to prevent facilitation
of tax evasion.” [See sidebar: U.K. can use powerful parts of Criminal Finance Act 2017.]
I think the one U.S. law doctrine I miss most in the U.K. is corporate “vicarious liability.” It’s hard for us in this country to get to the top to bring the corporate entity that committed a crime to court. It’s called the identification principle.
To get a corporate fraud in the dock here you need to have a “controlling mind,” and it’s tough to get the top people in the dock. This is because large companies inevitably have various boards and many layers to peel away before you can find
evidence of culpability at the most senior level.
So, if you’re just thinking about corporate fraud getting a company in the dock, we’ve got an outdated system.
FM: What are some specific ways the SFO is using technology to conduct its business?
Osofsky: One important point for investigators is not to hoover up every high-tech device in sight at a possible fraud location because we are going to have to be paying the price for that. We will have to go through all the material that will
jam up our system. So, even before you get to the investigative technology, you must be disciplined about what you take. Let me give you an example. We have had cases where we think we want the whole device, but during a search it turns out what
you really need is just a WhatsApp conversation. Now that requires a miniscule amount of data for a tech guy to collect on site compared to what’s contained in the whole device.
With document-heavy cases, I would like to do without the very punishing disclosure issues that we have to deal with. The 2014 Rolls-Royce case had 30 million documents — a record at the time. Now I would say that an average case has more like 50
to 60 million.
We have developed the SFO robot that can actually go through material and sift for legal professional privilege. We are using artificial intelligence and algorithms to sift documents, keyword searches and pull up documents that are relevant to the
case.
FM: You said that you will be a different kind of SFO director. How so?
Osofsky: I think I’m possibly the first that wasn’t born in this country. I’m a naturalized British citizen. I have just come from the private sector, which is an unusual background for this role. I have a lot of experience in terms of building
a company and managing people. So, I think a lot of my interest in how to make the SFO work has to do with how we manage people and how we get the best out of the people we work with. It’s about having the right culture and the right tone here
and the right approach to our cases.
I’m really interested in a very proactive vision of how we work with our cases. We need to ask what sort of techniques certain criminals are using to target our citizens. In the U.K., we need to be thinking ahead of the curve about what’s coming in,
and we need to think about some of the tools we’ve got. In the U.K., we are able to give partial or full immunity. When you’re at the FBI and a witness comes in — a potential whistleblower — and says, “I’m watching some really bad stuff at my
company,” we say, “Great, put on a wire, get back to work.” And you get the evidence that proactive way.
Some of the investigative techniques into serious and organized crime are every bit as valid in the white-collar space. I think we ought to be thinking long and hard about using them when we have the right opportunities. If we lack the operational
capabilities, we will co-opt operational field officers to assist. But we miss a trick if we don’t work at the front end in some of these cases.
Compliance officers are typically risk averse. They are rule-following good people who want to do the right thing. They are bothered when they see a lot of bad things going on around them. They might want to come and talk to us, they might make the
perfect person to work with us. We need to be thinking about how we can exploit or use some of what’s been observed and brought to us proactively. We are not going to trap people, we are not going to set up crimes that don’t exist. But if someone
comes to report a crime, we might think about having them go back and carry on with their job and report back to us. These are all legitimate prosecution and law enforcement techniques I hope we can use more and more.
FM: Do you think DPAs [deferred prosecution agreements] and unexplained wealth orders [see the Global Fraud Footprint column] are tools you will be using more of?
Osofsky: I will think: What does this case need? Where should this case go? Where has the evidence taken me? I don’t want to put quotas on the tools we use. If they are appropriate for the case, we will use them.
FM: Do you have any U.S. Department of Justice [DOJ] employees working with you in the SFO?
Osofsky: We do. We actually have a secondee who spent one year at the Financial Conduct Authority [FCA], and now he has been with us one year. He is out of the fraud section of the DOJ. We also had a couple of secondees from Singapore. We like
to learn from people from other countries. And if other people want to learn from us, we want to be able to share best practices and approaches to cases.
FM: What can law enforcement agencies in the U.K., the U.S. and in all parts of the world specifically do to cooperate better in gathering evidence across international boundaries and in all prosecutions?
Osofsky: You know it’s actually pretty simple. It’s usually talking to people — picking up the phone and being willing to help when they need it. To me that seems like an easy one. In some ways, it’s putting in the leg work, investing in the relationships,
showing people you’re trustworthy.
We also have a multitude of international bodies that meet around the world and share information and tactics and, more importantly, really get to know each other. I think the second week I was here I was sent to South Africa because there was an
international group of prosecutors meeting. We were invited to help launch the SFO in Ontario. They had modeled their office partly on ours. We worked with them to help them set up their own SFO. There is an SFO in Norway. There is another one
in New Zealand.
FM: In 1993, as special attorney for the DOJ’s fraud section of the criminal division, you were seconded to the SFO. Did that spark your desire to return to London in 2003 when he worked at Goldman Sachs International and then your return to the SFO?
Osofsky: Yes. Initially I came to the U.K. in 1992 to work on the BCCI case. I had a really great experience, and I started to get qualified at the bar whilst I was living here. So, when I had the opportunity to come back, I thought I knew I’d
go back to the court room. That’s what I love. I did get qualified at the bar, and I did end up at a Chambers [a group of barristers]. Then in 2003, Goldman Sachs in London gave me an offer I couldn’t refuse.
When I first came over, I was newly married. When I came back I had two young kids, and I thought, I want my children to be citizens of the world. I do not want them to have grown up in suburban Maryland. I wanted them to have the experience I had
being in Europe in the middle of the world in a way you don’t necessarily feel in one suburban corner of the U.S. So, that was my motivator.
FM: When Fraud Magazine interviewed your predecessor Sir David Green in 2013 the SFO’s budget had been cut and it had many issues to tackle. The SFO now seems to be on a much better footing. What did Green accomplish that’s helped you to begin with a 50 percent budget increase and apparently renewed enthusiasm for the SFO?
Osofsky: Everybody noticed that the Rolls-Royce settlement and other settlements meant that we were contributing positively to the bottom line. So, I think that the way that David Green and the office used the DPA tool to deal with culprits and
to end up with a net gain helped people understand that the SFO could bring home difficult criminal cases against big companies and it could feed the Treasury rather than be just a spending mechanism.
FM: The ACFE’s Report to the Nations on Occupational Fraud and Abuse, which ACFE founder and Chairman Dr. Joseph T. Wells, CFE, CPA, first began in 1996, shows that most cases come via tipoffs. Is that the case with the SFO?
Osofsky: We have cases from a wide variety of sources. The U.K. DPAs encourage corporates to come forward and self-report. We do get some tipoffs, but remember, the whistleblowing system is different here. We don’t incentivize, so it’s a slightly
different tipoff type system. We get a lot of referrals from other government agencies — the FCA, for example. And we develop our own cases through intelligence. We now have a chief intelligence officer.
FM: Do you think U.K. public limited companies should be obligated to report fraud? Some obviously don’t because they don’t want the publicity or damage to share price etc.
Osofsky: My real “wish list” would be to extend corporate criminal liability to these companies to help prevent fraud and false representation that’s not just limited to corruption and tax evasion and have a system that incentivizes companies
to report to us.
FM: What’s the message from the SFO to our members?
Osofsky: Well, we are open for business. We are internationally focused and proactive. We are using technology to the best advantage we can. We are here to make sure the bad guys go away, and we are here to make jurisdictions inhospitable for
criminals to ply their trade. The international point is big for me. I’m qualified into different jurisdictions. I see that rules are different, which means I don’t expect other jurisdictions to behave like us. It’s actually understanding that
people do things differently.
FM: How do you think Certified Fraud Examiners and the ACFE contribute to the fight against fraud? Would you have any personal encouragement for CFEs?
Osofsky: They contribute to training and knowledge sharing — something we have also found to be invaluable here in respect to training up our own investigators from the start of their careers through the in-house training program.
I would encourage them to be dogged and uncompromising in pursuit of answers and, ultimately, the truth. It is important to keep the end goal in sight, which includes approaching each investigation with an open mind, drawing on the full range of skill
sets at their disposal and their experience with and insights about people — all with the goal of achieving a fair result.
FM: Without giving too much away, can you give a preview of your message at the 30th Annual ACFE Global Fraud Conference?
Osofsky: I will probably talk about how I found myself at the head of an organization in a country where I didn’t start out. I will also focus on some of the techniques we are using in the work we’re doing to meet those goals of working proactively,
internationally and with technology. However, I reserve the right to completely change this because the conference isn’t until June!
Tim Harvey, CFE, is the ACFE’s global chapter liaison, based in London. Contact him at tharvey@ACFE.com.