Financial crime in Ireland
This chapter was originally published in The Euromoney Financial Crime & Cyber Security Handbook 2014/15.
It is a feature of the Irish criminal system that the right to trial by jury in respect of serious crimes is well-nigh absolute. The District Court (a judge-only court) has jurisdiction to deal with summary offences but generally speaking indictable offences are tried in the Circuit or Central Criminal Courts before a judge and jury. Although the Special Criminal Court, composed of three judges and no jury, could theoretically hold a trial involving a financial offence, to date trials before the Special Criminal Court have typically had a terrorist or organised crime element.
In England, concern at the duration and cost of complex fraud cases (the Systech fraud trial collapsed in 2005 after two years at trial when jurors went on strike, at an estimated cost of €50m) prompted the government to pass Section 43 of the Criminal Justice Act 2003 which allowed for the trial of fraud offences on indictment without a jury where the likely length or complexity of the trial would make it unduly burdensome. This provision has since been repealed, but the fundamental concerns giving rise to it remain, and there still exists in England a detailed protocol which sets out the procedure for the management of complex and lengthy fraud trials to prevent difficulties arising.
No such protocols or provisions exist in Ireland, although similar concerns exist here also. The one recent alteration made in this respect was to amend the Juries Act in 2013 to allow for the empanelling of 15 jurors in lengthy trials, to prevent the risk of the trial collapsing if, due to withdrawals, the number of jurors dropped below 10. This power was invoked for the first time in the Anglo trial, and 14 jurors (one juror, ironically, having to be excused on the first day of the trial) duly heard all the evidence, and at the end of the evidence, 12 of them were selected by lottery to decide the guilt or innocence of the accuseds.
2013 saw the conviction of Thomas Byrne, a former solicitor on more than 50 counts of theft, deception and forgery arising from his alteration of his client’s property deeds in order to borrow more than €52m from banks. This trial, which took 27 days, was notable not only for its length and complexity, but also for the use made by the prosecution of technology to simplify matters for the jury which unanimously convicted Mr Byrne on all counts.
It seems that concerns about the capacity of juries to try complex white collar crime cases will have been assuaged by the outcomes of the Byrne and Anglo trials, and it is unquestionable that the amendment of the Juries Act will assist in ensuring that duration alone will be less likely to cause the collapse of a trial. The diligence with which juries seem to approach their task is confirmed by the fact that in the Anglo trial, one accused was acquitted on all charges, while two others were convicted. Questions must still remain, however, as to the practicality of having a jury try a case of truly labyrinthine complexity over a period of many months, should this arise in the future.
Prosecution resources and expertise
Another feature of the prosecution of white collar crime in Ireland is the relatively diffuse nature of the prosecuting and investigating authorities. The Director of Public Prosecutions ("DPP") is the body empowered to prosecute the majority of criminal offences in Ireland. Summary company law offences tend to be prosecuted in the District Court by the DPP, the Office of the Director of Corporate Enforcement ("ODCE") or the Registrar of Companies, while summary market abuse and prospectus offences may be prosecuted by the Central Bank of Ireland ("CBI"), and the Revenue Commissioners prosecute summary revenue offences.
Where any of these offences are to be tried on indictment, then typically the DPP has the responsibility both of deciding if charges should be brought, and prosecuting the offence if this arises, although there is co-operation between the DPP and the other regulatory bodies where this does occur. For certain specified criminal offences, the Criminal Assets Bureau may become involved.
The Garda Síochána (the Irish police force) is responsible for the investigation of criminal offences, and the Garda Bureau of Fraud Investigation ("GBFI") is tasked with dealing with large scale and complex white collar crime offences. Some members of the GBFI are seconded to the ODCE to assist in its activities. In addition to this, the CBI has its own enforcement section.
This diffusion has the potential to create difficulties where the facts do not initially disclose what type of offence, if any, has been committed. Depending on the focus and manner of the initial investigation, the ability to prosecute other, less instantly obvious offences may be impaired. The possibility of inter-agency rivalry cannot be ruled out, and the proliferation of agencies militates against the efficient sharing of information.
This is in contrast with the role played by the Serious Fraud Office ("SFO") in the UK. As a non-ministerial government department, the SFO has a responsibility to investigate and prosecute complex financial frauds with an international dimension with an alleged value of over £1m, and was set up expressly to address the loss of public confidence in the handling of financial scandals. Fraud in this context is taken to include corruption (whether political or corporate), asset stripping, fraudulent trading, share ramping, the publication of false information, Ponzi schemes and boiler room frauds. Although the SFO is not without its critics, and indeed is currently facing civil claims of in excess of £300m from the Tchenguiz brothers arising out of its investigation into the collapse of Kaupthing Bank, it is difficult if not impossible to imagine investigations and prosecutions on this scale being successfully brought in this jurisdiction without the creation of a similar agency.
Similar concerns arise in relation to the resourcing of prosecutions, and more particularly, investigations. As the cliché goes, you have to speculate to accumulate, and the investigation of complex financial transactions alleged to involve a criminal element cannot be done on a shoestring. Moreover, the process will inevitably entail investigations which will not lead to prosecutions, and prosecutions which are not successful. These concerns in and of themselves are not inherently problematic, and indeed it would be more worrying were only cases which were seen as being cast iron pursued, as this would inevitably lessen the deterrence factor. It is instructive to consider the fluctuating budget of the SFO, which has gone from £52m in 2008 to £32m in 2013, and which the SFO has recently requested be augmented by another £19m.
Burden of proof and absolute liability offences
A feature of regulatory type offences in Ireland, as in the UK, is the reversal of the burden of proof. This means that rather than the prosecution being forced to prove every specific element of the offence, the statute in question may provide that if certain facts are proved, a rebuttable presumption arises that an offence has been committed unless the accused can take advantage of a statutory defence or otherwise rebut the presumption by pointing to evidence to the contrary. The Section 60 offences in the Anglo trial were offences of this type, in that where it was proven that the company was in breach of the section, the onus was on the accuseds to prove that they took all reasonable steps to prevent the company from being in breach.
The Irish Constitution expressly provides that criminal trials shall only take place in accordance with the due course of law. It has long been accepted that due course of law necessarily entails the accused enjoying the presumption of innocence, which means no accused can be convicted unless the prosecution proves beyond reasonable doubt all the necessary elements of the offence in question.
Where a statute shifts a burden of proof onto an accused, this can give rise to questions as to the constitutionality of the statute. If the statute requires the court to convict the accused, unless he provides evidence proving his innocence (i.e., by shifting the legal burden of proof), then the statute may be unconstitutional. If it is only an evidential burden that is shifted, then there is no breach of constitutional rights.
This already esoteric area is further complicated by the fact that typically, each statute expresses the shifted onus differently, which makes it significantly harder to extract a common thread. Furthermore, recent case law in this area is unhelpfully weak, and the Irish Courts have yet to consider an appeal where an accused has been demonstrably and unfairly prejudiced against as a result of such a provision.
There is a line of Canadian authorities to the effect that any offence which requires an accused to disprove the existence of a presumed fact, even on the balance of probabilities, where the presumed fact is an important element of the offence in question, would be unconstitutional. This is on the basis that an accused could raise a reasonable doubt as to presumed fact (but not prove it on the balance of probabilities) and still be convicted. This logic has been approved in passing by the Irish Court of Criminal Appeal and it is possible, at least, that with the right set of facts, a statute which shifted the onus in this fashion would indeed be struck down as unconstitutional.
Also of interest in this regard is the notion of strict and absolute liability offences. Typically, a criminal offence involves an element of intention, or mens rea, in that the prosecution must prove that the accused intended the outcome of his actions or omissions, or was culpably reckless as to the same. For certain regulatory type offences, which are deemed to be not truly criminal in nature, and where the sanction is minimal, and where the importance of the objective to be obtained justifies it, the Courts have affirmed the constitutionality of dispensing with the requirement for a mens rea. Therefore, with the offence of littering, punishable by a fine only, it suffices for the prosecution to prove that litter was dropped, irrespective of whether the litterer intended it or otherwise.
With more serious, truly criminal offences on the other hand, the Courts have adopted a different approach. In 2006, in CC v Ireland, the Supreme Court held that a statute outlawing statutory rape was unconstitutional because it did not allow for a defence of honest mistaken belief as the age of the complainant. The Court held that any statute which laid a heavy criminal burden on a person who had no intention to commit an offence, and indeed had genuine and reasonable (albeit mistaken) grounds for believing that they were not, was not in accordance with the Constitutional right to trial in due course of law.
In the Anglo trial, two accuseds were convicted of unlawfully lending money to purchase shares in Anglo Irish Bank, despite the bank, at the time, having taken both legal and expert advice that the lending was in fact lawful, and despite the Financial Regulator being broadly supportive of the proposed transaction. It seems possible, if not likely that an appeal will be brought against the convictions, having regard to the decision of the Supreme Court in CC v Ireland and it will be interesting to see what the final decision is in this regard.
A particular feature of the Irish approach to the prosecution of financial crime is a lack of clarity in relation to sentencing and penalties. It seems highly likely that the resultant uncertainty is frustrating early pleas and acknowledgment of wrongdoing.
Where the CBI investigates a regulated entity in accordance with its powers under the Central Bank Act 1942, and a settlement is reached, details of any penalty imposed, plus the contravention, are reported, and it is possible to glean at least some sort of direction from this.
As an example of this, the CBI expressly provides for an early settlement discount of up to 30% as part of its Administrative Sanctions procedure. Similarly, if and when the CBI ever invokes its Inquiry procedure against a regulated entity, it is reasonable to expect that the Inquiry’s conclusions, including the details of penalties to be imposed, will be reported.
Where financial crimes are prosecuted before the Courts, however, the same clarity does not apply. There is no dedicated division of either the Circuit Court or the Central Criminal Court set up to deal with financial crime and so it is next to impossible to infer any sentencing trends from the very few cases which have been tried (by a variety of judges) in the recent past.
Whereas in the UK there is a sentence tariff system in place which gives a fair amount of clarity as to the likely sentence which may be imposed (and solid grounds for appeal if this is exceeded), the Irish Courts have not adopted this approach, and judges have little guidance other than basic criminal sentencing principles. Nor does the Irish system allow for plea bargaining, which is a common feature in US financial prosecutions. Where an accused in Ireland wishes to plead guilty, they do so with no guarantees from the prosecution as to any sentence or penalty to be imposed, and are entirely at the whim of the judge (subject to any appeal) in that regard.
Another feature of the US prosecutorial model recently adopted in the UK is the DPA, or deferred prosecution agreement, which is a mechanism by which the prosecutor (with the approval of the court) can enter into an agreement with a party suspected of having committed a financial or economic crime, whereby the prosecutor agrees to defer prosecution provided that the suspect party agrees to comply with a set conditions with a specified time frame. No such provision applies in Ireland.
Notwithstanding the fact the recent trend in the prosecution of financial crime in Ireland is of capably managed and well run trials, the fact remains that serious doubts persist, both on a legal level and on a logistical level. It is striking that the transaction which prompted the Anglo prosecutions occurred in mid-2008, and was publicly known about at the time, and yet the trial did not commence until January 2014. Without minimising the complexity of the case, such a delay is hardly consistent with a fully resourced and pro-active investigation and enforcement policy. Confidence in the financial sector demands that justice must both be done, but also be seen to be done, and there are a number of systemic changes which need to be made in order to allow this to happen.