SFO outlines changes to UK Bribery Act

The director of the Serious Fraud Office (SFO), David Green QC, has proposed a number of changes to the UK Bribery Act, which, if enacted, could make it easier for the SFO to prosecute corporations under the Act. Furthermore, the Home Office has is considering financially incentivising whistleblowers in cases of fraud, bribery and corruption. If this is implemented it will represent a significant development in the discovery and enforcement of fraud, bribery and corruption offences in the UK.

FW spoke to Satnam Tumani, a partner at Kirkland & Ellis International, Siobhain Egan, a director at Lewis Nedas Law, and Sam Eastwood, a partner at Norton Rose Fulbright, about the proposed changes.

TalkingPoint: Proposed changes to the UK Bribery Act

Cyber-alert stats paint stark picture

BY Matt Atkins

The average US firm faces 10,000 potential cyber-security alerts daily, more than any IT team can possibly process, according to an analysis of web traffic by threat protection and containment firm, Damballa. The Damballa State of Infections Report Q1 2014 culled information from ISP and mobile traffic, as well as its own customers, finding that the busiest networks generated up to 150,000 alerts.

While the report makes clear that a large number of these alerts are innocent, the problem lies in the sheer volume of alerts that firms face. The scale of the problem leaves most IT teams with little hope of keeping on top of the daily alerts, allowing infected systems to hide more easily. “Bystanders may think it’s outrageous that a breach could go undetected for months,” says Damballa. “Main-stream media has certainly stirred the pot with stories about security teams ignoring alerts. But the people engaged in daily hand-to-hand combat know that an alert doesn’t equal an infection – and that’s part of the problem.”

Large multinational firms with a global reach face up to 97 active infected devices per day, according to the report, a relatively small amount. However, the manual work required to actually find infections is the number one security challenge. An overload of security alerts aids cybercriminals such as those who attacked firms in the US retail sector during 2013. During the time of its three-month security breach, Neiman Marcus experienced 30,000 security alerts. Sifting the alerts that indicated criminal activity from false positives and innocent but anomalous behaviour, extending the period in which the firm was under attack.

Traditional IT security controls can't stop today's threats, says the report. Organisations need to automate labour-intensive processes like alert chasing and focus on discovering successful infections and triage the devices at most risk. “There aren't enough trained security professionals in the world to solve the problem,” says Damballa.

Report: State of Infections Report Q1 2014

SFO turns screw on Barclays

BY Matt Atkins

The UK's Serious Fraud Office (SFO) has ramped up its probe into Barclays's dealings in the Middle East, according to the Financial Times. Former chief executives Bob Diamond and John Varley are due to be questioned under caution by the SFO, along with other senior executives, about alleged corruption in the bank's arrangements in Qatar.

Advisory fees

The SFO is hoping to impose a £50m fine on the bank for failing to disclose £322m in 'advisory fees' paid to Qatari investors, a charge which Barclays contests.

Barclays received Qatari investments worth £4.6bn in two emergency fundraisings in June 2008 and October later that year. The capital raisings, which came to £11.8bn in total and relied heavily on Middle East money, saved Barclays from part-nationalisation in the wake of the financial crisis. The 'advisory services' agreement with Qatar was disclosed in the June capital raising, but not in the October one, contests the SFO. The fees were not mentioned at all.

Barclays disputes the fine on the grounds that the advisory fees did not have to be disclosed under the FCA rulebook. The FCA takes issue with this argument, claiming the payments do not count as advisory fees.

Reasonable suspicion

That the current round of questioning comes under caution suggests the SFO believes it has reasonable grounds to suspect the interviewees have committed an offence. Such interviews, however, do not require arrest and can be scheduled by appointment, as has been the procedure in this case. No charging decision will be reached until the interviews have been conducted.

As the alleged offence dates back to 2008, the ultimate risk for Barclays is a corporate prosecution under the UK’s old corruption laws, since overhauled by the 2011 Bribery Act. Under these laws, the SFO must prove that a so-called directing mind of a company knew of and ordered bribes.

Just last week, Barclays launched a major restructuring plan aimed at boosting sluggish profitability. This news could hardly have come at a more inconvenient time and will surely prove an unwanted reminder of the issues hanging over the bank.

News: UK fraud office steps up probe into Barclays’ dealings with Qatar

UK hedge fund managers defy Europe slowdown

BY Matt Atkins

The majority of European hedge funds to set up business in recent years have done so in the UK, according to a Preqin's Hedge Fund Analyst factsheet. The UK accounted for 50 percent of European hedge fund launches in the past 12 months.

Europe decelerates

While hedge fund managers in France, Spain and Germany saw a net decrease in assets under management (AUM) between January 2013 and April 2014, UK-based fund managers witnessed an increase of approximately $57bn. “Europe is experiencing a slowdown in terms of new hedge fund managers setting up business in contrast to North America, which has seen an increase in the number of new fund managers coming into market in recent years,” says Amy Bensted, head of Hedge Funds Products at Preqin. “This can be partially attributed to the AIFMD regulation within Europe, which is deterring some prospective new firms setting up a hedge fund business in the region. However, one country within Europe shows no signs of sluggishness – the UK.” Firms with headquarters in the UK now account for $423bn in hedge fund assets – over 10 times the amount of any of its European neighbours.

Prolific 2013

Last year proved particularly prolific for hedge fund manager launches in the UK. Thirty-eight new groups set up business in the country, compared to 17 throughout the rest of Europe. Despite this, the number of hedge fund launches in each region has remained broadly similar, with 91 in the UK, compared to Europe’s 90. But while the UK far outstrips all other European countries in terms of AUM, it is a Sweden headquartered fund manager that has had the most success in fundraising new vehicles: Brummer & Partners’ Canosa fund has amassed over $1bn in assets since its March 2013 launch.

Expected developments

Going forward, the continued growth of UK hedge funds is likely, while continental Europe must do more to attract business, says Ms Bensted. “Over the course of the rest of 2014 it will be interesting to see if UK continues to see increasing volumes of new manager launches and if regulation and other hurdles continue to hinder start-ups in the rest of Europe.”

Press Release: UK Hedge Fund Industry Booms Despite a Wider Slowdown in Europe

US oil and gas sees mixed Q1

BY Matt Atkins

In the three month period to 31 March, US oil and gas M&A volume activity reached its highest Q1 volume in over a decade, according to PwC US. Deal value was also up on Q1 2013, with a total of 43 oil and gas deals valued greater than $50m, compared to 41 deals the previous year. However, although volume was particularly high for the period, it slipped by 23 percent compared to the 56 deals of the fourth quarter in 2013. Deal value in the first three months also slumped on the fourth quarter, declining 54 percent from $43bn.

Upstream activity

Increased activity in the upstream sector and a growing foreign interest in US oil and gas assets drove activity, according to Doug Maeir, energy sector deals leader at PwC US. “The first three months of 2014 represented a historic first quarter across the board led by deal activity in the upstream sector, including in the Gulf of Mexico and interest from foreign players,” he said. “Divestures continue to be a major source of deal activity, but we are seeing smaller deals taking place; larger portfolio adjustments have already been made. Smaller deals are also happening in the oilfield services sector as a result of companies selectively looking to fill in the white space by adding assets that can increase productivity and reduce costs.”

Unconventional assets

Shale extraction proved a significant driver of transactions, with 17 deals totalling $6.2bn related to shale plays. “First quarter shale deal activity was on par with what we anticipated as we see the continued shift towards unconventionals,” said John Brady, a Houston-based PwC partner. “A third of total deal value was related to shale plays in the first three months of the year, indicating the ongoing attractiveness of capitalising on the long-term prospects for shale gas.

Mega deals down

Master limited partnerships (MLPs) were involved in 11 of the first quarter’s transactions, representing approximately 27 percent of total deal activity. Financial investors continued to show interest in the industry, and were behind two total transactions, totalling $1.9bn. This represents a 230 percent jump in deal value compared to the same time period last year. Bumper deals were down, however, according to PwC. The first three months of 2014 saw five mega deals, representing $10.1bn. This compares to eight mega deals worth $19.7bn during Q1 2013.

Press Release: US Oil & Gas M&A Activity Reaches Highest First Quarter Volume in More than a Decade