Review for the Serious Fraud Office Te Tari Hara Tāware - Performance Improvement Framework - State Services Commission
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Performance Improvement
Framework
Review for the
Serious Fraud Office
Te Tari Hara Tāware
March 2020
Performance Improvement Framework – Review for the Serious Fraud Office a
Contents
Accepting the Challenge 3
Serious Fraud Office commitment 4
Central Agency support 8
The Challenge 9
Four-year Excellence Horizon 10
Performance Challenge 15
What will success look like? 23
Strengths and Opportunities 24
Overview 25
Strengths and opportunities in detail 27
Appendices 47
Lead Reviewers’ acknowledgement 48
About the Serious Fraud Office 49
The performance story so far 50
Framework Questions 51
Ratings Scale 52
Interviews 53
Introducing the Lead Reviewers
Jenn Bestwick Dr Paul Reynolds, QSO
Ms Bestwick’s public and private sector experience has included Dr Reynolds is a professional director and is currently Chairman of
consulting, management and governance roles. the Eastland Community Trust, Deputy Chair of Landcare Research
Ltd, Acting Chair of AgResearch Ltd, and he chairs the Sir Peter Blake
Ms Bestwick chairs the Resilience to Nature’s Challenges National
Trust and Our Land and Water National Science Challenge.
Science Challenge and is on the Board of the Tertiary Education
Commission, New Zealand Qualifications Authority, Arrow Irrigation He was Chief Executive at the Ministry for the Environment from 2008
Company and the Development West Coast Advisory Board. to 2015, when he also led the Natural Resources Sector Group of
Previously she served on the Boards of Southern Response Chief Executives and served as Chair of the Leadership Development
Earthquake Services Limited and Tourism New Zealand and she Centre and the Advisory Board to the Victoria University of Wellington
chaired the Ara Institute of Canterbury, including during recovery from School of Government. Previous senior public service roles were at
the Canterbury earthquakes. the Ministry of Agriculture and Forestry and the Ministry of Research,
Science and Technology. He holds a PhD in Biochemistry from the
Ms Bestwick has been a Lead Reviewer for PIF Reviews of Education
University of Otago.
New Zealand, the Ministry of Health, the Ministry for the Environment
and Land Information New Zealand. Dr Reynolds has been a Lead Reviewer for PIF Reviews of the
Ministry for Pacific Peoples, Crown Law Office, Ministry of Transport,
New Zealand Transport Agency, and a PIF Follow-up Review for the
Ministry of Culture and Heritage.
Published March 2020. ISBN# 978-0-478-43495-8 (Online) Web address: www.ssc.govt.nz/pif-reports-announcements
© Crown copyright
This copyright work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International licence. In essence, you are free to copy and
distribute the work (including in other media and formats) for non-commercial purposes, as long as you attribute the work to the Crown, do not adapt the work and
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Performance Improvement Framework – Review for the Serious Fraud Office
The Performance Improvement Framework (PIF) supports
State sector leaders to drive organisational improvement,
building positive outcomes for New Zealand.
PIF is designed for agencies in the New Zealand State sector.
PIF Reviews challenge and support leaders to drive organisational change, to
deliver better public services.
Independent reviewers lead each PIF Review. They have significant leadership
experience across New Zealand’s public and private sectors. Their fresh
perspective helps to stimulate ‘new thinking’ amongst agency leaders as they
grapple with the critical issues and challenges that lie ahead for their agency.
The Review is a future-focused exercise; it is not an audit or assessment
of current performance. The reviewers consider the questions: what is the
contribution New Zealand needs from this agency and what is the performance
challenge to make that contribution over the next four years? The four-year
horizon for performance improvement encourages medium-term strategic
thinking and helps leaders and agency staff understand what success would
look like. By considering current plans and capability to meet future challenges,
the reviewers evaluate the agency’s preparedness for the future and describe its Peter Hughes
performance improvement priorities. State Services Commissioner
Each PIF Review delivers a published report, ensuring transparency and
supporting accountability to New Zealanders.
PIF Reviews challenge and support leaders
to drive organisational change, to deliver
better public services.
Performance Improvement Framework – Review for the Serious Fraud Office 1
Performance Improvement Framework
Four-year Excellence Horizon
What is the agency’s performance improvement challenge?
Delivering Government Priorities
How well is the agency responding to government priorities?
Delivering Core Business
In each core business area, how well does the agency deliver value to its customers and New Zealanders?
In each core business area, how well does the agency demonstrate increased value over time?
How well does the agency exercise its stewardship role over regulation?
Organisational Management
How well is the agency positioned to deliver now and in the future?
Leadership and Delivery for Relationships People Financial and
Direction Customers and Development Resource
New Zealanders Management
Purpose, Vision Customers Engagement with Leadership Asset
and Strategy Operating Model Ministers and Workforce Management
Leadership and Sector Development Information
Collaboration and
Governance Partnerships Contribution Management Management
of People Financial
Values, Behaviour Experiences of
Performance Management
and Culture the Public
Engagement with Risk Management
Review
Staff
Performance Improvement Framework – Review for the Serious Fraud Office 2
Accepting the
Challenge
1
In this section:
Serious Fraud Office commitment
Central Agency support
Performance Improvement Framework – Review for the Serious Fraud Office 3
Serious Fraud Office
commitment
Introduction Our performance The SFO recognises the opportunities
for New Zealand and the SFO in
We welcome this PIF Review, which challenge the PIF Review and acknowledges
is particularly timely for the Serious that many of the actions required to
The reviewers articulate well what
Fraud Office given the anti-corruption produce a cogent system response
New Zealand needs from the SFO and
work we have undertaken over the sit with others. Accordingly, while the
demonstrate a clear understanding
last two years and the organisational SFO supports the recommendations,
of the financial crime and corruption
challenges we face. We want to thank our primary actions resulting from
landscape. They also set out the
the reviewers for the insights that they challenges that New Zealand faces the PIF Review will be addressing the
have provided, and also thank our areas within our control and financial
from the complex and changing threat
stakeholders who have supported the means, while continuing to work to
of financial crime and corruption and
review process and provided their influence wider system change.
how these interact with system issues.
own views on the SFO, how we can They identify system challenges in We also note that the proposed
be best positioned for the future and which the SFO can demonstrate public sector reforms could create
New Zealand’s financial crime and leadership adopting a multi-agency, opportunities for the SFO and other
corruption landscape. public and private sector approach agencies to work more effectively
The state and performance of the to protect all New Zealanders from across sectors on the complex issues
SFO is substantially different to that financial crime and corruption. of financial crime and corruption.
described in the 2014 PIF Review. We do note that the PIF Review sets
The SFO has made considerable out challenges in a system where
investment in its operating model, the SFO is not the lead agency
particularly new case and evidence with mandated responsibility for
management systems, together addressing those challenges, however,
with people and culture changes the SFO needs the system to be
– including new values of Pride, optimised to enable it to make the
Excellence and Connect. Over the last
five years, while we accept there is
best contribution to New Zealand. This review sets a
further work to be done, the SFO has
This review sets a bold challenge for
the SFO and its partners, stakeholders
bold challenge for the
focused on improving its connections
across the public sector. This
and the wider system. SFO and its partners,
focus is demonstrated in the SFO’s The reviewers’ conclusions can be stakeholders and the
leadership of the Anti-Corruption Work seen as a call to arms to address
complacency and ambivalence
wider system.
Programme, together with the Ministry
of Justice. towards the risk of financial crime and
corruption in both the New Zealand
public and private sectors. That risk
creates not only an increased financial
risk to the well-being of individuals
and businesses but also a significant
risk to our international reputation.
The reviewers have identified that
doing nothing is not an option, but the
question is what to do.
Performance Improvement Framework – Review for the Serious Fraud Office 4Responding to The reviewers correctly suggest that Working on ourselves
the SFO needs to gain the support
our performance of stakeholders for system change. The SFO agrees that it must address
challenge Over the next three months the SFO, the following three challenges if it
working with others, plans to consider is to play a greater role in tackling
In our view, the outcome challenges the threat of financial crime and
how a National Financial Crime
sit in three interconnected areas: corruption in New Zealand:
and Corruption Strategy could be
• Retaining our reputation in the world established with options for Ministers • Coming in from outer space –
• Developing a National Financial and other stakeholders being establishing strong and embedded
Crime and Corruption Strategy; and developed. The reviewers recognised relationships with other public
that the SFO is well-placed to take a sector agencies
• Everyone understanding the risks.
leading role in the development and
We consider that the first and last • Securing support for a system-wide
delivery of the strategy and working
challenges can be constructively leadership role in anti-corruption –
with a wide range of partners will be
addressed through the SFO working establishing wider support for the
crucial to success. Initial discussions
with partners on developing a National SFO as operational lead and ensure
centre around working in partnership
Financial Crime and Corruption it is adequately resourced to raise
with the Ministry of Justice to develop
Strategy. We note the 2014 SFO the level of activity and drive the
a work programme as a first step and
PIF Review’s recommendation that ACWP work programme
seeking a funding commitment to
a national financial crime strategy deliver the programme. An exemplar • Defining the SFO’s ecosystem -
be implemented was not picked up, is the National Cyber-Crime Strategy moving beyond the SFO’s current
so these issues are not new. In part, developed by the Department of the relatively ‘distanced’ approach and
there was no progress from 2014 Prime Minister and Cabinet in 2015. defining the ecosystem that can
because the SFO lacked the system assist it to have a wider impact in
mandate to pursue it. We suggest that a key part of prevention and detection of serious
any prevention strategy would fraud and corruption.
The SFO agrees that a fundamental be anti-corruption and financial
building block to maintaining NZ’s These system challenges identified by
crime education and advice,
reputation for low levels of financial the reviewers are closely aligned with
the development of high quality,
crime and corruption is the multi- the outcome challenges discussed
transparent integrity systems and
agency development of a National above, and the SFO intends to meet
intelligence-led activities to improve
Financial Crime and Corruption these challenges. The SFO has
understanding of how to avoid or
Strategy. The Anti-Corruption Work always operated at the fringe of the
mitigate risks. Such outputs would
Programme, while under-resourced New Zealand public sector, despite
address the challenge of helping
and still embryonic, has been efforts by the organisation over the
everyone understand the risks arising
important in identifying the risks last five years to develop closer links.
from financial crime and corruption
of corruption and alerting agency Part of this is geographic, being the
and practical steps to minimise
partners to those risks, while also only Auckland-based Government
those risks.
demonstrating the viability of a cross- agency with no Wellington presence,
agency approach solution. and partly the SFO’s size and largely
singular purpose, with no policy
function.
Performance Improvement Framework – Review for the Serious Fraud Office 5Anti-Corruption Work An outward focus Building on our
Programme To be a successful organisation, strengths
strong relationships with customers,
The SFO will continue to advance the Over the next 12 months the SFO
partners and stakeholders are critical.
Anti-Corruption Work Programme, will seek to maximise its funding
Over the next six months the SFO
jointly with the Ministry of Justice, with options to address the business as
will focus on ways we can be more
a Cabinet report-back planned for usual cost pressures that challenge
outward-facing. We will develop a
April 2020. This will outline potential our day-to-day operations. While
stakeholder management programme
next steps and funding options. While the funding pressures create real
with a particular focus on establishing
funding is critical to advancing the constraints, the SFO will look to
stronger and embedded relationships
Anti-Corruption Work Programme extract further efficiencies from its
with other public sector agencies.
further, the SFO will continue to seek existing investigation core business to
This will involve better consideration
opportunities to show leadership optimise our investigations pipeline.
of our operating ecosystem to ensure
in this important area, noting that Steps are already in place to develop
we have the right touchpoints for
risk of corruption is included in the more agile project planning and
detection and prevention of serious
National Risk Register, to further resourcing approaches to maximise
fraud and corruption. A good
the conversation so that others can returns on the investment in our case
foundation has been laid with the
understand the risks and possible and evidence management systems.
work already underway with the
mitigations. We recognise that the We do note that while the reviewers
Anti-Corruption Work Programme.
SFO must continue to develop support consider our operating model to
We note our size, funding and
for a lead role in anti-corruption. be strong but in need of greater
geographical challenges however investment, we should still make
recognise that this is an area where ourselves as efficient as possible.
we can do better.
We are keenly aware that the SFO’s
We will also focus on how we can people are its greatest asset. We will
better define the SFO customer continue to place special focus on the
experience, providing more visibility SFO’s culture to ensure it remains a
and clearer expectations around ‘great place to work’ and supports the
investigation and prosecution strong common purpose felt by our
activities. This could involve employees despite being challenged
developing a customer charter
by a competitive salary market. We
that provides information about will seek opportunities for staff to
the process of investigation and pursue professional development and
gives those involved up-to-date remain engaged with the challenges of
information about the progress and tackling financial crime.
expected timeframes of an individual
investigation.
Performance Improvement Framework – Review for the Serious Fraud Office 6The way forward
We would like to thank the reviewers for their insights. The PIF Review has
helped the SFO to better understand our priorities and direction and as well as
provide assurance that the work we have undertaken over the last four years has
been well-directed and recognised. The PIF Review, together with the work to
address the challenges, will play an important part in development of the SFO’s
Strategic Plan for 2020-2024. In fact, we need to address the challenges laid out
so that we can form a clear vision and plan of action for the SFO.
Lastly, while the SFO has lived and breathed the world of financial crime and
corruption for many years, we also hope that the PIF Review will help us with our
stakeholders and partners, along with the wider system, identify and recognise
the threat of financial crime and corruption and how we can work together to
combat that threat. This collective effort is necessary to ensure New Zealand’s
reputation for low levels of financial crime and corruption continues to be an
asset for New Zealand in the world economy and to protect the financial and
social wellbeing of all New Zealanders.
Julie Read
Director
Performance Improvement Framework – Review for the Serious Fraud Office 7Central Agency
support
Importance of the support from other agencies. This is an important partial
It needs to improve communication underpinning for the SFO’s role, with
agency role about its work to business partners, the current reform of the protected
This Review highlights the importance customers and the wider public and disclosures legislation a relevant
of SFO’s role in supporting the lift engagement with private sector current project. Equally important
financial and social wellbeing of all stakeholders to improve detection, underpinnings are the Department of
New Zealanders and our reputation as investigation and prevention of fraud the Prime Minister and Cabinet’s role
a largely corruption-free country. and corruption. overseeing advice to the Government
on the priorities for management and
The Review indicates the SFO is System opportunities mitigation of national risks to New
regarded as ‘best in class’ by most for Zealand and the Treasury’s role to
With a rapidly changing technological,
its core functions of investigation and monitor and manage the Government’s
social and financial landscape, the
prosecution of serious and complex finances.
nature of complex and serious fraud
fraud and as our lead agency for
and corruption is constantly evolving. The Ministry of Justice is the
corruption investigation. The SFO has
This presents risks for New Zealand Government’s policy lead on reducing
significant system value beyond its
and risks and opportunities for the crime in New Zealand and is preparing
core functions, including through its
SFO and the wider Public Service. In the report-back on the first phase of
work with international agencies to
this context, we note New Zealand’s the Anti-Corruption Work Programme.
address cross-jurisdictional fraud and
international commitments to the This phase has identified priorities to
corruption and to improve counter-
United Nations and the OECD on anti- better support New Zealanders’ efforts
fraud and anti-corruption practice.
corruption and public integrity. to guard against corruption as well as
In the last year it has demonstrated
operational leadership in developing The Review identifies scope for to support more focus on detection
and delivering the Anti-Corruption government agencies to act collectively and prosecution to deter corrupt
Work Programme. alongside the SFO, including to close practice. The Ministry of Justice will
system gaps in investigating and work alongside the SFO to provide
The SFO is considered efficient in use further advice to the Government.
prosecuting fraud and corruption and
of resources and continues to improve
to increase public and private sector Central agencies recognise the value
its efficiency. It is resource-constrained
awareness of, and actions to prevent, of maintaining and enhancing New
yet faces the same challenges as
fraud and corruption. The Reviewers Zealand’s reputation as largely free
counterparts offshore: increasing
consider this collective effort needs an of fraud and corruption. We will assist
complaints of fraud and corruption and
overarching cross-agency strategy to the SFO and the Ministry of Justice,
increasing complexity in investigating
combat fraud and corruption. ensuring that the SFO is supported
and prosecuting cases.
and better-connected with other
What good looks like How central agencies Wellington-based agencies to make
The SFO is well-placed to play a key
will help its best contribution to New Zealand.
role in deterring fraud and leading The State Services Commission leads
anti-corruption work. The Reviewers the State sector in all matters related
recommend that, to improve its to integrity and conduct: setting
effectiveness as a small operational standards; providing advice to staff and
agency, the SFO needs to be more investigating matters of integrity and
connected to the system, with better conduct in the State Services.
Peter Hughes Dr Caralee McLiesh Dr Brook Barrington
State Services Commissioner Secretary to the Treasury Chief Executive
Department of the Prime Minister
and Cabinet
Performance Improvement Framework – Review for the Serious Fraud Office 8The Challenge
2
In this section:
Four -year Excellence Horizon
Performance challenge
What will success look like?
Performance Improvement Framework – Review for the Serious Fraud Office 9Four-year Excellence
Horizon
In undertaking this PIF Review the Lead Reviewers considered: “What is the
contribution that New Zealand needs from the Serious Fraud Office (SFO)
and, therefore, what is its performance challenge? And, if the SFO meets the
performance challenge, what would success look like in four years?”
Scope Context For this review the Lead Reviewers
focused on trends in financial
For this review the Lead Reviewers Internationally, serious financial crimes that are perpetrated through
examined: crime1 is increasing in complexity and serious and complex fraud2 and/or
scale. The technologies that enable corruption3. Public agencies here and
• the context and environment for
us to communicate seamlessly from overseas report increasing complexity
the SFO’s work, including local
anywhere in the world, access our in detecting and prosecuting
and international trends in complex
bank accounts whenever we want, these crimes.
financial crime and corruption and
purchase goods globally and satisfy
how equivalent agencies in similar
many of our regulatory compliance
jurisdictions are performing to
obligations, also facilitate serious
address those trends
financial crime on a global scale. Internationally,
• in light of that context, how well is
the SFO responding to government
Financial crime and anti-corruption serious financial
agencies around the globe are
priorities and delivering value for reporting increasing complexity crime is increasing in
New Zealanders and where should
it focus to lift its performance in the
in the nature of the offending they complexity and scale.
investigate, as the perpetrators of
medium-term those crimes increasingly operate
• how well the SFO contributes in a borderless cyber world, adapt
now and the role it might play in to responses in prevention and law
future towards the Justice Sector’s enforcement and take advantage of
objective of reducing crime – new technologies.
particularly in regard to prevention
of crime and corruption.
1 While there is no legal definition of financial crime, this behaviour usually involves an intentional act accompanied
by the use of deception or dishonesty to obtain an unjust or illegal advantage. It is usually interpreted as including
fraud and corruption, as well as money laundering, terrorist financing, bribery and corruption, and market abuse and
insider trading. The term ‘financial crime’ is generally used more widely by international agencies than ‘fraud’.
Financial crime is sometimes referred to as ‘economic crime’.
2 The House of Lords in Scott v Metropolitan Police Commissioner said that the essence of fraud was to deprive a person
dishonestly of something which is theirs, or to which they might, but for the perpetration of the fraud, be entitled.
The SFO investigates fraud that is criminal in nature and is considered serious due to the impact, scale, complexity
and public interest.
3 There is no legislative definition of corruption in New Zealand, but the Supreme Court in R v Field defined
‘corruptly’ as knowingly receiving benefits provided in connection with official actions. The Court said it was not
necessary to prove an improper act on the part of the official. Transparency International states: “Corruption is the
abuse of entrusted power for private gain. It can be classified as grand, petty and political, depending on the
amounts of money lost and the sector where it occurs.”
Performance Improvement Framework – Review for the Serious Fraud Office 10Internationally, public agencies Volume and density of data increase in volume of information.
tasked with combatting serious The recent introduction of machine
Over the last 10 years, and the last
financial crime and corruption report learning assists in processing and
five in particular, the way in which
experiencing increasing complexity assessing data and information,
people communicate and transact has
in detecting and prosecuting these however the Courts’ expectations
changed dramatically. We’ve gone
crimes. Complexity in this instance regarding the introduction of evidence
from paper and analogue to digital
is driven by several factors assessed using these technologies
for practically everything we do. As
discussed below. are still relatively undeveloped, and
individuals we have multiple digital
hence uncertain. This increases the
devices, phones, tablets, laptops
Serious fraud and corruption evidential burden on the prosecutor
and we communicate and transact
are increasing in complexity seamlessly across each of them
once the case gets to trial.
Factors that contribute to increased daily. The impact for investigators of International transactions
complexity for investigation of serious serious fraud or corruption is that
It is now commonplace to find cases
fraud and corruption are: the volume of information seized in
where elements of the offending
their investigations has increased
• the volume and density of data occurred in another country and
exponentially.
involved in every case has assets were either sourced or
increased exponentially Gone are the days when an transferred to bank accounts overseas
• the legal process risk has increased investigation would involve seizing as part of the chain of transactions.
due to the volume and scope of a filing cabinet complete with its
Organisations investigating serious
evidence/information involved contents. Investigators nowadays
financial crime usually have a mandate
are faced, regularly, with seizing
• increasingly, fraudulent and corrupt to investigate only in their own country
and cloning over 50 devices such
activities, like other financial crimes, (subject to other country-to-country
as computers, tablets and mobile
involve international trans-border agreements in place). Where an
phones; these often contain up to one
transactions and asset flows element of the suspected offending
million individual records traversing
• perpetrators of these crimes are is committed in another jurisdiction,
all elements of individuals’ lives. While
more sophisticated both in how they the investigating agency will normally
artificial intelligence and machine
commit crime and in their defence make a Mutual Assistance Request
learning can assist in identifying
of their actions through legal to that country to collect relevant
which records may be relevant to the
processes. information and evidence. In New
investigation, there is still considerable
Zealand, Mutual Assistance Requests
additional work to understand the
are issued by the Solicitor-General
nature of the material retrieved and
under delegation from the Attorney-
develop search parameters to which
General. Mutual Assistance Requests
artificial intelligence can be applied.
may take several months or even
Legal process risk years to be fulfilled by the receiving
country. For example, the SFO has an
As the nature and volume of evidence
outstanding request to one country
seized has changed, so has the
that was issued four years ago and
legal process risk. Navigating the
has yet to be satisfied. The delays in
management of chain of custody
receiving information under the Mutual
of evidence, legal privilege and
Assistance Request4 process have a
legal disclosure has increased in
significant impact on the timeliness
complexity commensurate with the
and complexity of an investigation.
4 In New Zealand, mutual legal assistance across international borders is largely governed by the Mutual Assistance
in Criminal Matters Act 1992 (MACMA). MACMA governs both requests made by New Zealand to other countries and
requests made by other countries to New Zealand.
Performance Improvement Framework – Review for the Serious Fraud Office 11Whether or not elements of the Other features of the New New Zealand’s reputation
alleged crime occurred offshore, it Zealand context in the world
is now becoming commonplace for
Our role in international networks New Zealand is viewed as a country
personal and business documents
with a well-functioning democratic
and correspondence to be stored in Several of New Zealand’s partners system including strong democratic
the Cloud. With many of the global (including our Five Eyes partners) and public institutions and low levels
Cloud and other technology platforms have established, or are establishing of fraud and public sector corruption.
being domiciled overseas (e.g. Google, or strengthening, dedicated serious New Zealand is rightly proud of
What’s App, Office365) the number financial crime and anti-corruption this reputation. For several years,
and frequency of Mutual Assistance agencies in response to increased New Zealand has been ranked at
Requests is increasing as financial awareness of the risk and incidence or near the top of the Transparency
crime investigation agencies globally of serious fraud and corruption in their International’s Corruption Perceptions
are forced to chase evidence stored jurisdictions. The United Kingdom of Index, for its low levels of public
on overseas servers. Great Britain and Northern Ireland sector corruption. In the 2018 index5,
Increased offender sophistication (UK), Australia and Canada have New Zealand scored 87 out of 100,
and legal challenges made significant progress introducing dropping one point behind Denmark,
comprehensive functions and agencies the lead country.
Serious financial crime is big business, covering the spectrum of financial
often with millions of dollars involved. crime through to anti-corruption Our location in the Asia-Pacific
As preventative controls have become specific agencies. The UK has also region and developments in cross-
more sophisticated, so has the nature introduced a clearing-house function border crime, coupled with changes
of the offending. Such offenders are to coordinate the handling of serious in our national demographic and in
well-resourced to fight and attempt to financial crime across the range of UK international trade partners, means we
frustrate investigation and prosecution agencies working in this area. must be awake to the increased risk of
of their activities. The investigating/ corrupt and fraudulent practices being
prosecuting team must commit ever With the increasingly international introduced to our New Zealand way of
increasing resources to evidence nature of serious fraud and corruption, doing business.
management to maintain its high competent authority to competent
authority relationships become As a nation, New Zealanders are
standards and stewardship of robust
more important. The SFO is New generally trusting and honest.
legal processes.
Zealand’s representative at a number However, our small population and
of international serious financial crime relative isolation means we tend to
forums and the designated agency be complacent regarding overseas
to manage many of New Zealand’s threats, and naïve about their potential
international relationships for this to impact adversely on our culture and
work. As other countries scale up way of doing business. As an export
to fight and prevent serious fraud nation, we are increasingly trading
and corruption within and across in countries with different cultural
their borders, there are increasing norms regarding corruption and
demands on the SFO to participate bribery. No country is immune from
in international working parties (e.g. fraud and corruption regardless of
for the International Public Sector demographics or perceived ‘national’
Fraud Forum). While it is undoubtedly cultural norms. The high number of
valuable for New Zealand to be SMEs, and corresponding relatively
involved in these forums, there is an unsophisticated control mechanisms,
inevitable resource impact for the SFO. means that our businesses are ripe for
exploitation.
Performance Improvement Framework – Review for the Serious Fraud Office 12The New Zealand public sector need it and may be being fraudulently The growing complexity of cases
removed from the public system for outlined above further compounds the
Our public sector is widely
criminal benefit. challenge for the SFO in deploying its
respected for its transparency
limited resources.
and integrity, although the same Our serious financial crime detection,
level of complacency exists in our investigation and prosecution Possibly the most concerning issue
stewardship of public spending with landscape is populated with agencies is the impact of a combination of
relatively low levels of independent with fragmented and tangled organisational focus and boundaries,
scrutiny of grant-making, investment mandates. The SFO, Financial Markets limited resourcing and capability
or procurement processes for integrity Authority, Commerce Commission, constraints. This has created an
and corruption risk. There has been Inland Revenue and New Zealand effective gap whereby, for suspected
an increased emphasis on integrity Police (Police) have varying levels fraud of a certain profile or financial
in the public sector in recent years of interests and resourcing available threshold, no agency is resourced
and a strengthening of procurement to pursue financial crime offenders. or able to prioritise investigation and
practices. Some mandates appear to overlap prosecution. Complaints of fraudulent
whilst in other areas effective gaps activity received by the public sector
New Zealand does not have an
exist in responding to complaints may go un-investigated and/or
anti-corruption function operating
of financial crime due to resourcing prosecuted. Research tells us that
across the public sector (including
constraints and/or competing perpetrators of fraud often start small
local government) and no agency
resourcing priorities. The purposes, and grow the size of their offending as
has a clear view of the quality of
powers and penalties vary across their competence increases. Failing to
integrity systems or the robustness of
agencies resulting in inconsistency of address lower- to mid-level offending
prevention and detection of fraud and
approach and outcome depending on through prevention, detection or
corruption in the sector. By contrast
which agency pursues the offending. prosecution, or dealing with it in a
the UK and more recently Australia
way that avoids adverse publicity
have made considerable progress Established in 1990, the SFO is
represents a downstream risk we
in this area, resulting in a greater a small but important and unique
are currently blind to.
understanding of the extent and agency in the New Zealand system,
nature of corruption present in the mandated to investigate and prosecute
public sectors of both countries. Work serious and complex fraud offending
undertaken in the UK indicated that in both the public and private sectors.
undetected fraud, corruption and error The SFO is also New Zealand’s lead
in the UK public sector (including agency for corruption investigation.
distribution of public monies) The agency has limited resources (i.e.
accounts for somewhere between 0.5- $9.6 million pa total funding) to fulfil
5% of total public spending6. Based this role in the system. Accordingly,
on the current level of public spending it must be ruthless in prioritising
in New Zealand, this suggests that investigation of complaints and has
somewhere between $504 million capacity to pursue court action in only
and $5.04 billion of government a very limited number of important
expenditure may not be reaching serious fraud cases each year.
those in our community who most
5 Transparency International’s Corruption Perceptions Index 2018, see: https://www.transparency.org/cpi2018
6 Presentation by Lyn Mcdonald, Director Fraud, Error, Debt & Grants, Cabinet Office, UK Government, at Fraud and
Corruption Conference 2019, Auckland, New Zealand. See: https://www.sfo.govt.nz/file/850
Performance Improvement Framework – Review for the Serious Fraud Office 13Summary
In summary, New Zealand’s reputation
as a high trust, corruption-free society
is at risk. Our apparent complacency
and ambivalence towards the risk of
corruption and fraud in both the public
and private sectors not only creates
increased financial risk to individual
businesses but also risk to our
international reputation and economy.
Increased complexity of information
and sophistication of offending mean
that we are exposed. Our Five Eyes
partners have each experienced the
national humiliation of a major fraud
or corruption scandal involving its
public sector and/or public funding
before taking decisive action to
increase prevention and detection of
fraud and corruption. In the absence
of intervention, it must surely be only
a matter of time before New Zealand
experiences something similar and
suffers serious reputational damage.
Performance Improvement Framework – Review for the Serious Fraud Office 14Performance
Challenge
Outcomes challenge 2 – Unifying
Performance and penalties are appropriate,
behind a National Financial Crime aligned and applied appropriately
challenge - system and Corruption Strategy to respective system functions to
outcomes To achieve this, a fundamental building
ensure optimal functioning of
the system
Outcomes challenge 1 - Retaining block is the multi-agency development
of a National Financial Crime and • support collaboration between
our reputation in the world
Corruption Strategy. A key component the public and private sectors,
The performance challenge for New of that strategy needs to be the design especially professional bodies and
Zealand is to retain and strengthen its of an end-to-end anti-corruption and industry leaders, to ensure
reputation as a safe, corruption-free financial crime education, prevention, a seamless, effective approach to
country – a country with strong public detection and prosecution system. prevention, deterrence and early
institutional settings that ensure our Building upon the existing elements of detection of financial crime and
democratic processes, public sector our current system, the strategy needs corruption.
and private sector operate free from to clarify roles and responsibilities Resourcing to implement the strategy
financial crime, including corruption of existing agencies, establish new is essential. This investment is
and fraud. We need to build responsibilities for education and justified based on results for overseas
heightened awareness, understanding prevention of corruption in the public jurisdictions that have invested in
and ownership across both the public and private sectors. It must document fraud detection and prevention and
and private sector of effective controls a system operating model that anti-corruption activities in the public
and integrity systems that prevent enables effective and efficient system sector. The UK’s Cabinet Office
fraud and corruption. management and delivery across both reports returns of between 1:20
New Zealand cannot afford not to public and private sectors. and 1:100 for every pound spent
invest in raising awareness and The strategy needs to: and NZ$11.35 billion in savings
competence in integrity systems, anti- across their Departments since the
corruption and fraud prevention. New • highlight the importance of New introduction of its Counter Fraud
Zealand’s reputation as a corruption- Zealand’s public sector being a function in 2014. More broadly,
free, transparent and high integrity proactive and accomplished leader what’s the price of our reputation
country underpins much of our global in anti-corruption, counter-fraud as a transparent and corruption-
proposition as a security partner, and integrity systems that sets free trading nation? How much are
trading nation, investment partner, the national standard of what is we prepared to invest as a nation to
visitor and migrant destination. expected when transacting in New continue to enjoy the benefits of that
Maintaining that reputation is far Zealand and with offshore business reputation?
easier than rebuilding it, as many of partners and demonstrates effective
our international partners have found stewardship over government
spending
New Zealand’s reputation
to their cost. The challenge for us as
New Zealanders is to overcome the • provide frameworks and clarify as a corruption-free,
inertia and complacency that currently roles and responsibilities across transparent and high
underpins our misguided belief that public sector agencies to ensure
fraud and corruption do not reside, they can work in partnership integrity country
and cannot find traction, in towards providing visible, excellent, underpins much of our
New Zealand. consistent leadership across all
areas of activity and influence global proposition as a
• consider the policy and regulatory security partner, trading
landscape that attaches to the nation, investment
system addressing financial crime
and corruption and ensure the partner, visitor and
range of powers, interventions migrant destination.
Performance Improvement Framework – Review for the Serious Fraud Office 15The SFO has a key role to play community activities, or electoral
in partnership with other Justice or wider democratic processes,
Sector agencies in the delivery of the New Zealanders need to know what
strategy. As New Zealand’s expert excellent, transparent and high-
body on serious fraud and corruption, integrity systems look like.
it is the natural and competent party
This will require the development
to play a lead role in developing New
and professionalisation of risk
Zealand’s fraud prevention and anti-
management professionals
corruption capability and frameworks.
specialising in integrity and anti-
Its core functions are the logical
corruption education, advice and
platform from which to leverage an
frameworks for business, community
adequately resourced SFO expertise
and public entities.
in the medium term. This will
contribute to the Justice system’s key While current emphasis in the private
objective of reducing crime. sector is largely on detection and
investigation, protection of our
Outcomes challenge 3 – Everyone
reputation and trade settings relies
understands the risk
on us to investigate and detect serious
It is crucial that New Zealand fraud and corruption where it occurs
continues to investigate allegations and implement integrity and anti-
and prosecute incidences of serious corruption frameworks across our
fraud and corruption. Having industries and sectors. This requires
appropriate prosecutions in the public investment by the private sector to
eye is an important deterrent in our respond to increased demand for
system and will be essential for a advice and expertise.
new end-to-end integrated system to
Our system must remain current and
prevent financial crime and corruption.
awake to emerging risk profiles. It
However, New Zealand cannot rely
needs to be a learning system, using
on ‘holding to account’ as the only
the experience of our international
deterrent and control in our system.
anti-corruption and serious fraud
New Zealand needs to be awake to, networks, as well as intelligence
and acknowledge, the weaknesses from our prevention, detection and
in our own systems and the investigation activities to inform
risk to our businesses of being and continuously improve public
complacent regarding corruption understanding of how to avoid or
and financial crime. Business minimise exposure to new risks.
owners, employees, citizens all
need to share the responsibility for
ensuring the systems, processes,
values and actions we are exposed
to, and participate in, are designed
to maintain and strengthen New
Zealand’s integrity and reputation.
Whether in commercial and
Performance Improvement Framework – Review for the Serious Fraud Office 16Performance Challenge 1 – Coming in from compared to the magnitude of the
outer space challenge of establishing effective
challenge – agency anti-corruption practices.
The SFO needs to establish strong
System operating model and embedded relationships with The SFO has demonstrated its
The SFO currently operates very other public sector justice agencies. commitment and capability to lead a
much at the fringe of the New Zealand It needs to be a regular and skilled resourced operational anti-corruption
public and private sectors. It is a small contributor to wider Justice Sector function focused on the public sector
Auckland-based, operational agency issues, able to participate in both (in partnership with the State Services
with single purpose, all-encompassing policy and operational discussions Commission and Ministry of Justice).
legislation, largely facing the private relating to combatting financial crime It must now secure support from other
sector. The SFO is not well connected and corruption. While maintaining its public sector agencies to develop
into the wider public sector and has primary focus on investigation and a multi-agency budget bid outlining
only limited private sector touchpoints. prevention of serious fraud, it needs a co-ordinated programme of work
to demonstrate its ability to contribute to establish effective anti-corruption
Its lack of a policy function, single- to wider policy agendas in relation to and integrity frameworks and systems
purpose focus on serious fraud and financial crime and corruption. across the New Zealand public sector.
small size means it is often overlooked
or is not well-equipped to participate The quid pro quo is that other players There are useful reference models
in strategic discussions or work in the Justice Sector need to be in the UK, Australia, Hong Kong and
programmes in the Justice Sector. more open to and understanding of Canada to guide system design in
Despite the efforts of the Director perspectives of a smaller operational New Zealand and offers of support
and other Senior Leadership Team agency such as the SFO and lean-out and assistance from established
members, the SFO is hampered to the agency in the interest of system ‘sister’ agencies in those countries.
by the lack of a ‘Wellington mode’ cohesion.
This is a crucial area of work to
to its operations. This situation, Challenge 2 – Securing support protect and strengthen New Zealand’s
coupled with the lack of any mutual for a wider system leadership role international reputation and is
interdependencies with other core for SFO – Serious Fraud and Anti- mandated by Cabinet. It is essential
public sector agencies, means it is Corruption there is wider support for the SFO as
easy for the SFO to be forgotten or the operational lead and to ensure it
overlooked. The SFO put up its hand as
is adequately resourced to raise the
operational lead for the Anti-
Its recent work leading the Anti- level of activity and drive the work
Corruption Working Group mandated
Corruption Working Group has programme.
by Cabinet 7 and has done an
raised the SFO’s profile in Wellington admirable job of maintaining
to a certain extent, however the momentum across a work programme
limited, finite funding attached to that has suffered from the lack of any
the programme has undermined additional resource allocation. Given
engagement by other agencies and the lack of resourcing and limited
reduced the quantum of work able to commitment by other agencies, a
be progressed. laudable amount has been achieved
If the SFO is to play a greater role in over the last year with some useful
serious fraud and anti-corruption in tools and projects being delivered
New Zealand it needs to overcome the by the working group. Despite this
following three system challenges. work, progress is insignificant when
7 Cabinet Minute (CAB-18-MIN-0353.02) - In July 2018 Cabinet approved the first phase of the Anti-Corruption Work
Programme and identified eight specific areas of focus over the next twelve months.
Performance Improvement Framework – Review for the Serious Fraud Office 17Challenge 3 – Define the SFO form part of a collaborative effort
ecosystem and focus on raising awareness and
capability in prevention and detection
The SFO faces and delivers services
of serious fraud and corruption.
for the public sector and the private
The opportunity exists for the SFO
sector. It relies on and engages
to build a strong ecosystem of
with multiple professional parties
interested and connected parties
across the financial, legal and risk
around it that extends its effective
management sectors. However, it
shadow and leverages the expertise
does so on a relatively ad hoc or
and intelligence within these other
transactional basis and with little
organisations for broader impact.
wider impact.
Over time, with a relatively modest
The challenge for the SFO is to
level of effort and by building strong
move beyond its current relatively
connections and knowledge-sharing
‘distanced’ approach and define
pathways, the SFO could establish a
the ecosystem that can assist it to
cascading knowledge transfer network
have a wider impact in prevention
with a significant ripple effect into the
and detection of serious fraud and
wider business community. In the first
corruption. As the Government’s
instance, this has started under the
operational lead in serious fraud and
auspices of the Anti-Corruption Work
corruption education, prevention and
Programme.
detection, the SFO can only ever
achieve a certain level of system
reach, if it operates in isolation.
Establishing an ecosystem that
extends and leverages its reach is
critical to achieving an effective level
of system penetration. A range of
professional bodies (e.g. CAANZ8,
RITANZ9) have functions relating to
professional standards, ethics and
professional development for their
members. These could potentially
8 Chartered Accountants Australia & New Zealand
9 Restructuring Insolvency & Turnaround Association New Zealand Incorporated
Performance Improvement Framework – Review for the Serious Fraud Office 18SFO’s operating model Challenge 4 – Continue to evolve Challenge 5 – Define the customer
systems for organisational journey and experience
The SFO has significantly updated efficiency
its operating model and information While the SFO rightly invokes
systems in recent years and adopted Relativity and ServiceNow provide its extensive statutory powers to
leading edge machine learning/ the SFO with powerful tools and successfully prosecute serious fraud,
artificial intelligence technology in information to better manage their it is not always aware of the impact
its core forensic evidence and case investigations and wider workflow. on those involved in, or peripheral
management systems. It has been The challenge for the agency from to, an investigation. It has very little
smart in how it has implemented these this point is to determine where are understanding of its immediate
systems, using the opportunity to the greatest opportunities to further customers’ communication needs
redesign and continuously improve improve efficiency. By investing a or the significant negative impact
business processes and systems for relatively modest amount and with the of its activities on those individuals
increased efficiency. To date limited newly secured internal resource, the peripheral to, or under, investigation.
resourcing has meant the agency SFO is well-positioned to continue Because of the reasonably significant
has only partially implemented the to evolve its enterprise management nature of its powers, it is even more
full range of functionality available tools. Using operating models from important to exercise those powers in
in its new Relativity and ServiceNow professional services and project a way that is mindful of the impact on
systems. The challenge for the SFO is management firms as comparators/ others. Given the central assumption
to leverage its new technology for ever benchmarks may help the agency to of the criminal justice system that
greater efficiency and broader impact. identify further areas for improvement an individual is innocent until proven
in productivity and utilisation. guilty, the SFO must also consider
The SFO is an efficient organisation the justification of use of its powers
that applies resources wisely. With its Should it be resourced to do so, the
and the duration of their application in
very limited budget it will be difficult new systems will enable the SFO to
proportion to both the evidence and
to make much progress on any of the apply up-to-date project management
nature of alleged offending.
following challenges without either approaches and methodologies
additional funding or compromising to its fraud and anti-corruption While highly motivated to do the
itself by further reduction in its core work including real-time resource right thing for the New Zealand
case workload. Notwithstanding monitoring and charging capabilities. public, the SFO could significantly
this, the Lead Reviewers believe the Given the SFO has not operated in improve its approach to working with
following challenges are very real and this mode before, it would be wise to its customers as it undertakes its
represent significant opportunities consider private sector models in the core investigations and prosecution
for the SFO if it is to deliver its best design of any such function. activities. Providing more visibility
contribution for New Zealand. and certainty of timeframes for
complainants, victims and those under
investigation would make a marked
difference in those customers’ abilities
to manage their lawful interests
through the process.
Performance Improvement Framework – Review for the Serious Fraud Office 19The challenge for the SFO is to Challenge 6 – Lean in to its social slow, too unresponsive, too much of
gain insights from its customers licence to operate – be more a black box, it risks complainants
(which include complainants, victims outward-facing seeking other pathways for justice,
and those under investigation) or simply not bothering to raise their
The SFO’s culture is strongly
to understand their engagement, concerns, particularly when a driver
grounded in doing what’s right for
communication and commercial needs for a complaint could be the recovery
New Zealand and New Zealanders.
and to design customer journeys that of the loss.10
This ethos underpins the motivation of
ensure the SFO’s processes deliver
all the staff the Lead Reviewers spoke The challenge for the SFO is to
against them whilst not undermining
to and is impressive in its motivational become more aware of its wider
its core investigative and prosecutorial
impact for people who work at the operating environment and more
functions. Adopting an ethos of
SFO. outwardly connected. The intelligence
appropriate customer-centricity that
and educative value of much of the
ensures that justice is timely and The nature of its work requires it to be
SFO’s work is hugely valuable to
efficacious, and that investigative highly professional and confidential
a vast range of organisations from
processes only impact on customers in the handling of information, its
not-for-profit through to publicly listed
to the extent that is necessary, will be dealings with its customers and
companies and banks. Establishing
critical to ensuring the SFO retains wider New Zealand. One result is that
the value proposition of the SFO
the respect and goodwill of the wider the agency tends towards a largely
to a broader constituency will help
New Zealand public and business introspective culture; the majority of
it ensure it remains relevant to the
community. staff are focused quite myopically
majority, rather than only the minority
on the cases in front of them. Only
Supplying customers with who find themselves involved in
a very small number of senior
comprehensive information regarding SFO’s investigations. This will require
managers provide any outreach to or
process, timeframes and stages for the agency to think beyond its
engagement with the wider public.
an investigation and where to seek current case-specific contexts and
additional advice and support will help This culture, along with the increasing develop the ability to distil trends
the SFO’s customers understand and length of time it takes to bring cases and intelligence to inform external
navigate what is inevitably a lengthy, to court and a lack of customer- organisations’ awareness of what
complex and stressful process. Such centricity, is starting to draw into serious fraud looks like and effective
support will contribute to public question the SFO’s social licence fraud and corruption prevention
confidence in the SFO and its work. to operate. It is technically true that frameworks look like.
the SFO, as a product of statute with
By operating in this space, the SFO
extensive powers to support it in its
will nurture significant goodwill,
work, does not need a social licence
profile and ultimately increase its
to operate. In practice, to be effective
impact as a key deterrent in the New
the SFO relies on the public, trusts,
Zealand context. It also supports
companies, professional services
and aligns with the ethos the agency
organisations, banks and peer public
will be required to bring to any
sector agencies to bring complaints
wider Anti-Corruption education and
to it and to work alongside it on
prevention activities it is charged with
investigations and prosecutions. If
implementing.
the SFO is seen as too hard, too
10 The SFO has no mandate to recover the proceeds of crime though it can make proceeds of crime referrals to Police.
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