I have received a Section 2 Notice from he Serious Fraud Office.  What is it and what should I do? Are there any tips for how I should deal with one?

With the so-called criminalisation of corporate law and increasingly U.S.-approach adopted by UK law enforcement, it is more likely that a corporation may one day receive a communication from the UK Serious Fraud Office (SFO).  Frequently, a communication from the SFO will come in the shape of the receipt of a Section 2/2A Notice.  Recent figures for the last 12 months show that the SFO issued over 800 last year.

What is a Section 2/Section 2A Notice?

Broadly speaking, Section 2/2A Notices are used by the SFO to compel the provision of information and documents (including digital material) from witnesses and potential suspects relating to its investigations.  The name Section 2 is taken from the legislation, the Criminal Justice Act 1987, which created the powers (and the SFO).

Legal advice should be sought by the recipient of a Section 2/2A Notice (Section 2 Notice) as soon as possible given the criminal penalties and the serious implications which flow from receiving and dealing with a Section 2 Notice.

There is an important distinction between Section 2 and Section 2A Notices.  Section 2 Notices are used by the SFO in connection with an investigation which has been formally opened by the SFO.  Section 2A Notices are used by the SFO to compel information and documents in order to assess whether or not the SFO should open a potential corruption investigation.

If a recipient has received a Section 2A Notice the SFO has not (yet) formally opened an investigation.

The basis of any Section 2 Notice will be clear on the face of the Notice.

Tips

• Understanding the basis upon which a Section 2 Notice has been issued can be an important consideration for corporate recipients who consider they might be the target of an investigation when assessing whether their banking covenants or rules on making market announcements have been triggered (if applicable).
• Section 2 Notices may include broad requests for documents and information. Legal advice may need to be taken to assess the scope of the notice and its interpretation.

Penalties for Non-Compliance

Section 2 Notices carry the risk of criminal penalties.  Failure to comply, the provision of false or misleading statements, the destruction, concealment, falsification and/or disposal of relevant documents, all trigger criminal liability. Importantly, criminal penalties apply to a recipient of a Section 2 Notice and also any other person who knows or suspects an investigation by the police or the SFO is being carried out, or is likely to be carried out.

A Section 2 Notice can compel in two ways: (1) to compel someone to attend an interview with SFO staff and compel them to answer questions or otherwise furnish information (section (2)(2)); (2) to compel someone to produce documents or any other information (section (2)(3)).

Tip

• There is a defence to prosecution if the recipient can show that it had a reasonable excuse for non-compliance. Excuses for non-compliance are treated on their own merit.  The SFO will not allow an investigation to be delayed or frustrated but SFO guidance states that recipients should always be treated with consideration and fairness.  This is useful background when engaging with the SFO and should be borne in mind when considering a deadline and any corresponding request for extra time to comply with a Section 2 Notice.

Why are they used?

A Section 2 Notice enables the SFO to obtain evidence without needing to obtain a production order through the courts. It also enables those receiving a Section 2 Notice to provide information to the SFO without breaching any obligations to their clients in respect of confidentiality and data protection issues.

The protection from breaching confidentiality and data protection obligations explains why, in some circumstances, a person asked to provide information voluntarily to the SFO (i.e., without a Section 2 Notice compelling them to do so) may wish to request a Section 2 Notice be addressed to them to compel the information.

Who are they frequently addressed to?

A Section 2 Notice can be addressed to suspects and witnesses.

Tips

• Section 2 Notices are not a guarantee that the recipient is a witness or will remain so if they are a witness at the time of receipt. The status of a person can change during an investigation (and sometimes during a Section 2 interview depending on what the interviewee says).
• The focus of the SFO can also shift. Information may initially be sought using Section 2 compulsion powers for the purpose of seeking a Deferred Prosecution Agreement with a corporation.  With that goal achieved and a fresh review of the evidence to determine individual culpability there is a risk a person interviewed under Section 2 powers is subsequently considered a suspect.

Section 2 Interviews

Answers provided in a compelled Section 2 interview cannot be used in a prosecution of the respondent for the offence under investigation (and so create evidential challenges). However, they can be used to prosecute the individual for an offence of misleading the investigation if, for example, the answers given at the interview were false.

Section 2 Document Requests

Section 2 should not be used to force someone to create new documents, e.g., tables etc., and are not be used to obtain information already in the public domain or which the government already have.

Timing

A Section 2 Notice will normally contain a date for an interview or deadline for the provision of documents/information.

Here and Now Notices

In certain circumstances, the Section 2 powers can be used to demand information immediately. This is commonly known as a “here and now”. Here and now powers should only be used when there is a necessary reason for the information to be provided immediately, for example, during the course of a raid/search, to obtain the location of documents, the combination of a safe, or the password of a mobile phone or computer.

Tips

• A dialogue can usually be had with the SFO on timing. In practice it is often possible to agree to a reasonable amount of extra time to comply.
• If the SFO visits an office unannounced with a here and now Section 2 Notice seeking immediate responses to documents and information requests recipients should seek legal advice immediately.

Safeguards & Legal Professional Privilege

A Section 2 Notice cannot compel the production of material subject to Legal Professional Privilege.

Tip

• However, it should be noted that the SFO is increasingly challenging privilege claims and legal advice in connection with privilege should be sought.

Conclusion

Frequently, compliance with a Section 2 Notice can be more complex and lengthy than it might appear on first reading.

The recipient of any Section 2 Notice should seek legal advice as soon as possible in connection with the notice itself and also in connection with the ramifications of being a recipient of such a notice which can be wide-ranging.