News & what's on - Written by on Sunday, July 1, 2012 12:37 - 1 Comment

Serious Fraud Office at C5: Self reports, investigations, the manifesto & tantalisingly will Dodd Frank whistle blowing come to the UK

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The excellent C5 Annual Anti-Corruption forum in London describes itself as “THE must-attend event in Europe that shapes the anti-corruption community” and is targeted at chief compliance officers, general counsel, forensic accountants and their advisers from global companies.  This year we were kindly invited along with our very own [Declaration of Interest] press pass.  Neil McInnes attended and picks out the key messages from the new SFO Director’s keynote speech.

By Neil McInnes, Senior Associate, Pinsent Masons

Last week the SFO Director, David Green CB QC, spoke to C5’s Annual Anti-Corruption Forum in London to deliver a clear restatement of his manifesto for the UK’s chief fraud regulator – and gave his biggest indication yet that new Bribery Act investigations will be more heavily focused on the range of intelligence gathering at the SFO’s disposal.

No spin

The SFO will not, he was keen to emphasise, be chasing “eye-catching quick results” or “easy headlines” and the first Bribery Act case will happen when it is “the right case at the right time”. We were told the intelligence unit is currently dealing with four self-referrals with 11 further cases being proactively developed – the majority of which are corruption-related.

When resources are inevitably under pressure, the Director said the focus will be on selecting cases with strategic value; and when prosecutions come, theywill be surgical, “resisting putting a large canvass before the jury” but “indict the core of the criminal conduct”.

Does that mean we will see less of the long-running SFO investigations and prosecutions of the past that take many months or years to reach chargesor the start of a trial? Possibly (and the statistics have already shown time periods are shortening). It would also be what many commentators have predicted as the pragmatic solution for the cash-strapped regulator.

But the Director also underscored that if an investigation did not proceed to criminal charges, this was not a failed investigation in his view. For SFO historians, this also neatly refers back to the original purposes of the organisation and its dual investigation and prosecution role in statute. The power to investigate in is itself core to the Director’s functions – as set out in section 1(3) of the Criminal Justice Act 1987: “ The Director may investigate any suspected offence which appears to him on reasonable grounds to involve serious or complex fraud”. The theme ran through the Director’s remarks.

The right weapons

However, since 1987 a wider range of disposals and tools are now available to the SFO (with more to come if DPAs become law in 2013). What of this expanding arsenal?

On the breadth of options, the Director remarked civil settlements will “have their place” and reiterated the SFO’s past position of welcoming self-reporting. He recognised that corporates needed to see the advantages of this process (but was clear there could never be guarantees). He stated his support for DPAs used “in the right circumstances” (there was no mention of what he thought the “the wrong circumstances” might be – but we expect further indications about this are only likely after the current Government consultation completes).

Given he also made clear that the SFO was not looking to assume a compliance role (or punish minor infractions), it will be interesting to watch whether there may be a reduction in outreach work that his office takes on going forward. Similarly, organisations and their advisers will need to wait to see if the new Director remains as committed as his predecessor to offering guidance to parties in mergers and acquisitions when problems emerge in corporate due diligence.

David Green emphasised that the SFO’s diet of work will focus on top level fraud. His interest is in taking on cases that undermine “UK Financial Plc”; compromise level playing fields for business; involve serious bribery in a national or international context; or represent a striking new species of fraud. The last category underscores that the SFO will remain as much about Specialist Fraud as it has been Serious Fraud. Many have already noted that the SFO will now be passing to other agencies those frauds that don’t make the grade. Boiler rooms and mortgage frauds are off the menu at the Elm Street canteen. SFO white collar crime may be more of the well-starched collar variety.

Much of David Green’s message was to restate existing strengths of the SFO design model, but with some reorganisation. The combination of skillsets (lawyers, investigators, forensic accountants, and forensic IT professionals) are not about to be disassembled but with structural changes we can expect 2 fraud casework teams and 2 bribery teams, each led by a senior civil servant. There will be new layers of quality control on cases too.

The intel

If there is a change of emphasis, it appears to be the Director’s proposed expansion and concentration on the SFO’s intelligence gathering capability. He gave the C5 Forum an insight in to the component parts: a concentration on open source material; a blend from other sources, including SARs and whistleblowers; and then the “more exotic”. We shall await with interest what this last secret ingredient is.

And it seems clear the new Director is keen to open the discussion on the evidential issues arising from different kinds of intelligence: telling the audience he would “welcome a debate on bona fide whistleblowers being rewarded for information they provide”.

After DPAs, could this be the next US import to be added to the UK regulator’s armoury? Start drafting your responses to the consultation now.


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