Aziz Rahman and Joshua Ray of Rahman Ravelli detail the SFO’s powers and how companies should approach internally investigating allegations of bribery.
The Serious Fraud Office (SFO) receives information from many sources, which it assesses to see if it is worthy of investigation. If the SFO believes the situation undermines UK financial and corporate interests, it will accept it for investigation; involving the unique range of powers it has under Section 2 of the Criminal Justice Act 1987.
This involves SFO teams of skilled experts investigating and, where necessary, using Section 2 to compel any individual or organisation to provide the SFO with information or documents that it believes are relevant to its investigation. The SFO has even told lawyers that they are not guaranteed a right to accompany a client that is compelled to go in for interview under Section 2. If a lawyer wants to attend a Section 2 interview with their client, they must argue why they should be allowed to attend and even agree to certain restrictions during the interview. This is an approach that the Law Society has called “inappropriate’’.
When, as part of an investigation into possible bribery and corruption, three senior figures in GlaxoSmithKline were asked to attend for interview by the SFO under Section 2, the trio said they wished to be accompanied by solicitors retained by the company for the investigation. The SFO refused permission for the solicitors to attend. The SFO informed them that the presence of solicitors in interviews may prejudice the investigation.
The three men were unsuccessful in their application for a judicial review of the decision, with the High Court of Justice Queen’s Bench Division stating that the SFO’s stance on Section 2 interviews was in accordance with policy in the SFO’s Operational Handbook. The SFO’s stance on Section 2, therefore, remains in force.
In 2018, the SFO received a further boost regarding its use of Section 2 powers. The High Court held that the SFO can, under Section 2, compel companies and individuals to produce material that is held abroad, subject to there being a sufficient connection to the UK.
In this case, a UK-based subsidiary of the US company KBR was being investigated by the SFO over suspected bribery and corruption offences. KBR was also being investigated in the US by the Department of Justice (DOJ) and Securities and Exchange Commission for similar suspected offences. In April 2017, the SFO issued a Section 2 notice requiring the subsidiary to produce certain documents. The subsidiary provided documents that were located in the UK, including documents that had been sent to it from outside the UK.
The SFO believed that the subsidiary was drawing a distinction between the documents it held in the UK and documents held outside the UK that were beyond its control. It therefore issued another Section 2 notice, this time addressed to KBR, requesting documents held by it and not just the subsidiary. KBR objected to this and argued that Section 2 did not operate outside the UK.
But Lord Justice Gross disagreed, stating that although territorial limits had not been identified in the Criminal Justice Act the SFO could conduct investigations with an international dimension and the purpose of Section 2 might be frustrated if there was a restriction on its use. He did not say that Section 2 would extend to all foreign companies regarding documents held abroad but referred to the need for a principled balance, with it being used in other countries in cases where there was a "sufficient connection" between the company and the UK.
While not granting complete freedom to use Section 2 around the world, this ruling certainly extends the SFO’s ability to use it beyond UK borders when necessary. At the time of writing, KBR is appealing this ruling to the Supreme Court. But with its own range of powers and its ability to ask for extra “blockbuster’’ funding for major investigations, the SFO has all the resources for a thorough investigation.
It should also be noted that the SFO Director Lisa Osofsky, who has been in her position since 2018, used a speech at the Cambridge International Symposium on Economic Crime that year to signal her intention to seek increased levels of cooperation with other UK law enforcement agencies. It is a theme she has repeatedly returned to, most recently at the 2020 Symposium. She also wants closer relationships with the SFO’s international counterparts, international regulators, non-governmental organisations and the private sector in order to enhance its intelligence gathering. Osofsky also spoke of her desire to “focus on the SFO’s strategic use of cutting edge technology’’ to enhance its obtaining of data and intelligence.
This all means that the scarcity of Bribery Act convictions so far should not lull anyone into a false sense of security. There is an appetite for bribery prosecutions, even if that has not yet transformed itself into a string of convictions.
Bribery investigations can be long, drawn-out and complex affairs. If an investigation commences into allegations relating to conduct post-July 2011, it may take months, or most likely years, before a decision is taken regarding whether to press charges. The lack of many charges being brought under the Bribery Act should not, therefore, be taken as a sign that the SFO is not actively pursuing those it believes to be involved in bribery.
The ins and outs of UK bribery legislation make it necessary for anyone who comes under investigation to be represented by those with expertise in all aspects of it, who will know the best way to proceed.
If a company finds out, either officially, unofficially or even from its own staff or third parties, that it is suspected of bribery, there is a course of action that it must take. This course, while not complicated, must be commenced the instant any hint of bribery is suspected. An internal investigation has to be conducted immediately – into all aspects of the company’s activities. If those within the company are not sure how to proceed they should seek the relevant legal advice. It is only by conducting a well-devised and executed internal investigation that a company can properly assess the extent of any wrongdoing.
Knowing this can help a company respond appropriately and with credibility to any allegations made by the SFO. Crucially, if an internal investigation produces evidence of bribery before the authorities are aware of it, this gives the company the opportunity to self-report the problem. While this cannot be seen as a magic wand that removes legal difficulties, it is likely that any company that does self-report will receive more lenient treatment from the authorities; who will acknowledge the effort and honesty that has been involved.
The SFO has made it clear, however, that self-reporting is no guarantee that a prosecution will not follow. It will not accept a company’s report of wrongdoing at face value and will want to make its own enquiries. Having taken such a stance, however, the SFO has made it clear that it encourages companies to self-report as early as possible. The SFO’s approach is understandable and emphasises the fact that self-reporting has to be regarded as much more than an attempt to avoid prosecution by saying nothing illegal happened. The SFO has plenty of scope when it comes to the action it takes against those it suspects of bribery. Self-reporting gives those who believe bribery is being carried out in their name a real opportunity to start a dialogue with the SFO: a dialogue that could achieve that goal of avoiding prosecution
By way of guidance, the SFO published in August 2019 its five-page memo “Corporate Co-operation Guidance’’, which outlines what the SFO expects from companies in order for them to be given credit for co-operating with an investigation. In it, the SFO defines co-operation as "providing assistance to the SFO that goes above and beyond what the law requires" and details 11 general practices that companies should consider when preserving material and giving it to the SFO. There is specific guidance given relating to digital evidence and devices, hard copies and physical evidence, financial records and analysis of them, industry information and individuals. There appears to be a view taken by the SFO that a company could assist the agency by alerting it to aspects of an investigation that the company cannot gain access to or by identifying possible witnesses.
In the guidance, the SFO outlines its wish for companies to consult with it before taking steps such as interviewing potential witnesses and suspects. The guidance also talks of those under investigation providing what the SFO calls information on “industry knowledge, context and common practices’’ and on “other actors in the relevant market’’; although this is one area of the guidance that could benefit from further explanation from the agency. Tellingly, the guidance makes the point that compliance with the compulsory process does not, in itself, indicate co-operation. It even goes as far as to say that even “full, robust cooperation’’ will not guarantee any particular outcome.
The guidance reinforces the fact that self-reporting has to be based on an internal investigation that has been thorough, methodical and has utilised professionals with the relevant experience and expertise. Such people can include – but are not limited to – investigators, experts in data preservation and analysis, forensic accountants, economists and cultural experts.
Their efforts, as well as all other aspects of the planning and management of the investigation, have to be handled and overseen by lawyers with in-depth knowledge of bribery law, an awareness of how best to deal with the SFO and a realistic approach to the need to identify and rectify the wrongdoing, failings or areas of risk. What must always be borne in mind is that self-reporting is something that has to be done carefully and appropriately. It is a significant step and anyone considering it will need advice from those with both the relevant legal expertise and extensive experience of dealing with the SFO.
Such expertise is necessary in order to carry out the internal investigation properly – and also ensure its findings are handled appropriately. When it comes to reporting the findings, great consideration must be given to how and when they are reported. Any self-reporting carries the risk of giving the authorities the evidence they require for a bribery prosecution: what had been intended by those under investigation as an attempt to avoid prosecution by “coming clean’’ could be used against them if the self-reporting is not handled properly.
This was further emphasised in January 2020, when the SFO followed “Corporate Co-operation Guidance’’, with its guidance “Evaluating a Compliance Programme’’. The guidance outlines the SFO’s approach to assessing the effectiveness of the compliance programmes of companies it is investigating. This will, says the guidance, help the SFO determine whether prosecuting a company is in the public interest or whether the company is worthy of a DPA - and whether the company’s compliance programme can be considered good enough for it to be able to mount the defence that it had adequate procedures in place in relation to a charge under Section 7 of the Bribery Act 2010; that it failed to prevent bribery.
The guidance states that, when investigating, the SFO will assess a company’s compliance at the time of the offending and at the current time (if the company has taken proactive, remedial action) and the potential steps that could be taken under a DPA. The guidance says that assessment of a company’s compliance can be arranged around the six principles in the Bribery Act guidance published in 2011 by the Ministry of Justice.
These principles relate to:
Any move to self-report must be managed in a way that addresses the points made in this guidance. In a way, they can serve as a vital checklist when assessing just what has gone wrong, while also providing a framework for any plan devised in the wake of wrongdoing to prevent a recurrence.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.
Joshua Ray represents individuals and corporates in complex investigations, prosecutions and regulatory actions regarding market manipulation and multijurisdictional matters involving fraud, bribery and money laundering.