What you need to know about the SFO – Aziz Rahman explains how you can challenge its fraud allegations.
The Serious Fraud Office (SFO) was established in 1988 following a number of high-profile financial scandals in the City of London. As its name implies, it investigates and prosecutes fraud. But its remit has expanded in recent years in regard to overseas corruption, which makes it more likely that its investigators are looking at more companies in more varied business sectors than ever before.
As a result, it is probably more important now than ever before that companies know how the SFO investigates and prosecutes fraud.
When it comes to fraud, most prosecutions will be under the Fraud Act 2006 or the common law offence of conspiracy to defraud. The crux of any such prosecution is the issue of dishonesty. This was defined in the case of Ghosh (1982) as being conduct that reasonable and honest people would consider to be dishonest.
Prosecutors have to be able to convince a jury that this was the case and also that the defendant knew that his conduct would be considered dishonest by reasonable and honest people. In such cases, it is not a valid defence for the defendant to say he believed he was justified in doing what he was doing if a reasonable and honest person would regard it as dishonest. But as fraud cases are very often far from clear cut, the issue of dishonesty is one which offers significant scope for a proactive legal defence team to use evidence, witnesses and expert testimony to challenge strongly the prosecution claims.
Conspiracy to defraud
The common law offence of conspiracy to defraud is defined, following the case of Scott (1975), as "an agreement between two or more by dishonesty to deprive a person of something which is his or to which he is or would be or might be entitled, and an agreement by two or more by dishonestyto injure some proprietary right of his."
Such wording means that the offence is very wide in scope. It can cover in one charge activities that may have gone on in a number of places over a considerable period of time and involved a variety of proceeds. It does not have to involve an intention to deceive or any actual loss to the victim. The wide scope of the offence is the reason for its popularity with the SFO. Critics have said that the offence is over-used by the authorities in preference to statutory offences.
Such criticism helped pave the way for the Fraud Act 2006 but did not spell the end of the common law offence.
The common law offence of conspiracy to defraud was, however, limited by guidance from the Attorney General to cases where a wide range of criminality or many victims is involved or where no statutory offence covers the criminal conduct.
Fraud Act 2006
The Fraud Act applies to conduct committed after January 15 2007.
Section 1 creates a general offence of fraud that can be committed by false representation, failing to disclose information or abuse of position. For a successful prosecution, dishonesty has to be proved but also an intention to gain or cause loss to another or expose another to risk of loss. Each offence carries a maximum sentence of ten years in prison. Gain and loss can apply to money or property and can be either temporary or permanent.
For the SFO, the Act requires them to prove more than they ever had to if they prosecuted using the common law conspiracy to defraud offence. This is probably why the common law offence is still being used even though the Fraud Act has been in effect for eight years.
But while prosecutors may believe that a conviction is likely to be easier to secure using the common law off ence this still leaves scope for a defence team.
A defence lawyer can use their expertise to force the prosecution to disclose material before a trial – some of which may even hamper the prosecution – in order to build a credible case against the allegations of dishonesty.
Arguments can be mounted to disprove SFO conspiracy to defraud allegations that there was an agreement between two people. By obtaining all appropriate evidence and by using it shrewdly, SFO common law prosecutions can be challenged robustly when – or even before – they come to trial. The common law off ence may well be used by the SFO for a wide range of prosecutions.
But its wide-ranging nature offers a defence the chance to sow plenty of seeds of doubt in a jury's mind.
Similarly, the issue of whether a defendant's conduct constitutes either false representation, a failure to disclose or an abuse of position off ers a proactive defence team many opportunities to rebut SFO claims that an offence has been committed under the Fraud Act. With the Fraud Act requiring the SFO to prove more specifics than the common law offence in order to obtain a conviction, a defendant with the right legal team can use evidence and expert argument to challenge the allegations at every stage.
The SFO has a lot of weapons at its disposal when it comes to fraud. But this does not mean that they cannot be turned back on it with the right defence approach.