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Understanding Serious Fraud Office (SFO) Double Investigations - Rahman Ravelli

Author: Azizur Rahman  14 June 2013
5 min read

Self- Reporting to the Serious Fraud Office (SFO) has almost doubled in a year. Why has it happened? And what benefit is there in self-reporting?

The number of businesses self-reporting white collar crime to the SFO has almost doubled in the past 12 months. And the figure for the last financial year is six times that for 2008-09. The figures at this stage aren’t huge. The current figure is up to 12 from seven the previous year. But it’s fair to say these figures indicate an emerging trend.

Rolls-Royce is among the names that have self-reported recently, following SFO interest in its Far East operations. There seems to be a general acceptance that the issue of bribery is now well and truly on the agenda. As of now, the Bribery Act’s introduction two years ago has not led to a flood of prosecutions. But it has made corporations aware of the need to comply with it. And it has led to companies being aware that if they haven’t or aren’t complying with it then they stand a chance of limiting the punishment if they self report. In this day and age, the SFO and other organisations are capable of sharing a wide range of intelligence. They appear very happy to share it both at home and abroad and seem set to benefit from a whistleblowing culture that is alive and well in the UK. From November 2011 to November 2012, the SFO received 3,265 letters, emails or phone calls alleging financial crime. The US Securities and Exchange Commission has produced figures that show the UK provides more tip offs about financial wrongdoing in the US than any other country. Nowadays, it may not be merely risky to turn a blind eye to your company’s wrongdoing. It is getting near impossible. Self-reporting may be becoming the only logical route for a company that knows it has misbehaved.

The SFO’s Director David Green has stated that non-prosecution can be offered as an incentive for those who self-report. But the SFO is now out to gather more intelligence that is not self-reported, meaning that your chances of being caught are on the rise, whether or not you self report. This more proactive stance has been backed by a tougher approach that states that anyone who does self-report is no longer guaranteed a civil settlement. In a lengthy statement, the SFO recently announced;

“If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. The fact that a corporate body has reported itself will be a relevant consideration to the extent set out in the Guidance on Corporate Prosecutions. That Guidance explains that, for a self-report to be taken into consideration as a public interest factor tending against prosecution, it must form part of a “genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice”. Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.
“In appropriate cases the SFO may use its powers under proceeds of crime legislation as an alternative (or in addition) to prosecution…If the SFO uses its powers under proceeds of crime legislation, it will publish its reasons, the details of the illegal conduct and the details of the disposal.

In cases where the SFO does not prosecute a self-reporting corporate body, the SFO reserves the right (i) to prosecute it for any unreported violations of the law; and (ii) lawfully to provide information on the reported violation to other bodies (such as foreign police forces).’’

Taking that statement at face value, it appears that self-reporting is a “relevant consideration’’ when the SFO decides whether to prosecute. But it is clearly not the be-all-and-end-all that it may have previously have been thought to be. The statement goes on to say that the SFO will be looking for a “genuinely proactive approach’’ by management if a self-report is to be taken seriously by its investigators.
Putting it simply, self-reporting is not the stay out of jail card some people may have thought (or hoped) it would be. It is hard to prove either way, as the SFO has made it clear that it is not there to be an advice agency for companies looking to be told what to do. But one factor the SFO may weigh up when considering a prosecution is just how long it took management to self-report once they were made aware of wrongdoing. Did they self-report immediately? Or cough up the information when it appeared the net was closing in anyway? And will a greater amount of weight be attached to a self-report if it includes information of wrongdoing that the SFO would not otherwise have been aware of?

When a company self-reports, it has to go through the SFO’s Intelligence Unit. Hard copy reports have to be provided along with all other relevant data and documents that could be supporting evidence. At this stage, the SFO will give no indication whether a prosecution will result. It will analyse the available evidence and base its decision on whether to prosecute unlawful activity on the Full Code Test in the Code for Crown Prosecutors. The Test basically involves consideration of whether there is enough evidence to give prosecutors a realistic prospect of a conviction and whether it is in the public interest to seek a conviction. If the Full Code Test requirements are not met then civil recovery may be an alternative to criminal prosecution.

Some commentators may argue that because of this hardening of the SFO’s stance, there is nothing to be gained from self-reporting. But it is surely still the case that a self-report made with the best of intentions (and not just tossed out when the game was up) will place a company in a better light regarding an SFO investigation. The SFO has civil recovery as a tool to be used when it is appropriate. Deferred Prosecution Agreements (DPA’s) are also set to be introduced; giving the SFO another option when it comes to righting wrongs by having a company report, admit and pay a penalty for wrongdoing before subjecting itself to stringent conditions to prevent it happening again. Faced with these options, it seems unlikely the SFO will plough on with criminal prosecutions for every case of self-reporting.

With the right legal advice, a company can defend itself robustly during any investigation. The right legal specialist will know how best to represent a client in negotiations with investigators, how to emphasise certain aspects of a case and how to set in motion workplace changes to prevent such problems occurring again. But perhaps the best way to avoid the dilemma of whether to self-report or not would be to make sure there is no wrongdoing to report in the first place. Robust, responsive procedures to prevent and weed out corruption have to be introduced, promoted and revised from the top down. In many cases, specialist legal expertise is required to advise companies on compliance and help set up and run internal systems that reduce the potential for corruption. Different companies working in different industries or different locations will have differing needs regarding compliance. It is not a one size fits all situation and companies have to realise that what might work for one is unlikely to work for another.

Bringing in legal expertise to tackle workplace corruption will not only prevent it happening, it will go a long way towards proving to the SFO – should they ever come investigating - that you have been genuine in your determination to stop wrongdoing. The earlier legal help is brought in, the quicker it will be able to nip the potential for wrongdoing in the bud…and prevent the company having to join the lengthening queue to self-report. The Bribery Act, the Fraud Act 2006, the Enterprise Act and Money Laundering Regulations are all weapons that the SFO and other authorities have at their disposal. Self-reporting is one of the few that companies have…but it has to be used wisely.

Azizur Rahman C 09369

Azizur Rahman

Senior Partner

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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.

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