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Understanding Serious Fraud Office (SFO) Investigations: A Deep Dive

Author: Azizur Rahman  14 May 2013
4 min read

The Serious Fraud Office (SFO) is bringing prosecutions after discovering what it believes is fraud involving coal mines in South Wales. Here Aziz Rahman considers mining’s importance and why it is best to comply with the law rather than pit your wits against it.

Mining. It’s a line of work that instantly provokes mental images of pits, coal-blackened men clocking off and huge piles of fuel. As an industry, it has been with us for centuries and is likely to exist, in some form at least, until well into the future.

In recent years, however, law enforcement organisations have been taking a keen interest in what goes on in mining. Their interest seems to span what goes on both above and below ground. And there have been some serious consequences. For example, six people have been charged with conspiracy to defraud in relation to the sale of four open-cast mining sites in South Wales. The proceedings have now been transferred to Crown Court, which will at some point hear the case. It is alleged that the defendants conspired to defraud Neath Port Talbot County Borough Council, Bridgend County Borough Council, Powys County Council and The Coal Authority by deliberately prejudicing their ability effectively to enforce obligations to restore open cast mining sites in South Wales to either open countryside or agricultural land. At this stage, the men are to be presumed innocent until proven guilty. The fact that the case has been brought, however, is a reminder that the SFO and other authorities are prepared to dig deep wherever and whenever they suspect fraud.

The SFO has made no secret recently of its intention to mount prosecutions and get tough on business crime. Whether there will be an increase in prosecutions remains to be seen. But, if nothing else, the events that have so far unfolded in South Wales should serve as a clear sign that mining is an area where the authorities are paying very close attention. With this in mind, it is essential that those involved in mining can show that they are acting in accordance with the law.

 At Rahman Ravelli, we successfully represented one of the two defendants in the final Imperial Consolidated trial. The Imperial Consolidated case involved an alleged £150M fraud relating to South American and African mining rights, two trials over eight years and evidence from more than 30 countries. It cost the tax payer an estimated £10M to prosecute the case and finished when the then SFO director finally stating he would abandon any further efforts to prosecute our client. On that occasion, the SFO was unsuccessful. But it hopes for notable victories in the future. And the only real protection against this is to make sure you have your house in order. Rahman Ravelli has been advising exploration companies and PLC’s since the Imperial Consolidated case, with many having become more aware of their need to stay on the right side of the law.

But how exactly are you supposed to either put your house in order or prove that it already is in order? First and foremost, a company has to ensure that it is legally compliant. Having a fully-documented and recorded accounting system in place and detailed records of all aspects of a company’s activities means that the evidence is there to back up claims that things have been run properly. But a company can only be said to be working properly if it is working legally. And it can only be sure it is working legally if it is working within the confines of all aspects of the law and is making every possible effort to make certain that remains the case. To guarantee that requires specialist legal expertise. Only a solicitor working in the field of compliance can recommend measures to ensure that a company is not breaching any aspect of the law. Obviously, this costs. But it will certainly cost less than the possible alternative - criminal prosecution, custodial or financial penalties, loss of trade and damage to reputation. Many mining companies are busy organisations, employing thousands of people around the globe, having legal concerns regarding individual countries’ employment rights, health and safety legislation and financial regulation. Often, the need for introducing and maintaining a culture of compliance can get left by the wayside as the company reacts to what it sees as more immediate, pressing issues. But taking such an approach, either by accident or design, leaves a company at risk of future legal trouble.

At Rahman Ravelli, we advise companies on what to do to make sure they do not become the subject of an investigation and we represent any that do find themselves under investigation. It is worth noting that those that do come under investigation are extremely unlikely to be the ones that have taken expert legal advice on being compliant. The right legal expertise can help a company take the correct course of action if it becomes the subject of attention from the authorities. In the UK alone, the SFO, Financial Services Authority (FSA) and HM Revenue and Customs are changing the way they operate, gaining new powers and targeting new areas on an almost yearly basis, Any company caught in their sights – mining or otherwise – will find it hard to both stay abreast of the changing legal picture and know the appropriate response if they come under investigation. They need legal advice.

Mining is an industry with a long and proud tradition in many countries. The authorities, however, do not exist to respect history and past achievements. They exist to sift through piles of evidence and dig out the wrongdoers. A company’s strongest protection against this happening to them is to build and maintain a sturdy culture of compliance.

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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