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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

Understanding Serious Fraud Office (SFO) Investigations: Getting Tough

Author: Azizur Rahman  13 February 2013
5 min read

The Serious Fraud Office has recently clarified its stance on facilitation payments, hospitality and self-reporting. The newly-published policies indicate a hardening of the SFO’s position – making it even more important companies stay on the right side of the law.

Sometimes a review can seem like an admission of failing. The changes that follow often look like an attempt to put right what was wrong and can lay the perpetrator open to accusations that they didn’t know what they were doing. The SFO has had more than its share of critics in recent years. It has been blamed for failed prosecutions, poor investigations and a general inability to tackle fraud, bribery and corruption at the highest levels and on the largest scale.

But now, with David Green as its new Director, the SFO seems keen to be seen as taking a harder approach to crime. It has emphasised that it sees its primary role as being an investigator and prosecutor of serious and complex fraud while ensuring consistency with the approach taken by other prosecuting bodies. The SFO has also said it wants to “take forward’’ recommendations by the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery. But perhaps the clearest statement of intent from the SFO comes in a question and answer section on its website where it says “The SFO’s primary role is to investigate and prosecute. The revised policies make it clear that there will be no presumption in favour of civil settlements in any circumstances.’’ Putting it briefly, it is looking for prosecutions rather than civil recovery.

The SFO is at pains to point out that this does not mean there is no flexibility in relation to facilitation payments. But it states that such payments were illegal before the Bribery Act 2010 came into force and that they remain illegal. It explains in its guidance that whether a prosecution for facilitation payments goes ahead will depend on whether it is a serious or complex case that falls within the SFO’s remit and, if so, whether (having applied the Full Code Test in the Code for Crown Prosecutors) it then concludes that the offender should be prosecuted. If the requirements of the Full Code Test – which means basically whether there is sufficient evidence for a prosecution - are not satisfied then it would appear that the SFO will consider civil recovery. The same stance has been outlined by the SFO regarding corporate hospitality, with the new statement of policy emphasising that bona fide hospitality, promotional or other legitimate business expenditure is still recognised as an important part of doing business. The stance of prosecution if the Full Code Test is satisfied and civil recovery if it is not is also taken regarding self-reporting. But one line in the SFO’s guidance that bears special attention is:

“The SFO encourages corporate self-reporting, and will always listen to what a corporate body has to say about its past conduct, but the SFO offers no guarantee that a prosecution will not follow any such report.

“The SFO is primarily an investigator and prosecutor of serious and / or complex fraud, including corruption. It is not the role of the SFO to provide corporate bodies with advice on their future conduct.’’

Putting it bluntly, coughing up an early confession is not going to mean you escape prosecution – a position that many had thought the SFO was encouraging in the rush to civil recovery. The Bribery Act is a piece of legislation that has far-reaching consequences and the SFO’s latest statement of intent makes it clear that companies will be offered less “wiggle room’’ than they may previously thought they could count on. Before the Bribery Act came into effect, the UK’s prosecution rates for bribery were running at less than 10% of the rates for Germany and the US. The Bribery Act’s introduction has not, at least so far, seen a sudden increase in bribery cases coming to court. But that should not lull any companies into complacency.

The SFO’s latest pronouncements now make it clear that it is prepared to aggressively enforce the Bribery Act – which is an Act that places large responsibilities on companies who do not want to fall foul of it. A far-reaching Act strongly enforced is a scenario that should be sending the corporate world into some serious soul searching. Up until now, the theory doing the rounds that civil recovery was the SFO’s weapon of choice at least gave companies the comforting idea that if they self-reported and paid a financial penalty then any wrongdoing could be overcome. That is no longer the case: criminal convictions now look more likely outcomes.

So where does this leave companies who fear they could fall foul of the SFO’s new get-tough approach? Quite simply, they have to get their acts together. Fast. If companies want to make sure they are doing nothing to arouse the SFO’s interest they have to introduce a culture from the top down that sees the risk of corruption identified, dealt with and regularly monitored. Everyone within a company must be aware of their duties to comply with the Act. Introducing procedures is not enough. Companies must ensure such procedures are robust, responsive to the company’s activities, fully documented and subject to on-going review and, where necessary, revision. If senior figures in a company ignore the risk of corruption they can be subject to personal prosecution.

 As legal experts in serious and complex crime, we are familiar with the demands on companies and the pressures they face in remaining the right side of the law. We advise corporates, including large PLC’s, on compliance matters. We also help set up and run internal systems that remove the potential for corruption and criminality. No company wants to expend more time, money and effort on compliance than they have to. But compliance is not an issue where companies can cut corners. It may seem an easy option to not bother to devise and implement compliance procedures. But think of the long-term cost if such an attitude leads to prosecution – criminal convictions, large financial penalties, huge amounts of working hours lost as staff have to leave their posts to respond to investigations and the resulting prosecution, not to mention the severe dent to the company’s image and the resulting loss of business. When such outcomes are considered the importance of complying with legislation is clear. What is also important to remember is that there is no one-size-fits-all solution. Companies working in different sectors, providing varying products or services and employing workforces of various sizes will all face different challenges when it comes to being legally compliant. They may all need a “health check’’ to see what legal pitfalls they are facing but the way that compliance procedures need to be introduced and implemented will vary massively from company to company.

Perhaps the only thing that remains consistent from company to company is the SFO’s approach. It has now made it clear that it will be looking for prosecutions. Those prosecutions could involve companies in any sector, of any size and in any geographical area. The SFO is armed with plenty of legislation it can call on to demonstrate its tougher approach. As well as the Bribery Act, the Fraud Act 2006, the Enterprise Act and the Money Laundering Regulations give the SFO plenty of scope to seek and punish wrongdoing. Creating a company culture of legal compliance, risk management and sound corporate governance is the only option open to companies that want to avoid a mauling at the hands of the seemingly more aggressive SFO.

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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