At the beginning of October 2012, the Serious Fraud Office ("SFO") issued a revised guidance signaling a marked change in its attitude to prosecutions under the Bribery Act. The SFO said at the time that it had reviewed its policies on facilitation payments, business expenditure (hospitality) and corporate self-reporting and that its aims were to:
- restate the SFO's primary role as an investigator and prosecutor of serious or complex fraud, including corruption;
- ensure consistency with other prosecuting bodies; and
- meet certain recommendations from the Organisation for Economic Co-operation and Development (OECD).
The SFO's helpful checklist on how to self-report corruption was expunged and so was the perception of the cosy fire-side chats between companies, their representatives and the SFO. The comfort blanket that self-reporting would likely guarantee the avoidance of prosecution was stripped away and in its place, David Green CB QC, laid the ground for a more aggressive approach to punishing corruption.
Fraud Lawyers' Association speech
There has been much speculation about the full meaning and impact of the SFO's new approach and whether it has the resources to implement such a strategy. However, the new Director's speech on 26 March 2013 at the inaugural Fraud Lawyers' Association meeting left attendees in no doubt about his view on the SFO's more effective and brighter future.
Mr. Green explained in his speech that since taking up his post on 23 April 2012 ten fundamental changes have been made at the SFO. Most notable of those, as stated above, are that the SFO restated its role and purpose, and:
- the SFO has refocused its take-on criteria;
- the SFO has reviewed its inherited caseload and commencement of new projects and investigations reflecting its refocused take-on criteria;
- the SFO has issued new guidance on self-reporting and facilitation payments.
Restating the role and purpose of the SFO
In his speech, Mr. Green gave a not so thinly veiled dig at his predecessor by saying that in the past the SFO's role had become "blurred" and there was a perception that "it did not have the stomach for prosecution and preferred risk-free civil settlement". He emphasised once again the SFO's primary role as investigator and prosecutor, although did acknowledge that there was a place for civil settlements in the right circumstances.
Refocusing the SFO's take-on criteria
Mr. Green explained that the SFO must investigate and prosecute complex and high level fraud and bribery which either involve significant sums or that have led to serious harm. The perception that the SFO had "dumbed down" by avoiding difficult cases had to be eradicated.
Review of the SFO's inherited caseload
Mr. Green listed those investigations that had already been publicly disclosed that the SFO is undertaking. Overall the SFO has 65 cases on its books, of which 23 are criminal investigations; 14 are post charge or awaiting or are in trial; 13 are post trial (confiscation or awaiting appeal); and, 15 are under development in the SFO's intelligence section (some pre-dating and others post-dating the Bribery Act).
Mr. Green explained why he had withdrawn the SFO's guidance on corporate self-reporting. His concern about the document was that it suggested that if a corporate self-reported to the SFO then the SFO would "strain every sinew" to deal with the matter by way of civil settlement. Instead, the full Code Test for Crown Prosecutors will be applied1 and provided there was sufficient evidence and it was in the public interest to do so, a prosecution will follow. It was very interesting to note that an example given of a self-report which might lend against prosecution was as follows:
"BUT in the case of a genuine self-report, where, say, a new board had discovered previous misconduct under previous management, had investigated it and reported it to SFO and put in place measures to avoid repetition, then obviously the fact of self-reporting would weigh heavily in the public interest against prosecution."
That will not provide much comfort to many Boards considering self-reporting where corruption has taken place under their watch. In those circumstances, to avoid prosecution, they may well have to heavily rely on the defence to the corporate offence (of failing to prevent corruption) under the Bribery Act, namely that the company had adequate procedures in place (and that they were perhaps circumvented by a rogue employee). This serves as a further stark warning to those companies that have yet to adopt proper internal measures to prevent corruption. The SFO's new approach provides uncertainty for companies seeking to self-report which will unsettle companies. Whether this new prosecutorial outlook encourages companies to self-report remains to be seen, although it is notable that Mr. Green felt that self-reporting was "still very much alive and well".
The SFO's view on facilitation payments has also very much hardened. No longer can a prosecution be side-stepped if a company can show it was moving towards a zero tolerance policy on facilitation payments.
The SFO has reached an agreement with the Treasury to provide one-off funding for specific high level investigations. LIBOR is the first such example.
A number of challenges were identified by Mr. Green that the SFO must tackle on the road ahead under his stewardship. Of note was:
- his desire to instigate a debate on whether the threshold for establishing corporate criminal responsibility should be lowered. He pointed to the corporate offence under the Bribery Act as a more sensible approach, rather than the standard that must be met for other corporate criminal offences by reference to the 'controlling mind' of the company being complicit in the wrongdoing which is difficult to prove.
- his articulation of why companies should enter deferred prosecution agreements ("DPAs ") when they eventually are permitted by law. He stressed DPAs should only be used in the right circumstances and only in respect of companies. It was noticeable that he did not go on to offer the carrot that self-reporting could automatically lead to a DPA or assurance that a prosecution would likely be avoided. Instead he adopted the stick approach - that self-reporting was the right thing to do, and the SFO might find out about the wrongdoing anyway. A company will be on shaky ground if the SFO has to come knocking on its door for that not so cosy chat.
David Green CB QC has made significant internal changes at the SFO and robustly reasserted its role. This must be backed up by action if the SFO's reputation is to be restored both nationally and internationally after a number of setbacks. If Mr Green's assertions are to be given credibility, one expects, as he said himself, that it will have to "prove its worth" by delivering "results"; that means successful high level prosecutions, particularly in relation to LIBOR fixing and the Bribery Act.