During the summer, David Green QC, director of the Serious Fraud Office (SFO), described the organisation as being stuck between a rock and a hard place. He commented that the ability of the SFO to reach settlement agreements with corporates was circumscribed by the Court of Appeal’s comments in R v Innospec in 2010 whilst it would be some months before the arrival of Deferred Prosecution Agreements (DPAs) and the clarity it is hoped they would introduce.
Subsequently, in October, the SFO withdrew its existing guidance on how it would respond to cases of notified bribery and corruption and replaced it with an unequivocal new message - the SFO will prosecute where there is a realistic prospect of conviction on the evidence available and there is public interest in doing so (albeit self-reporting is one of the public interest factors tending against prosecution). Mr Green further clarified that civil settlements or DPAs will only be considered where there is no public interest in prosecution.
In this new era, corporates are thinking twice before approaching the SFO to self-report on fraud or corruption. A decision to self-report can only be made after a company has investigated the position and understands the risks to the business and any obligations that may have been triggered as the consequence of any wrong-doing that is uncovered. Although self-reporting has never been without risk, any assessment needs to be recalibrated in light of recent indications from the SFO as to how they will approach corporate criminal liability in the future. An ‘incentive’ to swift and comprehensive self-reporting has always depended upon both a decent degree of assurance that volunteering information to the SFO will provide some benefit (whether it is a decision not to prosecute or some form of recognition and leniency in any sentencing should a prosecution take place) and the risk of the wrongdoing being otherwise detected and prosecuted.
Alongside the marked shift in the stated policy with respect to the SFO’s approach to prosecution, Mr Green has indicated that the intelligence capabilities of the SFO are being significantly expanded and enhanced, implying a greater likelihood of fraud and corruption being detected by the SFO. He has referred to the SFO’s “state of the art digital forensics capable of sifting through terabytes of data”. In comments to the press earlier in November, he confirmed that the SFO would be conducting less ‘dawn raids.’ However, it would be increasingly reliant upon collating data from the vast amount of open source material available and blending it with more ‘exotic’ intelligence. He also specifically referred to reliance upon covert intelligence sources or more plainly, insiders feeding information to the SFO. His message was clear. If a corporate does not self-report, it will inevitably be found out. And in the words of Mr Green, it “can expect to receive little sympathy.”
Therefore, how real is the risk of wrongdoing being detected? Or are these just fighting words designed to ensure that corporates remain ‘encouraged’ to come forward with evidence of wrongdoing?
This message must be put into context by the publication last week of the HM Crown Prosecution Service Inspectorate’s “Report to the Attorney General on the inspection of the SFO”. With respect to the SFO’s intelligence function, the report concluded that this had developed in recent years without proper direction. The report was critical of the means by which cases have been identified, often through referral, media coverage or very informal intelligence without reassurance as to its credibility. The National Intelligence Model, a process and form for recording, analysing and communicating intelligence information between agencies, was not used by the SFO and there was a lack of critical intelligence analysis capability amongst SFO staff. Further, the report referred to poor casework handling and weak systems and processes. With respect to investigation, it was concluded that there was a lack of strategic focus and appropriate prioritisation.
Mr Green’s comments earlier in the month pre-empted the publication of this report, making it apparent that he is already putting his house in order, and quickly. However, although his intentions are plain, the enhanced capabilities of the SFO to detect wrongdoing must surely be a work in progress. Therefore, for those weighing up the pros and cons of self-reporting individual or corporate wrongdoing to the SFO, this latest publication concerning the SFO provides yet another factor to be carefully considered when deciding whether to self-report.