At the Cambridge Symposium the Serious Fraud Office discussed their enforcement record, DPAs, international cooperation and the future enforcement landscape. We look at five key learning points.
1. The SFO's enforcement record
David Green QC (Director) noted that, despite facing cases of significant complexity, multi-jurisdictional challenges, huge volumes of data (the Rolls-Royce case involved 30 million documents) and well-resourced defendants, the SFO has a very strong conviction record. It has secured:
- a conviction in respect of 89.5% defendants and in respect of 100% cases in 2016/17
- four Deferred Prosecution Agreements (DPAs) totalling £640 million
- a net contribution of £460 million to the Treasury over four years, which is equivalent to roughly £1 million for every member of SFO staff.
2. Deferred Prosecution Agreements
Alun Milford (General Counsel) set out a number of messages from the growing body of DPA cases:
- The award of a DPA is not a rubber stamp exercise. The court will take a very active role in scrutinising every aspect of the agreement and the application for approval.
- The seriousness of the offending will always be the first consideration. However, cases in which the criminality was of the most serious kind will remain in principle eligible for a DPA. Mr Milford quoted the judge in the Rolls-Royce case who stated that if this company was not to be prosecuted "in the context of such egregious criminality over decades, involving countries around the world, making truly vast corrupt payments and, consequently, even greater profits then it is difficult to see that any company would be prosecuted". However, due to the completeness of their cooperation, Rolls-Royce was eventually awarded a DPA.
- Two factors are critical in the interests of justice:
- Cooperation: Only companies that are fully co-operative with an SFO investigation will be awarded a DPA. Specifically, the organisation must ensure that in providing material as part of a self-report, it does not withhold material that would jeopardise an effective investigation and, where appropriate, prosecution of individuals involved. Full co-operation can involve identifying relevant witnesses and disclosing their accounts and the documents shown to them.
- Reform: A DPA will never be offered to a company that is likely to reoffend. Reform must include the removal of senior managers who are implicated in or should have been aware of the criminality. The purpose of a DPA is to incentivise openness which leads to the uncovering of financial crimes and to provide a way for the company to account to the court for its crimes without punishing innocent employees, suppliers or the local community. However, for this to be the case there can be no chance that the company will go on to create new victims of crime.
- If all of these criteria are met and a DPA is awarded, it can lead to significant reductions in penalty for the company in question. The 50% discounts awarded in XYZ and Rolls-Royce exceeds the standard 33% discount recommended in the Sentencing Guidelines.
- Mr Milford also discussed the fact that Standard Bank were allowed to present summary witness statements. He explained that whether this is acceptable to the SFO will be considered on a case-by-case basis. It is far from a general rule that full witness statements will not be requested.
- Mr Green emphasised that a DPA is not an exercise in letting the company off lightly. Rather, the completion of a DPA frees up resources so the SFO can pursue individual suspects.
Mr Green explained that self-reporting is still vitally important for an organisation to secure a DPA. When awarding DPAs to Standard Bank and XYZ, the judge attached considerable weight to the fact that the defendants immediately reported themselves and adopted a genuinely proactive approach to disclosure.
In relation to the Rolls Royce DPA:
- Rolls Royce secured a DPA without self-reporting because their cooperation was found to be "remarkable” and "full, unambiguous and proactive".
- In particular, Rolls Royce brought the SFO's attention to wrongdoing that it was previously unaware of to the extent that the company was effectively in the same position as if it had self-reported.
- The Rolls Royce case should not be seen as a signal that self-reporting is no longer necessary. It will not be possible for a company to secure a DPA just by “doing nothing, waiting for the phone call from the SFO and then going through the motions”.
4. International cooperation
The SFO has a strong record internationally but Mr Green stressed that it was vital to continue this:
- Mr Green quoted an OECD report which commended the SFO’s development of an intelligence unit and its effective approach to foreign bribery cases involving multiple jurisdictions by utilising Joint Investigation Teams.
- The SFO also proved when investigating Rolls Royce that they can coordinated the DPA with linked enforcement action in Brazil and the USA.
- Mr Green restated the importance of the SFO’s ongoing international enforcement activity because, if it did not do so, its US and other international counterparts would and any recoveries would go to foreign shores as opposed to the UK.
- For example, out of the ten biggest financial penalties handed out under the US Foreign Corrupt Practices Act since 2008, seven were against non-US companies.
5. The future enforcement landscape
The SFO will continue to be robust in tackling fraud and white collar crime:
- Since last September, 14 new investigations have opened and 43 defendants have been charged and are awaiting trial.
- In recent years the SFO has successfully resisted judicial reviews in two cases, and maintained a £4 million property freezing order in another.
- It has also proved itself willing to challenge legal professional privilege, doing this successfully when investigating ENRC.
- Despite the most recent Conservative manifesto contained a commitment to incorporate the SFO within the NCA, Mr Green concluded that “the SFO is confident, in good shape, attracting excellent staff, and well able to deal with the kind of case for which it was intended”.