How a US determination could cause headaches for the FCA and PRA

Posted on 19 July 2017

How a US determination could cause headaches for the FCA and PRA

The US Court of Appeals of the 2nd Circuit published a decision on 19 July 2017 that could potentially cause some real problems in relation to UK regulatory actions that have a US connection.

In summary:

  • the FCA interviewed Messrs Allen and Conti (both formerly of Rabobank) in relation to alleged Libor misconduct. 
  • Both were interviewed under compulsion. 
  • In accordance with its usual procedures, the FCA disclosed that compelled interview evidence to Paul Robson against whom it was taking action.
  • Robson closely reviewed the evidence, annotated it and took several pages of handwritten notes. 
  • Although the judgement refers to the FCA having subsequently dropped its case against Robson, it appears that the FCA in fact stayed it.
  • The Department of Justice in the US commenced action against Robson.
  • Robson pleaded guilty in the US and became an important co-operator for the DoJ.  He provided significant information and evidence, which contributed to the convictions of Allen and Conti in the US.

We covered the consequences of Robson's guilty plea in Enforcement Watch 16 "17 March 2015: FCA bans former Rabobank trader following LIBOR fraud conviction"

The US appeal relates to Allen and Conti's 5th Amendment challenge to their convictions.  There are two interesting aspects of the appeal for our purposes:

  • Was the 5th Amendment prohibition capable of being applied also to foreign compelled testimony?  The Court found that it was. 
  • In accordance with the Kastigar doctrine in the US, the Court held that when the DoJ was making use of a witness who had had substantial exposure to a Defendant's compelled testimony (as had Robson), it had to prove at a minimum that the review by the witness of the compelled testimony did not shape, alter or affect the evidence used by the Government. 

In this case, the Government was unable to prove this. Robson had substantially engaged with the compelled testimony of Allen and Conti. Indeed, his testimony in front of the US court was very different to the testimony that he had given to the FCA. In the circumstances, the convictions of Allen and Conti were quashed.


It is not difficult to envisage circumstances where, as part of a non-criminal process, the UK regulators may wish to compel evidence from a potential US criminal defendant and disclose it then to a person who may be a witness in those potential US criminal proceedings. This might happen for example where both potential US witness and potential US defendant were approved or certified persons in the UK, and both involved in alleged misconduct. 

Such a situation would require early and significant joined up thinking between the US and the UK authorities, something which has not always been in evidence.

If there was to be such thinking, one solution might be thought to be for the UK to step back from its regulatory action, allowing the US instead to proceed with its criminal action. However, that could well be unpalatable to the UK; it is one thing for the US and the UK to agree between them which of them will be taking criminal action against a potential defendant, but quite another for the UK to have to refrain from taking regulatory action against someone who would only be a witness in the US, which it might regard as delaying the exercise of its statutory objectives.

Another possibility might be thought to be a stay of the UK action. But that could also be unpalatable, not only because it would delay the exercise of the UK's statutory objectives, but also because it could run into limitation issues. Time will only stop running on limitation where a Warning Notice is issued. However, in order to get to that point, the FCA/PRA would have to have given proper disclosure (including any appropriate compelled evidence). Given that the compelled evidence would have been served, staying the action post Warning Notice might not achieve any real purpose.  The UK's stance may well be influenced by how far through the limitation period it was. 

A yet further alternative might be for the UK to be confident that it had absolutely secured the full and proper testimony of the prospective US witness before exposing that witness to the compelled testimony of the prospective US defendant. But, as Allen and Conti illustrates, that approach would not be without significant risk.  And it's not difficult to imagine a witness wanting to add to or develop his evidence (whether for legitimate or illegitimate reasons) in light of the disclosure he receives, especially if the UK proceedings were not stayed.

It won't be every day that the FCA and PRA run into issues caused by Allen and Conti but, where they do, those issues may prove to be very thorny.

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