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White Collar Crime & Investigations: What to expect from the SFO in 2022?

Posted on 19 January 2022

Having considered the enforcement action taken by the Serious Fraud Office ("SFO") in 2021, we will now look ahead to what we can expect from the SFO in 2022 particularly as the dust begins to settle on the COVID-19 pandemic, and the Law Commission publishes its options paper on potential reform to the law on corporate criminal liability.

Upcoming trials

As discussed in our round up of SFO enforcement activity against individuals and corporates, the past year saw a shift in focus by the SFO in its investigations from overseas bribery cases to fraud cases that had a closer nexus to the UK. This year also sees a number of fraud cases coming to trial, and it will be particularly interesting to see what evidence is relied upon in respect of the overseas conduct.

  • In February 2022 the trial of Andrew Skeene and Omari Bowers will commence at Southwark Crown Court. The two men face multiple charges, which include conspiracy to defraud, misconduct in the course of winding up, and making a false statement without oath. The charges arise out of their tenure as the directors of Global Forestry Investments which offered ethical styled investments in Brazilian teak plantations.
  • In March, the trial of Timothy Schools, David Kennedy and Richard Emmett will also begin at Southwark Crown Court. The three men face multiple charges arising out of an alleged fraudulent scheme that diverted money away from the now dissolved Axiom Legal Financing Fund for their own benefit. Axiom Legal Fund was a Cayman Island unregulated investment scheme that loaned money to UK law firms to fund cases and was placed in receivership in 2013.
  • In April, the chairman of the Harlequin Group of companies will stand trial for offences of Fraud by Abuse of Position. Mr Ames was charged with these offences in February 2017.
  • There are two trials currently fixed for September. The first involves five former executives at Balli Steel Plc who are due to stand trial for various fraud offences in relation to the collapse of the Anglo-Iranian Steel trader. The individuals face charges which include defrauding creditors, conspiracy to defraud various financial institutions and fraudulent trading. The second case fixed for trial in September is the only SFO bribery trial currently in the calendar - five individuals are facing trial for bribery and money laundering offences in relation to the alleged payment of bribes to secure contracts in the UK construction industry.

The trials, all bar one of which are for fraud offences, whilst not as expansive in scope as some of the bribery cases that the SFO has focused on in previous years, could provide the SFO with an opportunity to burnish its credentials after they were seriously diminished by events in 2021.

SFO under scrutiny

Following the Court of Appeal's significant judgement in Ziad Akle's appeal against his conviction for bribery, the Attorney General ordered an independent review into the SFO which will report directly to her. The Akle appeal centred in large part on the SFO's failure to disclose material evidence about the dealings that a number of its senior officials (including Ms Lisa Osofsky) had with a third party investigative "fixer", David Tinsley, during its investigation into the Unaoil group of companies.

The SFO is also awaiting the High Court's judgment in a claim brought against it and other parties by Eurasian Natural Resources Corporation ("ENRC") in connection with an eight-year investigation into ENRC over suspected fraud, bribery and corruption. In September 2018 the SFO suffered a high-profile defeat in the Court of Appeal over the privilege that attached to documents generated by ENRC during an internal investigation. It was then party to the 47-day High Court trial in the autumn of last year in which it was accused of misfeasance in public office and inducing breach of contract. The claim concerned the SFO's alleged contact with ENRC's former lawyer who was instructed by ENRC to carry out an internal investigation into allegations of fraud and corruption at an ENRC subsidiary. ENRC's former advisors are also Defendants to the claim along with the SFO.

If the Court decides against the SFO in the ENRC claim, it would serve as another example of a case in which the SFO's contact with third parties is called into question. Such a ruling could also seriously undermine its eight-year investigation into ENRC and it would be a serious blow in light of the ongoing review into its activities that is due to report to the Attorney General.

Deferred Prosecution Agreements

It is possible that this year could see Deferred Prosecution Agreements ("DPA) agreed in high profile SFO investigations into Rio Tinto and Glencore respectively.

The SFO opened a corruption investigation into the conduct of Rio Tinto's business activities in the Republic of Guinea in 2017. The investigation was opened after the mining giant self-reported to authorities in the UK, US and Australia following its discovery of a series of emails referring to a multi-million-dollar payment made to a consultant in connection with an iron ore mining project in Guinea. Media reports in 2020 indicated that Rio Tinto was in talks over a possible DPA with the SFO, with both parties declining to comment on the matter. Similarly in December 2019 the SFO announced that it was investigating the Swiss Commodities trader Glencore over suspicions of bribery in the conduct of its business. DPAs arguably serve as a win for the SFO, and Ms Osofsky's emphasis on how they help companies to be good corporate citizens is in alignment with the SFO's objective of protecting the UK’s economy and global reputation as a safe place to do business.

DPAs with Glencore and Rio Tinto would also be welcome news for the SFO after the high-profile issues of last year particularly in the case of Ziad Akle, which continues to cast a long shadow over its operations. In April, the trial of two former senior executives at Serco, Nicholas Woods and Simon Marshall, collapsed as a result of disclosure failures by the SFO. The trial judge concluded that the failures had undermined the process of disclosure to such an extent, that the trial could not safely proceed until they had been remedied and refused the SFO's applications to adjourn, directing the jury to return a verdict of not guilty after the SFO offered no evidence.

The fact that the SFO continues to suffer costly defeats as a result of disclosure failures suggests that there are problems that need to be addressed within its prosecutorial process. The risk of a trial, and consequences of any conviction, is one of the reasons corporates are drawn to DPAs. Therefore, the continued struggles of the SFO to convict individuals, even after their corporate employers have entered into a DPA, could lead corporates to be less inclined to enter into DPAs in the future.

The SFO's Priority themes

The SFO has four primary areas of focus for 2021/22:

  • International bribery and corruption in a changing world;
  • The 2021 threat landscape;
  • Getting ahead of investment fraud; and
  • The growth of cryptocurrency.
Cryptocurrencys

Cryptocurrency is firmly in the crosshairs of more than one law enforcement agency in the UK, with the Financial Conduct Authority also expressing its intention to tackle the threat that it feels Cryptocurrency plays from a market risk and money laundering compliance perspective.

The anonymity, jurisdictional and regulatory issues involved in cryptocurrency make it an attractive market for money laundering, terrorist financing and other illicit activity. Those who are involved in the provision or trade of cryptocurrency must be aware that they constitute a key part of the SFO's landscape in the coming year and most likely in the years to come and therefore any business should be conducted with the expectation of future scrutiny.

International Collaboration

The SFO's 2021/22 business report highlights the agency's desire to collaborate more with international law enforcement partners in their investigations. As discussed in the section on the SFO's investigations in 2021, the SFO suffered a significant blow in the Supreme Court's decision in R (on the application of KBR, Inc) v Director of the Serious Fraud Office which outlined the limits of the extra-territorial reach of the SFO's Section 2 powers. Notwithstanding this decision, the SFO remains committed to utilising international partnerships where it can in its cross-border investigations. The decision in KBR Inc only impacts situations where the SFO are trying to use their Section 2 powers to obtain information from entities that have no nexus to the UK. The SFO's business report makes mention of the success that its collaboration with foreign law enforcement agencies has yielded and as such it is likely that such collaborations will continue in the coming year.

Indeed there has already been an uptick in SFO activity in the Middle East as a result of a greater willingness of authorities there to engage with their requests for information. Middle Eastern Authorities who are also keen to secure evidence from the UK for their own investigations, recognise the need to act in a reciprocal manner to requests from the UK. It is expected that the SFO will continue to cultivate such relationships with foreign law enforcement agencies in the coming year.

New ways of working and increased funding

The pandemic impacted the SFO as it did any other organisation, but the SFO has been quick to adapt phasing in virtual interviews of suspects, allowing 90% of its staff to work remotely and investing in new technological capabilities. This suggests that the SFO is successfully navigating the new normal ushered in by the pandemic and it appears that the progress of its investigations will not be slowed down because of pandemic related issues.

The SFO received welcome news in the autumn budget where it was announced that it would receive an increase in its core funding to help its fight against fraud, bribery, and corruption. This means the SFO will have more resources at its disposal to carry out its investigative work and this coupled with the agency's new agile working arrangements could lead to more successful outcomes.

Corporate Criminal Liability

Lastly, those that litigate in the area of white-collar crime and investigations await the publication of the Law Commission's options paper following its review into the law relating to the criminal liability of non-natural persons, including companies. Lisa Osofsky has been vocal in her call for reform in this area, and the options paper that is due to be published in early 2022 might provide some of answers to the frustrations she has expressed about the difficulty that the SFO has faced when trying to hold companies to account for their alleged fraudulent conduct.

This year looks likely to be a very busy one for the SFO with ongoing investigations and new investigations being announced.

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