UK Economic Crime Group: Enforcement Update
In this edition of our Enforcement Update, we summarise the key developments in the last quarter of 2018 and the areas in which activity is expected in the coming year, notably: the results of the Financial Conduct Authority's (FCA) financial crime survey, evidence given before the House of Lords Select Committee on the Bribery Act 2010, the Law Commission's review of the UK's confiscation regime, the recent surge in Suspicious Activity Reports sent by Companies House to the National Crime Agency, and the Financial Action Task Force's evaluation of UK's anti-money laundering measures.
We also address the conclusion of the UK's first Deferred Prosecution Agreement with Standard Bank, and comment on recent investigations, including Société Générale's $1.4 billion settlement with US authorities, money laundering charges against Danske Bank and the conclusion of the Serious Fraud Office's (SFO) investigation into FH Bertling Ltd. In addition, we cover the recent prosecutions of individuals at Alstom, the collapse of the trial against Barclays regarding Qatari fundraising, the acquittals of defendants in the Tesco fraud trial, and the parliamentary seizure of evidence linked to Facebook.
Finally, we review the treatment of corporate crime in the US under President Trump's administration and Lisa Osofsky's first quarter as SFO Director.
Table of Contents
OCTOBER »
Patisserie Valerie: Investigation into Accounting Irregularities
Patisserie Valerie announced that it was on the brink of collapse after uncovering a shortfall of £40 million, prompting the SFO and FRC to commence investigations into its activities.
Barclays Bank: Qatari Fundraising Trial Collapse
The SFO failed to reinstate criminal proceedings against Barclays on charges of conspiracy to defraud and provision of unlawful financial assistance.
NOVEMBER »
FCA Financial Crime Survey
The FCA published its first industry-wide review of the risks facing the financial sector, which include cyber crime and fraud enabled by new technology.
House of Lords Select Committee on the Bribery Act 2010
The ongoing review heard evidence from interested parties including law-enforcement agencies, defence lawyers, anti-corruption trade associations, and global companies.
Law Commission Review of UK Confiscation Regime
The Law Commission is reviewing the United Kingdom's confiscation regime and its consultation paper is due to be published by September 2019.
Société Générale: $1.4 Billion Settlement with US Authorities over Sanctions Violations
Société Générale Group agreed to pay a $1.4 billion settlement to US authorities over sanctions violations related to Cuban dollar transactions.
Companies House: Surge in SARs Sent to the NCA
The UK's NCA reported that it has seen a five-fold increase in Suspicious Activity Reports in the last financial year, with 2,264 received from Companies House in 2017–18.
Danske Bank: Charged by Danish Prosecutors in Ongoing ML Investigation
Danish authorities announced that Danske Bank A/S was to be charged with offences contrary to the Danish Anti-Money Laundering Act.
FH Bertling: Conclusion of Trial in Corruption Investigation
The SFO's investigation into FH Bertling Ltd., started in September 2014, concluded following the conviction at trial of three former company executives for bribery offences.
Standard Bank: Conclusion of UK's First Deferred Prosecution Agreement
The SFO confirmed that Standard Bank has successfully complied with all required terms of the first UK DPA, entered into three years ago.
DECEMBER »
Financial Action Task Force: Evaluation of UK's Anti-Money Laundering Measures
FATF published a report on the UK's anti-money laundering and counter-terrorist financing measures as of March 2018, the results were generally positive.
Alstom: SFO prosecutions
Another individual was convicted of conspiracy to corrupt, bringing the investigation and prosecution of Alstom companies and individuals to a close.
Tesco: Acquittal of Defendants in Fraud Trial
Despite entering into a DPA with Tesco in May 2017, the SFO failed to secure convictions against senior executives.
House of Commons Select Committee Seizes Evidence Despite US Court Seal
Parliamentary powers were used to seize material understood to contain communications between Facebook executives, despite those documents being protected by a US court order.
GENERAL »
Corporate Criminal Liability under the Trump Administration
Statistics show the number of corporates prosecuted for white-collar criminal offences in the US has decreased under Donald Trump's presidency, reflective of his deregulation agenda.
Lisa Osofsky's Tenure as SFO Director to Date
Despite recent challenges at the SFO, Lisa Osofsky remains committed to making the UK "a high risk place for the world's most sophisticated criminals to operate."
OCTOBER
Patisserie Valerie: Investigation into Accounting Irregularities
Patisserie Valerie remains under scrutiny after an internal investigation in October 2018 revealed "significant and potentially fraudulent" accounting irregularities. The company's shares were suspended and investigations were commenced. After the company uncovered a shortfall of £40 million in its finances, it announced to the stock market that it was on the brink of collapse. The shortfall was traced to two company bank overdraft facilities that were supposedly kept secret from the board, suggesting a clear lack of corporate transparency.
CFO Chris Marsh, immediately suspended following the revelations, was arrested by the SFO on suspicion of committing fraud by false representation and released on bail; he subsequently resigned. CEO Paul May was also forced to step down.
The Financial Reporting Council (FRC) has commenced an investigation into the company and the role that its CFO played, and will interrogate the company's accounts for the years ending 2015, 2016 and 2017. Grant Thornton, the company's auditors, are also under investigation for their activity in overseeing the company's accounts. This follows other recent investigations in which large accounting firms have been scrutinised and criticised for "rubber-stamping" the accounts of companies subsequently investigated for fraud and accounting irregularities. This is an area that may yet prove fruitful for regulators in future.
Barclays Bank: Qatari Fundraising Trial Collapse
On 26 October 2018, the SFO failed in its final bid to reinstate criminal proceedings against Barclays Plc of conspiracy to defraud, and Barclays Plc and Barclays Bank Plc regarding charges of providing unlawful financial assistance contrary to the Companies Act 1985.
The allegations concerned Barclays' 2008 borrowing from Qatar during the global banking crisis, which helped Barclays avoid any bailout from the UK government. The SFO claimed that Barclays Plc conspired to secure this funding via hidden side deals worth over £300 million. The SFO further alleged that both entities were involved in providing a $3bn loan to the State of Qatar in 2008 for buying shares in the bank.
On 21 May 2018, The Hon. Mr. Justice Jay sitting at the Crown Court at Southwark dismissed the corporate charges. On 23 July 2018, the SFO applied to the High Court to reinstate those charges via an application for a voluntary bill of indictment, an exceptional procedure sought where, for example, a prosecutor seeks to try a defendant on the basis of evidence that has previously been dismissed, or where a procedural irregularity with the way that a case has been charged needs to be corrected. In the High Court, Lord Justice Davis refused the SFO's application, removing the SFO's ability to prosecute either corporate entity on this evidence.
The charges against four individuals—former chief executive John Varley; Roger Jenkins; Thomas Kalaris; and Richard Boath—remain. Notwithstanding that these men will stand trial, the failure even to have a jury hear the evidence on which the SFO Director considered there was sufficient evidence to charge Barclays Plc and Barclays Bank Plc will be embarrassing for the SFO, which sought and secured additional funding from the Treasury in order to pursue this investigation and referred to it in keynote speeches as one of its major investigations.
NOVEMBER
FCA Financial Crime Survey
On 13 November 2018, the FCA published its first industrywide review of the risks facing the financial sector. The report is based on data from 2,000 UK-based banks and building societies over a one-year period providing insight into how they are responding to financial crime risks.
The financial services industry is putting significant resources into preventing financial crime and reporting concerns internally to Money Laundering Reporting Officers (MLRO) and externally to the National Crime Agency (NCA). The data demonstrates that in the period covered, 363,000 cases of suspicious activity were reported to the NCA by MLROs. In the same period, law-enforcement agencies submitted 123,000 investigative orders under the Proceeds of Crime Act seeking information about these financial institutions' customers.
The review identifies cyber crime and fraud enabled by new technology as the greatest threats. Examples include: vishing (using the telephone in an attempt to deceive the user into surrendering private information); malware-enabled fraud (software used to collect information or data); phishing (fraudulently obtaining sensitive information such as usernames, passwords and banking details by sending disguised emails); and hacking.
The review's list of high-risk countries provides no real surprises. Iran, Panama, Russia, Iraq, and Laos make up the top five (largely, no doubt, in relation to sanctions risks), with countries in the Middle East and Africa making up the majority of the remainder at the top of the list. Interestingly, whilst countries considered "offshore" (e.g., Jersey and Guernsey) are featured in the list of 228, they are low-risk because, whilst they facilitate transactions for many businesses and individuals through their generous tax regimes, they have developed very effective anti-money laundering laws and regulations to mitigate the associated risks.
House of Lords Select Committee on the Bribery Act 2010
As reported in our October Enforcement Update, the House of Lords Select Committee on the Bribery Act 2010 was formed in May 2018 to consider the effectiveness of the Bribery Act— whether it has led to stricter prosecution of corruption, a higher conviction rate and a reduction in offending. The Committee recently heard evidence from interested parties including law-enforcement agencies, defence lawyers, anti-corruption trade associations and global companies.
On 13 November 2018, Sir Brian Leveson, President of the Queen's Bench Division, who has presided over the judicial approval of all four of the UK's deferred prosecution agreements (DPAs) to date, shed light on what "adequate procedures" under the Bribery Act should be. Sir Brian supported the suggestion made by a committee member that in court, adequacy could be construed in light of what was "reasonable in all the circumstances." If this view is taken on more widely by the judiciary, greater clarity would be provided to businesses than has so far been provided by the SFO or in the legislation itself.
On the same day, the Committee heard from representatives of the SFO, the Director of Public Prosecutions and the NCA. SFO Director Lisa Osofsky, supported an extension of the "failure to prevent bribery" offence to other kinds of economic crimes. Sir Brian noted that this extension could be in the public interest, enabling UK law enforcement to take a more robust, far-reaching approach to tackling economic crime.
In a further evidence session on 11 December 2018, Iskander Fernandez, a lawyer who represented Skansen Interiors Limited in the first contested "failure to prevent" trial, a prosecution which he described as "bizarre," given the company's level of cooperation and self-reporting. His evidence focussed on what companies (particularly SMEs) can do to ensure they have the right procedures in place, stressing the importance of having a "bespoke" policy in place to cover red flags, rather than "a blanket policy from the internet" which could fail properly to meet the requirements of adequate procedures.
The Committee is expected to report its findings by 31 March 2019.
Law Commission Review of UK Confiscation Regime
The Law Commission is reviewing the confiscation regime as it currently stands under Part 2 of the Proceeds of Crime Act 2002, with its consultation paper due in September 2019.
Law Commissioner Professor David Ormerod QC noted in a public statement about the review:
"The Law Commission welcomes the opportunity to review this area of the law and we are asking all those with expertise and experience of the confiscation regime to provide us with evidence, examples and ideas to inform the project. What we hear will inform our options for law reform, to be published in a consultation paper next year."
In its first year, the project will review the current legislative regime and will be open to input from practitioners, academics and experts. The review will not, however, touch on the recovery of criminal assets under the civil regime, leading some to criticise that the review will fail to offer an efficient proposal to connect the currently separate parts of the confiscation regime, for example by combining the civil and criminal parts of the system.
Société Générale: $1.4 Billion Settlement with US Authorities over Sanctions Violations
In November 2018, Société Générale Group (SocGen) agreed to pay a $1.4 billion settlement to US authorities over sanctions violations related to Cuba in 2015. The penalty combines with a three-year DPA in which the bank will not be prosecuted if it abides by the terms of the agreement. SocGen has taken several steps to ensure compliance such as hiring an independent consultant to evaluate the bank's enhancement implementations in its sanctions compliance programme. An additional penalty of $95 million has been agreed over separate violations of regulations related to the bank's New York branch.
In a statement by Chief Executive Frederic Oudea, SocGen admitted "shortcomings that were identified in these settlements," and noted that the company has "cooperated with the US Authorities to resolve these matters."
The penalties are for approximately $13 billion of transactions that violated US sanctions between 2004 and 2010. SocGen conducted these transactions between clients in Iran, Cuba and Sudan. Prosecutors alleged that oil transactions between a Dutch commodities trading firm and a Cuban company with a state monopoly on the production and refining of Cuban crude oil were deliberately masked under inaccurate payments to hide the Cuban nexus of dollar transactions.
Companies House: Surge in SARs Sent to the NCA
The NCA has seen a five-fold increase in Suspicious Activity Reports (SARs) in the last financial year. A Freedom of Information Act request lodged by UK NGO Corruption Watch has shown an increase from 426 reports in the financial year 2016–17, to 2,264 received by the UK National Crime Agency from Companies House in 2017–18.
A spokesperson for Companies House said that "Companies House works closely with law enforcement bodies to identify suspicious and potentially criminal activities and, where necessary, information is shared with law enforcement partners."
Roger Hamilton-Martin of Corruption Watch, however, believes that "concerns remain over the integrity of the UK company register given the lack of verification by Companies House of beneficial ownership information." Duncan Hames, of Transparency International UK, also commented that "more needs to be done to hold those accountable for facilitating these crimes."
UK limited partnerships have felt the pressure of criticism as they have often been used to hide shell companies and have regularly been caught in money-laundering scandals, the most recent of which concerned Danske Bank. In September 2018, the bank identified 177 UK-registered customers who may have laundered money through its Estonian branch between 2007–2016 [see next item].
In the past year, 922,544 transactions reported to the NCA as SARs were identified as warranting further investigation. The bulk of SARs received by the NCA are submitted from financial institutions with more than two million currently in its database.
Danske Bank: Charged by Danish Prosecutors in Ongoing ML Investigation
On 28 November 2018, the Danish State Prosecutor for Serious Economic and International Crime (SØIK) announced that Danske Bank A/S was to be preliminarily charged with offences contrary to the Danish Anti-Money Laundering Act on four counts all relating to the bank's Estonian branch covering the period from 1 February 2007 to the end of January 2016. The company's statement following the charging decision noted that it expected the preliminary charges after it presented its preliminary findings to SØIK in September 2018.
The suspected money laundering is understood to exceed $200 billion. However, it is possible that any penalty that results from the conclusion of the SØIK investigation may be of limited significance when compared to the damage already caused to the bank and the risk that other international law enforcement investigations and prosecutions may follow (particularly if this were to involve US prosecutions). The recent significant seven-fold increase in Danish sentencing tariffs for money laundering offences will likely not apply to the Danske Bank case as these increases took effect after the conduct in question occurred.
FH Bertling: Conclusion of Trial in Corruption Investigation
The SFO's investigation into FH Bertling Ltd., which started in September 2014, has concluded following the conviction at trial of three former company executives for bribery offences.
The case concerned the payment on FH Bertling's behalf of over £350,000 in bribes and facilitation payments to ensure that its bid for the ConocoPhillips'Jasmine' shipping contract was successful, as well as to obtain assurances that inflated prices it would charge for other services (said to be worth over £16 million) would be approved by the oil company.
A separate investigation into the company revealed that between January 2004 and December 2006, senior executives had conspired to pay bribes to an agent for the Angolan state oil company to secure shipping contracts worth around $21 million.
The SFO confirmed that across both investigations a total of nine convictions (either through guilty pleas or convictions after trial) were secured, including for the company itself. The SFO's Director commented: "Bribery has no place in business in Britain or abroad. It undermines the rule of law, distorts our economy and damages the reputation of the UK."
On 11 January 2019 the three former Bertling executives, together with one ConocoPhillips executive, were sentenced to terms of imprisonment of between six months and two years, all of which were suspended and will not take effect for two years, provided no further offences are committed.
Standard Bank: Conclusion of UK's First Deferred Prosecution Agreement
On 30 November 2018, the SFO announced the successful completion of the UK's first DPA, approved exactly three years previous, as discussed in our February 2016 Enforcement Update.
The agreement concerned charges against Standard Bank PLC that, contrary to Section 7 Bribery Act 2010, it had failed to prevent persons associated with it from committing bribery. Not only was this the SFO's first use of a DPA, it was the first charge for that offence.
Financial orders met by the bank under the DPA included a fine of $16.8m; $8.4 million in disgorgement of profits (passed to the UK Treasury); $6 million in compensation plus over $1 million interest to be paid to the Government of Tanzania; and £330,000 in costs to the SFO.
The bank was required to cooperate with the SFO by disclosing information and material relating to the activities of individuals involved. The bank also implemented an improved corporate compliance programme including a PwC review of its anti-bribery and corruption procedures. PwC was required to implement any recommendations and report to the SFO.
DECEMBER
Financial Action Task Force: Evaluation of UK's Anti-Money Laundering Measures
The Financial Action Task Force (FATF) founded by the G7 exists to develop policies to combat money laundering and terrorist financing. On 7 December 2018, FATF published a report on the UK's anti-money laundering and counter-terrorist financing measures as of March 2018, noting there was a "well-developed and robust regime to effectively combat money laundering."
As a major global financial centre and the world's largest centre for cross-border banking, the UK risks being used as a destination to launder the proceeds of crime. Despite this, the report found that the Anti-Money Laundering system is effective, particularly: "in the areas of investigation and prosecution of ML/TF [Money Laundering and Terrorist Financing], confiscation, the implementation of targeted financial sanctions related to terrorism and proliferation, protecting the nonprofit sector from terrorist abuse, understanding the ML/TF risks facing the country, preventing misuse of legal structures and co-operating domestically and internationally to address them."
Areas requiring improvement include the resourcing of the Financial Intelligence Unit (FIU) (based in the NCA) and the SAR regime. Despite concerns raised about the lack of available resources over a decade ago in the UK's previous FATF mutual evaluation, the issue persists. FATF stated they are not convinced that other law enforcement agencies fill the gaps left by the FIU and that the FIU's more limited role impacts on the sharing of information with foreign FIUs. In relation to the SAR regime, FATF suggested an overhaul due to under-reporting of suspicious transactions by trust company providers, lawyers and accountants. Moreover, the SAR regime's reporting mechanism requires modernising to ensure that SARs are effectively screened and checked against multiple databases, this is linked to the issue of resourcing. As well as additional human resources, the NCA needs to ensure that the best analytical software is available to detect and prevent money laundering.
Alstom: SFO Prosecutions
On 19 December 2018, Nicholas Reynolds, former Global Sales Director for the Boiler Retrofits Unit of Alstom Power Ltd. (a subsidiary of Alstom SA), was convicted of conspiracy to corrupt, concluding the investigation and prosecution of Alstom companies.
Reynolds and two other individuals—John Venskus and Göran Wikström, both of whom pleaded guilty—and Alstom Power (which also pleaded guilty) were convicted of conspiracy to corrupt in relation to bribing Lithuanian politicians and officials in a Lithuanian power station in order to win two contracts worth €240 million. Venskus and Wikström received custodial sentences and Alstom Power was ordered to pay £18,038,000.
On 10 April 2018, Alstom Network UK Ltd. was found guilty of conspiracy to corrupt in relation to making corrupt payments to win contracts in Tunisia, but is yet to be sentenced. The company and two individuals were acquitted of similar charges in relation to contracts in India and Poland, and the company and three individuals were acquitted of a similar charge in relation to a contract for the Budapest Metro.
It was a difficult period for the Alstom group, with adverse findings and financial penalties for corruption in the UK, US and Switzerland. Despite this, the company reported revenues of €8 billion in 2017 and shareholders approved a merger with Siemens in early 2018.
Tesco: Acquittal of Defendants in Fraud Trial
As a result of an investigation into accounting irregularities, Tesco elected to enter into a DPA with the SFO in May 2017 and paid a penalty of £129m. However, the SFO has now failed to secure convictions against two key senior executives after the trial judge dismissed the prosecution's case for being "too weak" to be placed before a jury.
In 2014, the UK retailer announced it had overstated its profit by £250 million "due to the accelerated recognition of commercial income and delayed accrual of costs," leaving a deficit in its accounts.
The SFO's case against the defendants—former UK managing director Chris Bush and ex-UK food commercial director John Scouler—concerned a claim that income was "pulled forward" into one financial period, treating future income as current. Both men were each alleged to have been aware of the illegality of this technique, and to have encouraged its use with the intention of misleading the market. Both were charged with fraud by abuse of position, contrary to Sections 1 and 4 Fraud Act 2006; and false accounting, contrary to Section 17 Theft Act 1968.
The re-trial at the Crown Court at Southwark (an earlier trial being halted due to the serious illness of a co-accused) collapsed after the trial judge, Sir John Royce, ruled that the prosecution case lacked sufficient evidence to show that the defendants knew of the fraudulent accounting. There was, therefore, no legal case for either defendant to answer. The SFO sought to overturn the ruling by exercising the ability to request the Court of Appeal Criminal Division to reconsider rulings that would otherwise terminate criminal proceedings. However, that court refused the SFO leave to appeal and the jury were directed to acquit both defendants.
What is significant about this case is that the SFO lost a submission of no case to answer at the half-time stage of the trial, raising serious concerns about the charging decisions taken against these defendants, and the ensuing flaws that were highlighted by their legal teams in the manner that the prosecution was pursued. Despite the SFO's failure to adduce sufficient evidence at trial to support a fundamental element of the offences charged—knowledge of the alleged offence—it is still considering whether to re-try a third former director, who faces the same charges.
This trial was the first example of a trial of individuals following a DPA approved by the SFO. Companies that agree to DPAs following an investigation have to consider whether they can accept that there was criminal wrongdoing within their organisation. Following the high-profile failure of this trial, there exists uncertainty as to whether convictions against individuals will necessarily follow SFO-approved DPAs (and as to whether the SFO could in fact prove the criminal charges on which DPAs are formulated), which could weaken the SFO's hand in seeking to encourage companies to enter into future DPAs.
House of Commons Select Committee Seizes Evidence Despite US Court Seal
Pressure on Facebook's executives remains high following the Cambridge Analytica scandal. In a bid further to investigate Facebook's data and privacy controls, Damian Collins MP, Chair of the Digital, Culture, Media and Sport Committee, invoked parliamentary powers conferred on the committee to seize material that is understood to contain confidential internal communications between Facebook executives.
The documents were demanded from the founder of a US software company, Six4Three, who was in the UK at the time, and was compelled to comply with the demand.
Whilst the ability for parliamentary committees to demand and obtain material from third parties is by no means a new power, the exercise of this power by serving a demand on an executive visiting from another country is more novel. Standing Orders permit committees such as this to require the attendance of, or the production of documents from, persons in the UK (companies or private individuals), provided the information sought is relevant to the work of the committee. Rules governing parliamentary privilege mean that witnesses so summoned have immunity from civil or criminal proceedings based on evidence they provide, whether orally or in writing.
This case is novel because the materials obtained by the committee are subject to a preservation seal from the San Mateo Superior Court in the US (where Six4Three and Facebook are involved in litigation), making them publicly unavailable and subject to restricted disclosure. The court has reportedly invited submissions from the litigants as to how the actions of the committee may raise important constitutional issues in the US.
Companies who may find themselves within the sights of parliamentary committees should consider carefully what material is brought to the UK by executives because once material is within the UK, a parliamentary committee may seek its production. Even overseas courts' orders are unlikely to prevent the revelation of material of interest to parliament.
GENERAL
Corporate Criminal Liability under the Trump Administration
Government data and interviews with federal officials show that the number of corporates prosecuted for white-collar criminal offences in the US has generally decreased since Barak Obama's presidency. From the second half of the Obama administration, there was also a sharp decline in financial penalties enforced against banks and large corporations.
Three large corporations—Walmart, Barclays and RBS—were faced with high demands in order to resolve investigations during the final months of the Obama administration: federal officials demanded that Walmart pay nearly $1 billion and plead guilty in the foreign bribery investigation; Barclays was demanded to pay nearly $7 billion to settle claims that it sold toxic mortgage investments that helped fuel the 2008 financial crisis; and RBS was investigated over its role in the crisis. Since Trump's presidency, the Department of Justice (DOJ) reached a settlement agreement of $2 billion with Barclays, RBS escaped criminal charge, and Walmart is yet to be charged.
Under the enforcement of the US Securities and Exchange Commission (SEC) and the DOJ, experts found that since Obama's administration, there has been a 62 percent decrease in SEC penalties imposed and illicit profits recovered and a 72 percent decline in DOJ corporate penalties.
SEC enforcement officers state that the agency should not be judged according to financial penalties alone, but by the impact of high-profile cases it has tackled in the past year, which they claim compares favourably to any period in the commission's history. In addition, the statistics must be considered against the overall improving stock market, and the fact that since the financial crisis, industries have increased their compliance procedures. That said, Trump's more sympathetic stance towards corporate misfeasance reflects the administration's deregulatory agenda that has been pursued throughout the federal government.
Lisa Osofsky's Tenure as SFO Director to Date
Lisa Osofsky's tenure as SFO Director o began on 28 August 2018. Amidst high-profile trials, a high turnover of SFO staff and the impending uncertainties of Brexit, Osofsky is now three months into her new role and remains committed to "making sure that the UK is a high risk place for the world's most sophisticated criminals to operate."
Osofsky delivered the keynote address at the 35th International Conference on the Foreign Corrupt Practices Act (FCPA) in Washington, DC. Based on themes which aligned with the plans set out during her introductory speech in September 2018, she prioritised:
Collaboration Across the International Law-Enforcement Community
The SFO's bribery and corruption cases overwhelmingly involve the conduct of foreign participants, highlighting why international cooperation is essential when investigating and prosecuting these cases. Osofsky's commitment to prosecuting large-scale money laundering on a global level is likely to involve intelligence-sharing both domestically, between the UK's governmental bodies, and internationally.
Osofsky noted that a DOJ prosecutor is currently working at the SFO and, whilst he is "learning our British ways," he is also teaching UK prosecutors the DOJ's ways. However, the perception remains that Osofsky will lead the SFO with American methods.
Company Cooperation
Osofsky's role so far has required consideration of the SFO's approach to, and implementation of, DPAs. She has strongly encouraged the cooperation of companies under investigation and the adoption of compliance and reform measures.
Offering practical advice on what the SFO expects when it refers to cooperation, Osofsky said that companies should "tell me something I don't know," and make the path to admissible evidence easier through:
- Making witnesses available (promptly);
- Pointing the SFO to the "hot documents"—evidence that is most important, both inculpatory and exculpatory;
- Making the evidence available in a way that comports with our laws;
- Making the evidence available in a way that is useful and enables the SFO to test and probe the facts; and
- Avoiding actions that create proof issues or create procedural barriers.
Osofsky maintained the SFO's dicta that, following an internal investigation, corporates seeking to claim privilege over first-witness accounts were unlikely to be considered "cooperative." Corporates will have to consider how to balance disclosure of the outcome of their investigation, alongside the fact that they may later be required to disclose this in court against one of their employees to ensure a fair trial.
Osofsky also noted that, with the intention of accelerating the current pace of investigations, the SFO is investing in technology that would:
- Help to get to the hugely varied ways that criminals now converse;
- Lead more quickly to both inculpatory and exculpatory documents; and
- Help to meet the SFO's disclosure obligations in criminal trials in the UK.
More recently, Osofsky confirmed that she would welcome additional laws, akin to corporate manslaughter, to enable the agency to pursue the "corporate big boys," whom she believes the SFO's current legal armoury allows to escape prosecution for fraud and corruption, resulting only in prosecution of the "middle managers" rather than the "controlling minds."
It may still be premature to assess Osofsky's leadership style so far and predict her future impact as a senior UK prosecutor: she has dealt in recent months with results from charging decisions for which she was not responsible. However, she has given a clear indication of the direction in which she hopes to steer the SFO, and in the forthcoming year it can be expected that she will seek to stamp her mark on the way that the agency operates.
© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.
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