What Enforcement Actions Can We Expect from the UK's Serious Fraud Office in 2021 and Beyond? (Part 1)
This Advisory is the first in a series on the enforcement landscape in the UK, looking at expected and potential actions from various enforcement agencies. We start this month with a focus on the Serious Fraud Office (SFO), considering how we see the agency framing its work in 2021.
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Retrospection can often be a good indicator of what is to come. However, carrying out a review of enforcement activity in the UK over 2020, given all of its unpredictability, may not allow for a fair assessment of the UK's enforcement activity and what we can expect from our various enforcement bodies going forward. Enforcers have had to contend with the unique challenges that the pandemic presented for all, and we discuss the various activities that have been undertaken and what we consider may happen over 2021 and beyond.
During 2020, and going into 2021, the SFO has been met with both achievement and setback. It secured three Deferred Prosecutions Agreements (DPAs), closed three long-standing investigations, and published guidance on the DPA process and the evaluation of compliance programmes. On the other hand, it faced a slow-down in investigations in the first half of 2020, had certain of its overseas investigatory powers clipped, and discussions to expand the "failure to prevent" offence to all economic crime were shelved. Moreover, the SFO continues to be beset with rumblings of ways to improve its efficiency and value for taxpayers' money. While the question of a merger with the National Crime Agency (NCA) appears to have taken a backseat for the moment, the SFO will be alive to stemming any criticism of its conduct. Against this context, we consider that there will be three key areas of focus for the SFO in 2021 and beyond.
First, we anticipate that the SFO will continue to pursue financial settlements with corporates through DPAs. Having published further guidance on the DPA process in early 2020, followed by the conclusion of three DPAs over the course of the year, the SFO has demonstrated that it has a strong appetite to engage in the DPA process with corporates under investigation where it is appropriate to do so. To this end, the SFO has also now had the opportunity to clarify its expectations of companies hoping to avoid prosecution: early and proactive cooperation with the SFO. Additionally, the SFO issued guidance last year outlining how it evaluated a company's compliance programme in consideration of whether the company would have a defence against a Section 7 Bribery Act 2010 offence of failing to prevent bribery. It made clear that the outcome of its evaluation of such a programme could impact upon the terms of a DPA, reminding companies of the importance of implementing and maintain effective policies and procedures. While plans were abandoned to expand the "failure to prevent" corporate offence to all economic crime, which would have resulted in an overhaul of the compliance landscape across the UK for regulated companies, there is an ongoing review of the UK's approach to corporate criminal liability. The SFO's trajectory so far suggests that corporate cooperation will continue to be on the agenda.
Second, the SFO is likely to increase its cooperation efforts with other agencies, both nationally and internationally, in order to continue to investigate and prosecute complex, multi-jurisdictional economic crime. The SFO has agreements in place with domestic enforcement agencies, including the Competition and Markets Authority, the Financial Services Compensation Scheme and the National Economic Crime Centre (NECC). While it is too early to assess the efficacy of this national multi-agency approach to investigating, it will be important for the SFO to allocate its resources appropriately and continue to investigate with the autonomy and independence with which it is currently mandated.
In respect of international investigations, we wrote about the Supreme Court's decision in the KBR case clarifying the SFO's inability to rely on its legislative powers to conduct overseas investigations. Instead, the SFO must continue to utilise diplomatic channels in order to obtain evidence held abroad by foreign entities. Additionally, the UK is no longer be able to issue or detain individuals pursuant to a European Arrest Warrant and will have to request arrest warrants and extradition through bilateral channels. However, mutual legal assistance arrangements have always been available to the SFO, and with use of tools such as Overseas Production Orders, it will be interesting to see how the SFO will cooperate on a global scale in its fight against economic crime.
Finally, we anticipate that there are new workflows that will be of interest to the SFO. As the UK gets to grips with the pandemic, we expect that the SFO will commence investigations into Covid-19-related misconduct. There has been no shortage of press reporting on the concerns surrounding the government's pandemic procurement procedures, and given the level of public spending, investigations are likely on the horizon. While current matters are being investigated by the NECC, the SFO has said that it anticipates that the more complex and serious offences will fall to it to be investigated. However, given the delays that the SFO has already faced throughout 2020, it is difficult to predict how quickly these investigations will come to light.
Separately, with the announcement in the Budget of eight new freeports around the UK, concerns have been raised that these could lead to increased money laundering risks, in particular bearing in mind the expected timeline for the freeports to be up and running within a year. It seems clear that the SFO should be alive to the risks presented here and, along with the NCA, be prepared for any investigations that may become necessary.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory 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.