At this year’s 4th Annual GIR Live London, Partner David Corker participated as a panel speaker, discussing topics including the Criminal Finances Act and DPAs.
Co-chair Elizabeth Robertson: David Corker is going to begin by talking to us about the Criminal Finances Act.
Corker: A lot of the attention on the Criminal Finances Act is understandably focused on UWOs [Unexplained Wealth Orders] and the new offence of failure to prevent the facilitation of tax evasion, but I think that really misses the point. Those offences will rarely be prosecuted and are there largely for symbolic value, a bit like the offence of failure to report money laundering under the Proceeds of Crime Act – which has never been prosecuted, but which has had a huge effect in changing compliance culture. In terms of litigation, the focus instead is going to be on Section 16 of the Criminal Finances Act, which allows law enforcement to obtain an AFO [asset freezing order] for money held in bank and building society accounts. The reason why this is terribly important is because it’s a massive new source of revenue for the Crown. Basically, in summary, it enables the government to monetise SARs [suspicious activity reports]. There are, as we know, thousands of SARs every year. Section 16 will enable law enforcement to quickly turn SARs into real money because under the provision if there are reasonable grounds to suspect that money held in a UK bank account or bank society is recoverable property, law enforcement can go to any Magistrates Court ex-parte to apply for an order to freeze the money for at least one or two years. Just think about that. And, if the respondent doesn’t oppose it, law enforcement can then make a forfeiture application within two years with no problem because they can say the money in the accounts is recoverable property on the balance of probabilities [the civil proceedings burden of proof] and can obtain the money.
Now why would you bother [as a law enforcement officer] to get a restraint order through the Crown Court anymore when you can get an AFO under section 16? Why would you bother? Just think about it, you haven’t got to prosecute anybody anymore, there’s no need to go for the criminal process of the ancient institution of trial by jury and to prove guilt beyond reasonable doubt. Secondly, and more importantly, a confiscation order obtained through the Crown Court in criminal proceedings is largely confined to the benefit obtained from the criminal scheme, but under this regime [section 16], all of the money is recoverable and the entire balance can be seized. So, again, why bother with expensive litigation in the Crown Court when you get an AFO and thereafter an asset forfeiture order. That’s why I think section 16 is by far, and will be by far, the most important section for litigation in the Criminal Finances Act.
Robertson: I think David and Claire are absolutely right. If you consider that 450,000 SARs were filed last year if only 10% are used to obtain AFOs that’s going to be very significant. Intelligence from SARs are going to be used a lot as a way of putting pressure on people, if nothing else, and in the context of wider law enforcement, as a form of evidence gathering.
Pollard: I may be wrong on this, and David you’ll correct me, but if the amount in an account is £10 million, won’t law enforcement have to show which part of the £10 million is in fact potentially recoverable property?
Corker: Oh yes, they’re civil proceedings. But look at the resources needed to do that on a very large case. I take the point if you have a dodgy oligarch but trying to conduct a forensic exercise on a large sum of money which is sitting in an account is, as we all know, a difficult exercise. Ultimately, it’s lay bench magistrates who are going to have to adjudicate on this so there’s no criminal procedure rules yet around this.
Corker: Mr Green, the SFO’s ex-director can rightly say that he never lost a JR [judicial review] application and he can rightly say that about this one too [R (on the application of AL) v SFO]. But it’s the second occasion in about nine months that the admin court has dismissed the application, but then spent the next 30 pages of judgment, in obiter observations, criticising the SFO without actually saying they’re criticising them. So when two judges in this case take 120 paragraphs in obiter comments about the SFO’s practices, you can be sure it’s a judgment that you ought to carefully read. We absolutely need to be familiar with it. There are tons of issues that they deal with. The only one I’m going to highlight, and there are several I could, is about the third-party disclosure regime. Now the reason why I think the defendants in this case didn’t seek a witness summons against the company is because they believe rightly that the law would mean the material would be inadmissible because the law said you can only get that kind of material from third parties. If it only becomes admissible contingently, for example, because a witness gives a certain answer, which makes it admissible, then you can’t seize it. So that was why the third-party disclosure regime from defendants was very limited, very restrictive. In various paragraphs in the judgment, they sweep this away. They say [the judges] that in the future the defence should have enhanced rights of compulsory disclosure against the parties. What the defence should do in the future is, they should summons the solicitors or the company in this case; demand it themselves.
Corker: And it came up against the wrong judge. To humanise it for a minute, it’s a lesson for all of us, the hapless case controller [SFO case controller Emma Luxton] in this case, her predecessor had died, she took on a case which she obviously didn’t have from the beginning she didn’t see this point coming because she was busy doing other cases. It’s a lesson for all of us, if you take on a case from someone else, this is what can happen.
Corker: Mr Green’s legacy is that he kept the SFO in existence. He batted off two home secretaries, one who became prime minister, who were determined to close it. He succeeded in ensuring its existence.
Corker: Just another recent development last week that was the hearing in the Divisional Court of KBR’s application to set aside a Section 2 notice. The notice required KBR, a US company, to hand over all its emails which are situated in the US. KBR is fighting this and of course the SFO is saying it would hamper investigations if section 2 notices don’t have global effect. There is no judgment yet, but one to watch out for.
Corker: This XYZ case [R (on the application of AL) v SFO] says that first-hand, witness accounts of what witnesses have said are not privileged and that the SFO should always be asking for them.
Corker: The XYZ case [R (on the application of AL) v SFO] says companies can’t have their cake and eat it that if they are going to get a DPA they can’t then not cooperate with the subsequent investigation of individuals. Companies should then basically hand over everything. If they get advantages, which they do under a DPA, they must thereafter fully cooperate. We expect the SFO in future to be far more stiff and demanding in requiring them to cooperate in relation to subsequent investigations.
Polly Sprenger: So, we have an incoming director and among the many noticeable things about her is that she talks like me and not like you [Sprenger is American]. How do you think culturally that’s going to work at the SFO to have a New Yorker running the show?
Corker: I don’t know her and I have not had the honour of meeting her, but I predict that she will introduce some quite big changes. I think based upon her US-led background she’ll be very interested in immunities. This has fallen into disuse really by the SFO in recent months or recent years. She will galvanize that. She will want to do prosecutions with immunities, with witnesses giving evidence. Secondly, because of her racketeering background she will want to use surveillance techniques, including wire taps. She will be really into that kind of idea because of her background. On the other hand, she will be probably very respectful of privilege. She will probably be more respectful of it than Mr Green was because of the US tradition of respecting attorney/client privilege. She will probably be less aggressive there, but she will be more aggressive in what you could call pushing the envelope. She’ll encourage case controllers to go to the edge, to be ready to be more aggressive demanding, to be less British. So in that sense I think she will make quite a lot of changes in terms of the spirit and ethos of the organisation. More like an American DA [District Attorney] as you would expect really.
None of us welcome change but generally, once it’s happened it’s a good thing. I think David Green has brought in a lot of change, but he’s also been there for six years so his speed of change had inevitably slowed down. I think it would be very good to have a new director with a different background, different experience and different ideas to reboot the change.
Corker: Well if I’m right in my analysis of Section 16 [Criminal Finance Act] she’s got a golden opportunity. Asset-freezing orders can be negotiated and we can take half so there’s potentially lots of low hanging fruit I suppose. If she wants to do that in the first couple of years, she’ll have an open season.
Read the full interview in GIR here, behind a paywall.