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09 Sep 2016

Kim Potts interviewed re recent SFO policies and trends in Lexis PSL

Examining the SFO’s recent policies and trends

Corporate Crime analysis: Kim Potts, associate at Corker Binning, examines some of the recent Freedom of Information (FOI) responses published by the Serious Fraud Office (SFO) and provides insights into policies and trends that can be extrapolated.

Original news

SFO publishes responses to FOI requests, LNB News 18/08/2016 176

SFO has published a number of responses FOI requests covering areas including restraint and confiscation, investigations, and cost

What is your reaction to the SFO FOI responses published in August?

These FOI responses do not contain any real surprises in terms of the SFO’s focus and ongoing work. 12 criminal investigations were opened in 2015/16 compared to 16 in 2014/15. This small decline in new investigations is not surprising, given the last few years have been dominated by large investigations, such as LIBOR, and so a considerable amount of the SFO’s time will have been dedicated to those investigations, which have now largely concluded. While the figures for 2015/16 are lower than the previous year, it is not substantial enough to reflect any lack of willingness on the SFO’s part to pursue new criminal investigations (evidenced very recently by the opening of a new criminal investigation into Airbus).

What do they indicate about SFO investigations, prosecution, asset recovery and compensation policies?

The FOI responses firstly show that the SFO remains committed to pursuing criminal investigations shown both by the number of new investigations opened in 2015/16 and the increasing number of interviews conducted under caution (a rise from 75 to 84). The number of Bribery Act 2010 prosecutions remains relatively low—only five individuals having been charged in total. Bribery cases against corporates are also very low. This reflects the difficulty of bringing such cases. It is plainly too early to comment on the figures regarding Deferred Prosecution Agreements (DPAs).

In relation to asset recovery, one way to preserve assets for recovery at the confiscation stage is to impose restraint orders on suspects. It is however clear from the FOI response that the number of restraint orders applied for by the SFO is very low. For 2015/16, in the context of 12 new criminal investigations commencing (which may each involve multiple suspects), only four restraint orders were applied for. It is also clear that very few orders are applied for at the start of an investigation. While restraint orders should only be applied for where the evidence clearly shows both benefit and a real risk of dissipation of assets, these low figures will be relied upon by those who argue that the restraint/confiscation scheme under the Proceeds of Crime Act 2002 is too cumbersome and needs reform.

In relation to compensating victims, while the figures show that for 2015/16 there were only two compensation orders obtained by the SFO, there was a significant rise in the total sum of payments made to compensate victims from £2,075,093 in 2014/15 to £7,519,179 in 2015/16. This indicates that standalone compensation orders are not being used to compensate victims but that compensation is being catered for through confiscation. Overall, however, the figures show an increasing commitment from the SFO to obtain compensation for the victims of crime.

Can you identify any trends corporate crime practitioners should look out for?

The FOI response concerning interviews is interesting as it shows that the number of interviews conducted by the SFO under section 2 of the Criminal Justice Act 1987, in 2015 rose fairly substantially from the number conducted in 2014 (129 to 177). Section 2 interviews are compelled interviews and they are therefore considered to be a very useful way for the SFO to gather evidence. It is clear from the statistics, which show a healthy rise in the number of these interviews being conducted, that the SFO continues to view them as a useful investigatory tool.

Does the SFO represent good value for money?

The question of the ‘value’ of the SFO is one that has been a source of debate now for many years. The 2015/16 conviction rate (not found in the recent FOI requests but in the SFO’s annual reports), which details the convictions obtained by the SFO, was 31.6%—with 68.4% of defendants being acquitted after trial. This was a significant reduction in convictions achieved by the SFO following cases that went to trial. These figures undoubtedly show that the SFO suffered a significant decrease in 2015/16 in the number of cases it was able to successfully prosecute.

However, the FOI response regarding case costs reveals that the total costs incurred by the SFO to investigate and prosecute recent corporate offenders were actually not that significant. This is undoubtedly due to the fact that corporates often engage with the SFO at early stage with settlement firmly in mind. For example, it cost the SFO £195,960 to investigate and prosecute the Sweett Group, which achieved a fine of £2.25m, and costs were awarded to the SFO of just over £95,000. When you consider the SFO’s ‘value for money’ in this context, it is difficult to suggest that the SFO is wasteful. It no doubt also explains why the SFO is so keen for companies to co-operate through an internal investigation.

Interviewed by Alex Heshmaty

This article was first published on Lexis®PSL Corporate Crime on 1 September 2016. Click for a free trial of Lexis®PSL.

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