The UK’s Serious Fraud Office (SFO) recently released its 2021-2022 Annual Report. The report highlights major successes for the SFO along with key challenges the prosecutor needs to tackle going forward.
A recap of the figures
The report reveals the SFO had opened 43 new cases into serious fraud, bribery, and corruption in the 12 months to the date of the report, with the current active caseload standing at 130 cases. The agency had noteworthy success with regards to confiscation orders, which increased by 134% to £105.5million in 2021-2022, recovering nearly twice as much as its core budget of approximately £56million. The SFO also commented on the length of its typical investigation, which currently stands around 4 years or 1460 days.
Notable high-profile resolutions concerning bribery offences were detailed. The SFO continues to seek Deferred Prosecution Agreements (“DPAs”) from corporates subject to investigation, a tool that enables the corporate to avoid prosecution, typically in exchange for full cooperation with the SFO in the course of its investigation, payment of a material financial penalty and a commitment from the corporate to thoroughly remediate and address any underlying compliance weaknesses.
The SFO entered into three DPAs in the period, bringing the total resolutions of this type to 12 since it first wielded the tool in 2015 in the case of Standard Bank PLC. U.S. authorities have used DPAs in cases of regulatory breaches for several years, resulting in huge corporate settlements such as a total of $1.92 billion collected through individual settlements with Ericsson and JP Morgan in 2019 and 2020 respectively, and a steady inflow of cash which has been used to fund agencies such as the SEC and DOJ, whose resources dwarf those of other regulators and cement the U.S. as the leading enforcer of bribery and corruption globally.
The SFO has made a £1.7 billion contribution to the exchequer from its settlements since the introduction of DPAs in 2014. This represents 3.9 times the agency’s cost to the taxpayer in the last four financial years but contrary to the position in the U.S., the recoveries are not used to fund an increased budget for the SFO. Given the relative success of the DPA model and the challenges faced by the SFO in relation to funding this creates a strong case for investment and an increase into the SFO’s budget.
The SFO also obtained two guilty pleas for bribery offences by GPT Special Project Management Ltd and Petrofac Ltd. The latter came four years after an independent internal investigation commissioned by Petrofac concluded it found no evidence of any payment of bribes. This case marked the largest ever Bribery Act 2010 corporate conviction for a corporation, defying the criticism that prosecutions under Section 7 were reserved for small companies and less complex cases of corruption.
The SFO has faced a number of challenges over the last 12 months, played out in the public domain. Last year saw the closure of a number of high-profile cases without charges being brought. The civil claim against the organization by ENRC continues to consume resources.
Procedural issues emerged in the R v Woods and Marshall (Serco) and Unaoil cases. Simultaneously with the publication of the annual report, came the release of independent reviews by Brian Altman QC and Sir David Calvert-Smith into these two cases, with the common denominator between the two being disclosure failings. The judges also highlighted a lack of appropriate resourcing and technology which had contributed to the issues relating to disclosure.
These conclusions further strengthen the case for additional support and investment into the organization.
Looking to the future
The SFO’s annual report highlights it future plans for its 2022-2025 Strategy. These include a goal to reduce the average and median length of investigations to 3 years and deliver at least one successful outcome in over 80% of its cases and a 60% conviction rate of defendants (both corporates and individuals). Additionally, the SFO commented that implementing recommendations from the independent reviews will be a “pressing priority.”
If the SFO is to be successful in fulfilling its mission effectively, focus and investment are needed at pace in the following two areas:
The agency has reflected that one its key challenges is managing the increasing complexity and volume of data across all its cases. The SFO’s major achievements in the technology space in 2021-2022 included the delivery of IT system improvements to support cross-location hybrid working and automation of its data processing pipeline alongside “initial scoping” for advanced data technologies such as AI and Machine Learning.
The ground-breaking DPA settlement with Rolls-Royce in 2017 featured the use of advanced analytics and machine learning platform, OpenText Axcelerate, assisting the SFO to rapidly review over 30 million documents for legal privilege. Such investigative techniques are constantly evolving with more advanced technologies emerging continuously. The legal teams supporting defendants will almost certainly utilize sophisticated review platforms and analytics, placing the SFO at a disadvantage unless supported to procure similar products. This is particularly true as communication methods have changed markedly in recent years, with email becoming less relevant in investigations with offline communications on platforms such as WhatsApp, WeChat, Telegram, and Signal and technology tools to tackle these apps need to be constantly updated.
To transform its investigation capabilities and increase efficiency, the SFO will be required to focus on investing in advanced data analytics capabilities and artificial intelligence. These could then be used in its investigations to help tackle the challenges brought by vast amounts of digital content.
Skills and resources
The annual report is quiet regarding the SFO’s future strategy with regards to attracting and retaining talent with the appropriate skills needed to investigate complex financial crime. The independent reviews reference the need for the SFO to ensure it recruits people with sufficient technical skills and provides regular training in areas such as technology, data management, and disclosure law and guidance.
Interestingly, the SFO recently announced it was outsourcing the disclosure process for the prosecution case against G4S to an e-disclosure specialist, indicating that the SFO is determined to get the disclosure process right.
The new year for the SFO has started well. It obtained a conviction against Glencore on multiple counts of bribery and has a record number of trials planned to begin in 2022-2023. It also secured the convictions of the two company directors behind fraudulent green investment schemes in Brazil, which took in approximately £37 million of investments. The SFO will need to be determined going forward and respond to the challenges raised in the recent reviews, but it has made a promising start to the new year.