An investigation by the Serious Fraud Office (“SFO”) must be treated with the utmost seriousness. The enforcement authority has considerable powers to investigate organisations, including the ability to search your premises and seize documents, as well as conduct interviews under caution. As one of the UK’s most highly-regarded, successful, and busy criminal and regulatory law firms, our Barristers and Solicitors have a wealth of experience in dealing with SFO investigations and prosecutions. The Legal 500 describes us as
“A forward-thinking firm with its finger on the pulse of the market. Head and shoulders above a lot of the competition. Agile and modern.”
Few white-collar crime Barristers and Serious Fraud Solicitors can match our experience, intelligence, and sheer tenacity when it comes to getting results for our clients. We can arrange to attend interviews with you and advise you on search warrants and restraint orders. Furthermore, our team will examine the evidence against you and devise a clear strategy for your defence at an early stage. This is crucial because decisions taken in the first few hours of an SFO investigation can have a significant impact on the ultimate outcome of the case.
Our initial focus is always to avert prosecution; however, sometimes a criminal trial is inevitable. We instruct Counsel considered to be leading in their field where clients face charges to ensure the highest level of representation.
The SFO are one of the few Government agencies in the UK who both investigate and prosecute cases, but they only do so for the most serious or complex of allegations of fraudulent activity. Their investigations can take years to conclude and can involve a series of challenging interviews under caution, the search of your home or business premises and seizure of your possessions. If proceedings are ultimately brought, then the consequences of a conviction can be devastating to you, your business, or both.
Whilst the SFO will look into the company itself, they will also be looking at the role of key individuals who formed part of the company and scrutinise the extent to which knowledge and actions have may have contributed to the corporate wrongdoing. This often takes place in real time, when suspected illegal activity is still ongoing, or has only recently taken place. In many cases however, allegations will only come to light after a significant period has passed, with individuals having moved on to new roles. As memories fade, and access to documents becomes limited, the ability to gather historical information to provide a strong defence is crucial.
If you have been contacted by the SFO in respect of an interview under caution; or if you have received notification of prosecution, contact us now. Our expert team of investigative serious fraud solicitors are adept at digging deep into a case and will utilise a number of key strategies in order to collate the information needed to counter allegations.
Below are some of the most frequent questions we are asked regarding serious fraud, the SFO, and other regulatory bodies that deal with fraud.
What is fraud?
Fraud is where deception and/or false statements are used to gain a dishonest advantage, which is often financial, over another person or organisation. Offences of fraud are wide-ranging and are set out in both legislation and common law (i.e. law made by the Courts through judicial precedent).
The main pieces of legislation that cover fraud are:
- The Fraud Act 2006
- The Theft Act 1968
Three main offences are provided by the Fraud Act 2006, namely:
- Fraud by false representation (section 2). A representation may be express or implied.
- Fraud by not disclosing information where there is a legal duty to disclose it (section 3).
- Fraud by abuse of position (section 4). This applies where a person holds a position in which they are expected to protect the fiscal interests of another person (for example, an Attorney under a Lasting Power of Attorney or a Trustee).
In all the above offences the Prosecution must prove the Defendant acted dishonestly, intending to gain an advantage for themselves (or another) or causing loss to the victim.
The Theft Act contains the offences of:
- False accounting (section 17).
- False statements by company directors (section 19).
Fraud is often referred to as a white-collar crime; however, it can encompass individuals committing benefit fraud through to large scale mortgage fraud perpetrated by international criminal gangs.
The following are some of the common types of white-collar fraud:
- Conspiracy to defraud – this is defined as “to deprive a person dishonestly of something which is his or to which he is or would be or might be entitled” or “by dishonesty to injure some proprietary right” . Conspiracy to defraud is a broad offence and may encompass business practices that although perhaps unethical or immoral, fall outside the realm of criminal or tortious acts. Therefore, it is vital to contact us immediately if you or your organisation is facing allegations of conspiracy to defraud. We will swiftly shut down an investigation based on acts or omissions that the Court would consider to be merely sharp business practices.
- False accounting – involves destroying, defacing, concealing or falsifying account-related documents or produces or makes use of any account, record, or document that to their knowledge is (or maybe) misleading, false or deceptive.
- Fraud by abuse of position – this offence is committed if a person who occupies a position in which they are expected to protect or not act against the best interests of another dishonestly abuses that power with the intention to make a financial gain for themselves or another or cause loss to another or expose them to the risk of loss.
- Fraudulent trading under the Companies Act 2006 – occurs when a director knows (or should have realised) that their company is insolvent but carries on operating, with the intention of defrauding creditors.
- Fraudulent trading under section 9 of the Fraud Act 2006 –normally applies to sole traders who are outside the reach of the fraudulent trading provisions of the Companies Act 2006.
If the level of fraud committed is serious enough, it may result in an SFO investigation.
What is the SFO?
The SFO is one of the few Government agencies in the UK that both investigate and prosecute cases. Focusing on a small number of serious complex fraud, bribery and corruption cases, often with a cross-border element, its investigations take around five years on average to conclude. If you are on the Board or are a senior manager of an organisation subject to an SFO investigation, you may be subjected to a series of challenging interviews under caution, the search of your home and/or business premises and seizure of your possessions.
Whilst the SFO will look into the company itself, they will also examine the role of key individuals who formed part of the company and scrutinise the extent to which their knowledge and actions may have contributed to the corporate wrongdoing. This often takes place in real-time, when suspected illegal activity is still ongoing, or has only recently taken place. However, in many cases, allegations will only become known after a significant period has passed, with individuals having moved on to new roles. As memories fade and access to documents become limited, the ability to gather historical information to provide a strong defence is crucial. Our expert team of investigative lawyers are adept at digging deep into a case and will utilise several key strategies in order to collate the information needed to counter allegations.
How does the SFO decide whether or not to investigate a serious fraud allegation?
In deciding whether to investigate a matter, the Director of the SFO applies a Statement of Principle, which includes consideration of:
- Does the suspected criminality undermine UK PLC commercial or financial interests in general but particularly in the City of London?
- How high is the actual or potential loss?.
- How significant is the actual or potential harm?
- Is there a significant public interest element?
- Does the matter involve a new type of fraud?
The SFO also has a proceeds of crime division and assists overseas jurisdictions with their investigations into serious and complex fraud, bribery, and corruption cases.
What is the process of an SFO referral?
The first step the SFO takes is to analyse the referral it has received. Using the Statement of Principle considerations, the Director will decide whether to launch a formal investigation, refer the matter to another agency, or drop the case completely.
If a decision is made to investigate a case team is assembled which can number between five and eighty people. The team will be headed by a case controller who is normally a Solicitor. A Principle Financial Investigator (PFI) will be appointed to run the investigation. Other specialists such as forensic accountants and Corporate Solicitors may also form part of the case team. Additionally, the SFO has a specialised international support team to manage requests for assistance from overseas investigators and prosecutors. The PFI will also request assistance from overseas agencies several times during a typical investigation.
Usually, SFO investigations involve an enormous amount of evidence being collected and analysed. Investigators use their powers under section 2 of the Criminal Justice Act 1987, which includes the right to search the homes and premises of “the person under investigation or any other person”, seize documents, and conduct interviews under caution.
It is up to the Case Controller to ultimately decide if the evidence gathered provides a realistic prospect of conviction and whether a prosecution would be in the public interest. In making this decision, they will follow the Code for Crown Prosecutors principles.
If there is not enough evidence to launch a prosecution or doing so is deemed not to be in the public interest but criminal property can be identified, the SFO can use its civil recovery powers. If it does so, it will “place in the public domain sufficient information” in order to “demonstrate transparency in its decision making”. Due to the reputational damage such a statement can cause, our Serious Fraud Solicitors will negotiate a confidentiality arrangement with the SFO or provide advice on issuing a company statement at the same time the enforcement agency publishes its report on the civil recovery action taken.
What is a Deferred Prosecution Agreement?
A Deferred Prosecution Agreement (DFA) involves the prosecution of an organisation (individuals cannot enter into a DFA) being immediately suspended so long as the company agrees to specified conditions laid down by the SFO. These conditions could include paying a financial penalty, paying compensation, publicly admitting wrongdoing, putting in place measures to prevent further wrongdoing, and co-operating with future prosecutions of individuals. Prosecution of the company can be resumed if it does not abide by the SFO’s conditions and take actions where required.
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How does the FCA investigate fraud allegations?
The Financial Conduct Authority (FCA) has extensive powers to investigate allegations of fraud in the financial sector. Similar to the SFO, an investigation will always start with a referral which often arises out of the Regulator’s supervisory process.
Upon receipt of a referral, the FCA’s Enforcement and Market Oversight Division will start preparing its case. The first step in this process is the appointment of investigators. Under section 167 of the Financial Services and Markets Act (FSMA) 2000 (general enquiries) and section 165 (3) or (5) (which is concerned with specific breaches), the FCA must send a Notice of Appointment of Investigators. Even if there is no requirement to provide notice, the Regulator will normally do so unless it believes providing notice could prejudice the investigation.
An FCA investigation into fraud may include requests for documents and interviews with those being investigated as well as any witnesses.
Once the investigation is completed, the FCA will send your organisation a Preliminary Findings Letter which will contain an investigation report. These will set out the facts found during the investigation and invite you to confirm the findings or provide further comments. The latter needs to be completed within 28 days, although an extension can be requested.
Upon receipt of your comments or acceptance of the investigator’s findings, the FCA may decide to take no further action or begin enforcement procedures that are likely to involve sanctions such as fines or ongoing supervision. Criminal prosecution can also be brought by the Regulator for offences such as money laundering or fraud.
What is a Section 2 Notice in relation to serious fraud?
Section 2(2) and (3) of the Criminal Justice Act 1987 provides that the Director of the SFO can give written notice requiring a person under investigation or any other person whom the Director has reason to believe has relevant information to:
- answer questions or furnish information, or
- produce documents
concerning any matter relevant to the investigation at a specified place and either at a specified time or forthwith.
Caselaw has determined that ‘forthwith’ means ‘as soon as reasonably possible’ rather than immediately. However, you mustn’t deliberately or unreasonably delay in complying with a Section 2 Notice.
What are Letters of Representation?
Before a formal charge is made, your Serious Fraud Solicitors are permitted to make representation stating whether there is sufficient evidence against the suspect or whether a prosecution is in the public interest. The Code for Crown Prosecutors states that any Prosecuting Authority must consider the aforementioned factors when deciding whether or not to bring a prosecution.
Your Solicitor will disclose their findings to the Prosecuting Authority in a Letter of Representation. Our team’s extensive experience means you can be confident that our Letters of Representation will be highly strategic, taking into consideration the consequences of the representations being unsuccessful and, should you be acquitted at trial, how they can be used when making an application for costs.
How does Directors’ and Officers’ (D&O) liability insurance work?
If an allegation of fraud has been made against you, you have two options available:
- Seek indemnity from the company, or
- Turn to the D&O insurance policy for assistance.
D&O insurance is taken out by a company to protect directors and officers from personal loss resulting from claims made against them concerning the discharge of their duties.
Given the dramatic increase in regulations, the public hunger for corporations to be held to account for wrongdoings, leading to immense pressure on regulation and enforcement agencies to rigorously investigate and if possible prosecute companies and directors, D&O insurance is a vital part of an organisation’s insurance cover portfolio.
If you are facing an investigation or prosecution for serious fraud, please contact our Serious Fraud Solicitors immediately.
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