For any organisation, whether small, medium, large, or global, being on the receiving end of an accusation of serious fraud can have considerable implications. Not least, the reputational damage of being wrongfully linked with an SFO investigation has the potential to negatively impact share prices and revenue.
Take the recent case of British American Tobacco (BAT) which was featured in a recent BBC Panorama programme and underwent an investigation by the Serious Fraud Office (SFO) following accusations of market rigging in South Africa. It was alleged that BAT paid large sums of money to private security services in the country to carry out surveillance on rival companies and bribed government officials in Zimbabwe. Following an extensive SFO investigation, which started in 2017, the case was dropped in January 2021 after they concluded, “The evidence, in this case, did not meet the evidential test for prosecution as defined in the Code for Crown Prosecutors”. In response, BAT stated, “BAT is pleased that the SFO has closed its investigation and that the SFO is taking no further action in respect of this matter. BAT remains committed to the highest standards in the conduct of its business”. In this article, we will explain the powers of the SFO and what is meant by a Deferred Prosecution Agreement (DPA).
What are the powers of the SFO?
Being informed that your organisation is going to be investigated for alleged fraud can be deeply distressing. It may conjure up thoughts of dawn raids and invasive investigation techniques to find supporting evidence of fraud. For those unfamiliar with the SFO, they are an independent department of the UK government whose role, according to section 1 of the Criminal Justice Act 1987 (CJA 1987), is to investigate and, where necessary, prosecute large fraud and corruption cases. Because they are a relatively small government department (with roughly 300 staff), they typically only take on a limited number of cases each year. The SFO look at two types of cases; serious and complex fraud cases and bribery and corruption cases.
As laid out in CJA 1987, the SFO has statutory powers requiring those suspected of fraud to produce documents, cooperate with requests for interviews, and obtain search warrants. Beyond their statutory powers, they have general investigative powers and can carry out surveillance in accordance with the Regulation of Investigatory Powers Act 2000. They do not, however, have the power to arrest or detain (this would be done in conjunction with the police if needed).
How is an SFO investigation carried out?
As in the case of the BAT investigation, SFO investigations take on average around five years to complete. After referral to the SFO, the investigative process involves several stages, including
- Gathering intelligence – this is completed by a specialist SFO intelligence team. This intelligence will be assessed and a decision made as to whether the case should be subject to a formal criminal investigation
- Multi-disciplinary investigation team created – An SFO case controller will put together a multi-disciplinary case team to look at various aspects of the alleged fraud
- International assistance – Where necessary, the SFO’s international assistance team will be involved to deal directly with overseas courts and prosecutors
- Gathering documents and information – Documents will be obtained and witnesses interviewed
- Assets – Assets may be restrained in some cases
- Prosecution decision – having completed the above stages, the case controller will review the information available and decide if there is a sufficient legal basis to proceed with prosecution.
On what basis will the SFO decide to proceed with a prosecution?
The SFO has to weigh up several factors when deciding whether to proceed. According to the Code for Crown Prosecutors, they need to a) take into account the seriousness of the offending, b) ensure the court has sufficient sentencing powers, and c) present the case clearly and concisely. Most importantly, in order for a case to proceed to prosecution, it must pass the evidential test. BAT’s case failed the evidential test and hence was closed. The evidential test can only be passed where there is enough evidence to realistically lead to a conviction. As such, even if there is evidence of fraud, this may still not be sufficient.
According to the Code for Crown Prosecutors, there must be sufficient evidence that “an objective, impartial and reasonable jury or bench of magistrates or judge hearing a case alone, properly directed and acting in accordance with the law, is more likely than not to convict the defendant of the charge alleged”.
Even if the evidential test is passed, the case must still go through the ‘public interest’ test. This includes consideration of:
- The seriousness of the offence
- The level of culpability of the suspect
- The harm to the victim
- The age and maturity of the suspect
- The impact on the community
- Whether prosecution is proportionate to the offence
- Whether certain information requires protection
There are several gateways which the SFO must pass in order for a case to eventually result in criminal prosecution, and hence why many cases are closed before reaching court.
For any organisation or individual facing a potential SFO investigation, it is essential to act without delay and secure the services of a legal team who will seek to confidentially resolve the matter as early in the process as possible. Options such as Deferred Prosecution Agreements (DPAs) may be recommended where appropriate as a means to bringing investigations to a close and avoiding serious consequences. We will cover DPAs in more detail in our next article.
If you are facing investigation or prosecution for alleged fraud, our Criminal Law Barristers and Solicitors can help. You can reach us through our contact page here.