This article was co-authored by Megan Atkins, Legal Assistant, London.
Building on the recently enacted Economic Crime (Transparency and Enforcement) Act, which we previously discussed, the Economic Crime and Corporate Transparency Bill (Bill) was announced to Parliament for the first time on 22 September 2022, further signalling the UK’s attack on economic crime and its attempt at improving transparency over corporate entities.
A raft of measures, which have received a lot of air time, principally focussing on the reform to Companies House, are being considered, which, if enacted, will, the government states, “bear down further on kleptocrats, criminals … who abuse [the UK’s] financial system”.
Here, we focus on the proposal that will allow the Serious Fraud Office (SFO) to compel suspected criminals and institutions to disclose information linked to a suspected crime at the pre-investigative stage of a case, which has snuck in under the radar.
The SFO’s investigative powers, which were introduced by s.2 of the Criminal Justice Act 1987 (CJA) can be used to compel individuals and companies to provide information as part of its investigation. However, s.2 powers could only initially be used following a decision by the SFO Director to commence an investigation where there were reasonable grounds to suspect that a crime had taken place.
In acknowledging the difficulty that the SFO had in effectively pursuing cases involving international bribery and corruption, in 2008, the SFO’s s.2 powers were extended to allow them to be used at the pre-investigative stage of such investigations.
S.2A was introduced (as amended by the Bribery Act 2010) to give the SFO powers to compel individuals and companies to disclose information at the pre-investigative stage.
With crimes in the SFO’s remit evolving and becoming increasingly domestic in nature, its current s.2A powers have become a hindrance; preventing the agency from gathering information before an investigation has officially commenced unless that investigation relates to cases of suspected fraud or international bribery and corruption.
What’s being proposed?
The government is proposing a further expansion to the s.2A investigative powers to all SFO cases. The government states that the effect of the proposed amendment in the Bill will remove the limits that the SFO is presently working under, and, it is suggested, will accelerate the process for gathering information at an earlier point in the SFO’s investigations. This, in turn, will enable the SFO to commence inquiries more swiftly and freeze proceeds of crime quicker. In addition, the fact sheet to the Bill notes that the amendment will help the SFO in its mission to “protect the UK’s reputation as a safe place to do business”.
The suggested effect of the proposed expansion will (i) give the SFO early access to information and evidence held by individuals and/or companies (ii) expedite the early stages of an investigation (iii) ensure that the proceeds of crime are identified far quicker than they currently are and (iv) guard against fraud investigations coming to a close in advance of the case being formally accepted by the SFO because those cases do not meet the reasonable grounds to suspect criteria.
Although it can be argued that the limits to the SFO’s ability to do the job it was tasked with under the Roskill model should have been foreseen, these new proposed powers are not earth shattering. It is a surprise that it has taken this long to make the change given that corporate fraud was estimated to cost the UK over £11 billion a year during that period.
However, further arming the SFO does not appear to be the immediate issue. It is the effective and diligent use of existing and proposed powers that the SFO appears to/may struggle with. A quick search of its highs and lows will reveal that lows appear to outweigh the highs because of a common culture issue within the agency. The lack of assurance, limited resources, lack of guidance and (alarmingly) a toxic internal culture of distrust that was pointed to in recent reviews of the SFO’s handling of two cases will not go away by merely legislating for more powers. What appear to be deep rooted problems will have to be tackled by the SFO before it can fully utilise what it already has (and will have) in its armoury.
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