UK anti-corruption and enforcement update: SFO annual report

Overview

On 22 July 2020, the Serious Fraud Office (SFO) published its annual report for the year ending 31 March 2020 (the Annual Report), which also marks the midpoint of Lisa Osofsky’s second year as Director of the agency. The Annual Report celebrates the huge Airbus DPA, but is perhaps less convincing on the SFO’s response to COVID-19 when the numbers are analysed carefully. Setbacks in high profile trials of individuals and recent judicial criticism of director Lisa Osofsky make it, at best, a mixed year for the SFO.

The 2019/2020 SFO Annual Report

This update explores some points of note from the Annual Report and looks to the future as the SFO navigates the challenges created by the COVID-19 pandemic.

The numbers

The SFO’s 2019/2020 in numbers:

• 13 defendants brought to trial;
• 6 individual defendants charged;
• 3 deferred prosecution agreements (DPAs) (totalling £860m in fines, costs and disgorgement of profits);
• 5 investigations opened;
• 5 investigations closed;
• 65 ongoing investigations;
• 629 section 2 notices issued;
• 21 searches conducted; and
• 345 interviews undertaken.

Casework performance

The highlight of the SFO’s performance over the last year is undoubtedly the €3.6bn Deferred Prosecution Agreement (DPA) with Airbus, agreed in January 2020. This agreement, the “world’s largest ever global resolution of bribery and corruption charges”, was the strongest example seen so far of the SFO’s unified dedication and commitment to working with international agencies, both in the United States and France. For analysis of the Airbus DPA, please see our insights article here.

This record breaking DPA is set against the backdrop of a less successful a year in which the SFO has been criticised for both:

• a series of high profile acquittals of individual defendants charged with offences following investigations into fraud and corruption, including at Gürlap Systems and Sarclad and;
• the length of time that the SFO has continued to take in progressing its current caseload.

These criticisms have added pressure to calls for a top-to-bottom review of how the SFO allocates its resources and decides which cases to charge, in an effort to prevent the use of taxpayer’s money for lengthy trials that end with defendants being cleared of all wrongdoing.

As discussed in our what to look out for in 2020 update, the average SFO case takes 4-5 years to reach a conclusion. However, with a number of cases having been dropped in 2019/2020, including investigations into ABB Ltd, De La Rue Plc, the LIBOR manipulation, Rolls-Royce and GlaxoSmithKline, it appears the SFO is, at least ostensibly, diverting its limited resources away from historic cases and towards opening and progressing new investigations. It will be interesting to see whether this translates into a higher number of new cases being opened in the coming year.

Financial performance and funding

The SFO’s core parliamentary funding has increased from £52.7m (year ending March 2019) to £55.5m. This marks a longer-term commitment to increase the agency’s core funding (it received £32.9m in the year ending March 2018), making the SFO less reliant on ‘blockbuster’ funding from the Treasury for cases expected to cost over five percent of its budget. This shift was partially prompted by criticism that the SFO was relying on temporary staff to deal with heavy caseloads who were subsequently let go once the work had subsided. Consistent with that, the number of staff permanently employed by the SFO has increased from 398 in the year ending March 2019 to 421 this year.

Response to COVID-19

Ms Osofsky wrote in the Annual Report that she had been inspired by the SFO’s “efficient and effective” response to the upheaval that followed the outbreak of COVID-19. With 99% of employees working from home, face-to-face engagement has ceased but the agency claims to have remained in close contact with domestic and overseas partners to ensure that joint or parallel investigations progress.

However, the SFO’s response to a Freedom of Information Act (FOIA) request from Global Investigations Review paints a more modest picture. The SFO did not conduct any suspect or compelled interviews between 23 March 2020 (when lockdown began) and 18 May 2020. The FOIA request also revealed that, in the same time period, it issued only 16 notices under section 2 of the Criminal Justice Act 1987, demanding access to certain information or specific documents. Given that the SFO typically issues between 600 and 1,000 section 2 notices a year, this figure suggests that there has been limited investigative activity and that the agency has been more hampered by COVID-19 than the Annual Report may suggest.

This impression was confirmed by a Crown Prosecution Service Inspectorate (CPSI) report published on 29 July 2020, which concluded that “the SFO has not relied on remote working to any extent in the past and struggled to move immediately to a position with nearly all staff working from home." Perhaps most concerning is that recent events have “brought into sharp focus the lack of video conferencing facilities at the SFO,” which has in turn been criticised by the Court during hearings in the litigation with Eurasian Natural Resources Corporation. The CPSI report did however recognise that the SFO is working quickly to improve its IT capabilities and that the agency’s response had been effective on the whole. For more information on how UK enforcement agencies are reacting to COVID-19, see our tracker here.

The Annual Report also details how the SFO has embedded a new eDiscovery platform into its in-house technology capabilities, allowing the agency to open new cases which do not have “interdependencies on other data”. The SFO intends to migrate all historic data to the new platform as well, complementing the agency’s more general shift away from relying on less cost-effective external resources. Whether this migration will enable the SFO to better cope with the pressure of managing document heavy cases during a new era of working from home remains to be seen.