Disputes - What to look out for in 2020: The Serious Fraud Office

In brief

• the SFO faces criticism for the slow pace of its historic investigations and the low numbers of new investigations opened.
• it plans investment in new data management technology, closer co-operation with international partners and a heavier reliance on co-operating individual and corporate suspects.
• with the price of co-operation high, SFO Director Lisa Osofsky is under pressure to ensure this plan yields results.

Problems and priorities

Fifteen months into her tenure, the director of the SFO, Lisa Osofsky, is facing increasing pressure to improve the agency’s performance. Though the SFO appears finally to have shaken off calls for its closure - there was no mention of this in the Conservative Party’s 2019 Manifesto - it continues to face criticism, in particular for the slow pace of its investigations. The average case takes 4 – 5 years from investigation to trial.

A Prosecution Service Inspectorate report in October 2019 shed some light on the causes for this. It suggested huge volumes of data and a severe backlog in the SFO’s digital processing unit were a significant bottleneck on its progress. Other contributing factors include delays in defining the parameters of new investigations and allocating resources to them and cumbersome channels for sharing evidence internationally.

These struggles should not be taken as indicators of a failing agency – the SFO has a reasonable conviction rate of 60% by defendant and 79% by case (2015-2019). However, heavy commitments on historic cases:

• divert the SFO’s limited resources away from opening or progressing new investigations;
• create prolonged and unfair pressure for individual defendants and extended commercial consequences for corporates; and
• can result in a degradation of the investigative process as witnesses cease to be available and evidence is lost.

These are likely to have been factors in Osofsky’s decision to drop legacy investigations into individuals implicated in wrongdoing at Rolls-Royce, as well as a five-year investigation into corruption allegations involving GSK. But we haven’t seen large numbers of new investigations taking their place – overall in 2019, the SFO has dropped more cases than it has opened. Where new cases have been taken on, we’ve seen speculation that Osofsky is targeting different types of crime to her predecessor, shifting away from corporate corruption and complex fraud and towards offences that more closely affect consumers or investors.

The SFO’s response

The SFO recognises the challenges it faces. In its Annual Report for 2018-2019, the key priorities are investment in new technology to improve efficiency in data management and improved relationships with international (as well as domestic) partners. The SFO is also focused on streamlining its cases by identifying key lines of enquiry at an early stage, selecting appropriate charges and presenting cases in a jury-friendly manner. One route by which it hopes to do this is through the use of co-operating suspects or ‘insiders’ who, in return for leniency, identify key issues and evidence and help to bring complex, typically document-heavy cases alive for juries at trial. Another is through reliance on co-operating corporates who are willing to go “beyond what the law requires” in securing, collating and presenting the evidence the SFO needs, in the hope of an offer of a DPA. For more detail on the SFO’s expectations in this regard, see our article on its Corporate Cooperation Guidance.

However, the effectiveness of some of the SFO’s proposed measures is hard to predict. More effective international co-operation (within Europe at least) is likely to be hampered by Brexit, due to the resulting lack of access to EU co-operation measures such as arrest warrants and investigation orders. Improvements in electronic data management will hinge on the SFO’s ability to attract good candidates for eDiscovery roles. With a wealth of higher-paying opportunities available in the private sector, this may be hard to achieve.

What this means for you

• the SFO will increasingly be looking to streamlining investigations through the use of co-operating corporate and individual suspects. The SFO already has the power to grant immunity or leniency to individuals in return for co-operation but has used it only once at trial. Persuading suspects and their advisers of the benefits of co-operating may not be easy. Anecdotally at least, British juries don’t take kindly to a ‘grass’ and so the SFO may face an uphill struggle.
• for corporates, the list of demands made in the Corporate Co-operation Guidance is long and the SFO offers no guaranteed outcome in return. The price of co-operation may prove to be too high, particularly in the context of questions being asked about the effectiveness of the DPA regime. There is a conspicuous absence of convictions of individuals on whose alleged conduct DPAs have been based and some companies who have secured a DPA have seen continuing fallout in the civil courts. For more information on this, see our article.
• 2020 will be the year in which there will either be decisive action to tackle the challenges the SFO faces, or progress under Osofsky’s leadership will stall.