Serious Fraud Office: Which way from here?

Colin Aylott QC and Sarah Day explore the clues indicating the future focus and direction of the Serious Fraud Office under its new Director, Lisa Osofsky.


The appointment of Lisa Osofsky as the new Director has coincided with a difficult time for the Serious Fraud Office (“SFO”) with the collapse of the high profile Tesco fraud trial, the High Court’s decision to uphold the dismissal of the SFO’s prosecution of Barclays over its Qatari fundraising in 2008, and the abandonment of the prosecution of individuals of Glaxo-Smith Kline and Rolls Royce.  Lisa Osofsky came to the SFO as a former US prosecutor and FBI lawyer.  Speaking in Cambridge in September 2018, shortly after taking up her tenure, Osofsky stated her “goal is to make sure our country is a high risk place for the world’s most sophisticated criminals to operate.”[1]  The question is, will her appointment mark a change in the approach and focus of the SFO? In real terms, Osofsky’s comments to date point towards the SFO seeking to streamline its investigative efforts, focusing on multi-jurisdictional cooperation, the use of technology to assist the investigative process, improved corporate engagement and the continued use of Deferred Prosecution Agreements (DPAs), and the deployment of asset recovery powers.

Multi-Jurisdictional Cooperation

In a recent interview with Joshua Rozenberg, Osofsky conceded in respect of Rolls Royce and Glaxo-Smith Kline, as well as other cases which she stated she has not referred to publicly, that the SFO has faced difficulties.[2]  Osofsky highlighted the issues in cases fulfilling the evidential test for prosecution when they are historical, spanning decades.  She also focused on the difficulties faced by the SFO when multi-jurisdictional cases require overseas cooperation, which is not always forthcoming.  While we know that the SFO has had strong relations with European authorities, Brexit has created significant uncertainty for all the UK’s investigative authorities in relation to future cooperation with their European counterparts if the underlying EU framework is removed.

Given Osofsky’s pre-existing associations in the United States, there is likely to be improved cooperation with the US authorities.[3] In October 2018, Peter Pope, a partner at the US firm Jenner & Block, joined the SFO on a year-long secondment.  Pope is in place as an international liaison and investigations adviser to build and consolidate relationships with authorities in other jurisdictions, participate in case reviews and advise on engagement with corporates and compliance issues.[4]  It seems likely given Osofsky’s repeated endorsement of the use of DPAs, that efforts will also be focused on building closer ties with those jurisdictions seeking to establish a similar DPA model: Argentina, Canada, and Australia.[5] Such relationships will have benefits for the SFO when it comes to sharing intelligence and expediting the provision of evidence, and potentially for companies as it reduces the risk of double jeopardy as authorities take a joined-up approach to high-value global enforcement.

Technology

No doubt Osofsky is acutely aware of the criticisms made of SFO’s lengthy and costly investigations, which have still resulted in the collapse of cases at trial, most notably in the recent Tesco case.  Her response and the future direction of SFO appears to be twofold: technology and DPAs.

Its undoubtedly the case that SFO investigations are data heavy, with the document count often running into the millions.  The SFO’s use of an AI robot in 2016, to assist in checking for legal professional privileged documents in the Rolls Royce case, was widely reported.[6]  Osofsky states it led to savings of 80% in the area in which it was used.[7]  Ososfsky plans to roll out an “eDiscovery” platform across all new cases, to build on the LPP robot and bring a range of machine learning and AI based technology assisted review features.[8] The hope is that this will be a more efficient way of working which will shorten investigation times and lead to quicker charging decisions.[9]

Deferred Prosecution Agreements

For companies, though not individuals, DPAs are the focus for the SFO.  In a sense, they are an easy win; self-reporting being a key factor for a DPA to be on the table at all, they have the potential to significantly curtail the investigative burden on the SFO and give the impression of obtaining real results with the accompaniment of a hefty fine.  A DPA can neatly sidestep the difficulty in establishing corporate criminal liability in the UK and can appear almost as an olive branch.

Cooperation is the real crux of the regime and DPAs are only considered appropriate if a company has fully cooperated with the prosecutor.[10]  Osofsky has made clear how important the public interest analysis is in considering whether a DPA could be appropriate, outlining that the factors can include: the seriousness of the predicate offence or offences; the importance of incentivising the exposure and self-reporting of corporate wrongdoing; the history (or otherwise) of similar conduct; the attention paid to corporate compliance prior to, at the time of, and subsequent to the offending; the extent to which the entity has changed both its culture and in relation to relevant personnel and the impact of prosecution on employees and others innocent of any misconduct. [11]

According to Hannah Von Dadelszen, Head of Fraud at SFO, the drive is towards encouraging ethical corporate behaviour and corporates monitoring their own behaviour.[12]  If there is going to be self-reporting, it needs to be transparent and genuine.  Von Dadelszen warns: “engage now or hide behind smoke and mirrors at your peril.”[13]  Ostensibly, Osofsky wants the public to see that not just individuals but also corporations can be held to account.[14]

Asset Recovery Powers

Where prosecution is necessary, it seems likely that asset recovery powers will be deployed, particularly the newly minted “Unexplained Wealth Orders” which has thus far only been utilised by the NCA.  These are an investigative order made in the High Court requiring the holder of targeted property to explain its acquisition in circumstances where there are reasonable grounds to suspect that the known sources of lawfully obtained income would be insufficient. In appropriate circumstances an interim freezing order may be granted to prevent dissipation. Where there is no response, there is a rebuttal presumption that the property is the proceeds of crime. Where there is a response, a decision has to be taken to either accept it or continue investigating primarily with a view to bringing a civil recovery case before the courts.

In this aspect, the SFO’s stated aim is to aid the victims of economic crime.  Elizabeth Baker, Head of the Proceeds of Crime and International Assistance Division of SFO has indicated that the “ideal outcome, where-ever it is possible, is for the money secured through asset recovery to be returned to victims, using that term in its widest sense.”

The signs point towards Osofsky having a vision of a dynamic SFO, focused on streamlining and channelling its resources to bring successful prosecutions and with an emphasis on company responsibility through the use of DPAs.  Whether that vision comes to fruition, remains to be seen.


[1] https://www.sfo.gov.uk/2018/09/03/lisa-osofsky-making-the-uk-a-high-risk-country-for-fraud-bribery-and-corruption/

[2] Rozeberg interview https://www.bbc.co.uk/sounds/play/m0002z45

[3] https://wp.nyu.edu/compliance_enforcement/2018/10/16/director-of-the-serious-fraud-office-lisa-osofsky-keynote-on-future-sfo-enforcement/

[4] https://www.sfo.gov.uk/2018/11/21/current-priorities-and-future-directions/

[5] https://wp.nyu.edu/compliance_enforcement/2018/10/16/director-of-the-serious-fraud-office-lisa-osofsky-keynote-on-future-sfo-enforcement/

[6] For example: https://www.ft.com/content/55f3daf4-ee1a-11e6-ba01-119a44939bb6

[7] https://www.sfo.gov.uk/2018/09/03/lisa-osofsky-making-the-uk-a-high-risk-country-for-fraud-bribery-and-corruption/

[8] https://www.sfo.gov.uk/2018/09/03/lisa-osofsky-making-the-uk-a-high-risk-country-for-fraud-bribery-and-corruption/

[9] https://www.sfo.gov.uk/2018/11/21/current-priorities-and-future-directions/

[10] https://www.sfo.gov.uk/2018/12/04/keynote-address-fcpa-conference-washington-dc/

[11] https://wp.nyu.edu/compliance_enforcement/2018/10/16/director-of-the-serious-fraud-office-lisa-osofsky-keynote-on-future-sfo-enforcement/

[12] https://www.sfo.gov.uk/2018/11/09/engage-now-or-hide-behind-smoke-and-mirrors-at-your-peril/

[13] https://www.sfo.gov.uk/2018/11/09/engage-now-or-hide-behind-smoke-and-mirrors-at-your-peril/

[14] https://wp.nyu.edu/compliance_enforcement/2018/10/16/director-of-the-serious-fraud-office-lisa-osofsky-keynote-on-future-sfo-enforcement/

Colin Aylott QC

Appointed to Queen’s Counsel in 2017. Listed in the 2019 editions of Chambers & Partners and The Legal 500 for both Crime and Fraud.

Sarah Day

A committed and persuasive advocate with broad experience in all areas of criminal defence, as well as in international criminal law.

If you would like to contact Carmelite Chambers in relation to this article, please email clerks@carmelitechambers.co.uk.