Earlier this month, the Serious Fraud Office (SFO) published its
new strategy for the next five years. This follows on from Nick
Ephgrave's promise of a bold new approach in his inaugural
public address as director of the SFO. However, scratch the surface
and much of the content and rhetoric in these recent pronouncements
has a very familiar look to it.
In recent years, the SFO has come in for stiff criticism. It has
been blighted by blunders and mismanagement, resulting not only in
the repeated delay and collapse of prosecutions and the overturning
of convictions in several of its highest-profile cases, but also
the commissioning of two independent reviews into its handling of
those cases. It was therefore hoped that the arrival of Nick
Ephgrave as the new director of the SFO would help to reverse the
agency's fortunes and shake it out of its malaise.
In his first public speech in his new
role, Mr Ephgrave set out his plan for what he would do as
director. He made clear that he was not like his predecessors
– he is not a lawyer, after all, but rather a "law
enforcer". He also emphasised that he wants the SFO to be
"bolder" and to "explore new ways of doing
things" under his leadership and that if the SFO is to be
serious about being quicker and more efficient in handling its
biggest cases, it needs to focus on intelligence.
Following on from this, the SFO has recently published its five-year strategy for
2024-2029 and appended Business Plan for 2024-2025 (together,
the "strategy"). This strategy sets out at a very high
level the agency's direction, values, approach, and goals for
the next five years.
In his foreword, Mr Ephgrave writes: "The SFO needs to be seen
as a strong, dynamic, confident and pragmatic organisation. This
means playing a greater role in the national effort to tackle
fraud, ensuring that SFO cases progress at a faster rate, taking
bold and pragmatic decisions on our casework and, finally, being
seen as the partner of choice domestically and
internationally."
A brave new world?
So, how bold, dynamic, and revolutionary are these
proposals?
Given that the challenges facing the SFO today are broadly similar
to those the agency has faced in recent years, it is perhaps
unsurprising that many of the overarching aims set out in both Mr
Ephgrave's inaugural public speech and the SFO's strategy
are consistent with those of the previous SFO regime,
including:
– improving the pace of its investigations;
– developing its use of technology;
– deepening the agency's use of intelligence;
– maximising the use of the tools the SFO already has at its disposal; and
– building "strong and trusting" relationships
with both its domestic and international partner.
The strategy also focuses on the development and engagement of the
SFO's workforce and highlights the fact that, in order to meet
its ambitions, "the SFO needs to attract and retain the
brightest and best from a range of professions" –
something which the agency has historically had difficulty in
doing.
What is perhaps more surprising is that while some of the specific
ideas detailed in Mr Ephgrave's speech and in the strategy are
genuinely new (such as testing new crime prevention methods through
a pilot programme), or even an evolution of existing policies (such
as helping corporates to self-report more easily), many of the
solutions proposed to address the challenges facing the SFO, and
the rhetoric surrounding them, appear strikingly similar to those
that the agency has been pushing for years.
These familiar proposals include incentivising whistleblowers,
making better use of co-operating witnesses, and calling for
changes to the disclosure regime. Far from being new ways of doing
things, each of these ideas was part of the previous regime's
vision for how to improve the SFO's fortunes.
Given these ideas failed to solve the SFO's problems
previously, it is therefore worth exploring whether they might work
better now, or whether, despite all the promises of a bold new dawn
for the agency, the SFO is simply out of ideas.
Co-operating witnesses
Nearly five years ago, Nick Ephgrave's predecessor, Lisa
Osofsky, made headlines as she suggested that the SFO's fight
against financial crime in the UK would be enhanced by the use of
US-style plea bargaining and co-operating witnesses.
At the time, experienced criminal practitioners were quick to
question whether methods used in the USA could be easily transposed
to the UK's criminal justice system.
Five years down the line, after anything but a successful track
record during Ms Osofsky's tenure in the use of cooperating
witnesses (including the Unaoil case, which saw the SFO
engage what the Court of Appeal described as an "American
fixer" in an attempt to encourage defendants to abandon their
not-guilty pleas), it is not immediately apparent why the SFO
appears to be interested in exploring this idea again.
While the use of co-operating witnesses is nothing new in the UK,
they have tended to be used mainly in drugs and organised crime
cases. The SFO has to date made very little use of the relevant
provisions under the Serious Organised Crime and Police Act 2005
(SOCPA), whereby an offender can be granted a reduced sentence or
even immunity from prosecution in return for assisting in an
investigation or prosecution.
The reason for this is likely, at least in part, due to the fact
that British juries are considered to have a cultural distaste for
such "supergrass" evidence, and because, in practice, it
can be relatively easy for defence lawyers to undermine the
integrity of such evidence at trial. Perhaps the more telling
reason that the SFO has not used the provisions under SOCPA more
frequently to date, however, is that persuading an individual to
plead guilty requires powerful incentives and, unlike its
counterparts in the USA, the SFO's impotence is well
known.
A defendant charged in the USA faces a very high likelihood of
being found guilty and receiving a very high sentence if they go to
trial, whereas prosecutors can offer large, guaranteed sentencing
discounts for co-operation. In the UK, by contrast, the sentencing
regime is less harsh than in the USA and the available discounts
both smaller and less certain.
Added to that, the SFO's performance in recent years, with
numerous high-profile failures in the prosecutions it has brought
against individuals, means that it is perhaps even less
intimidating when compared to its American cousins than it was five
years ago.
In short, little has changed in the past five years to mean that
the SFO is any more likely to entice defendants to become
co-operating witnesses. If anything, the prospect may be less
enticing to a potential co-operator. It is therefore surprising
that the Mr Ephgrave is choosing to fish this particular proposal
out of Ms Osofsky's recycling bin.
Incentivising whistleblowers
Much fanfare has surrounded the proposal that the SFO should
explore incentivisation options for whistleblowers, including
paying them.
Like the use of co-operating witnesses, although more commonplace
in the USA, the concept of rewarding whistleblowers is not new to
the UK; both the Competition and Markets Authority and HM Revenue
& Customs offer financial incentives to whistleblowers.
The SFO, however, does not have any similar powers and is a long
way behind the curve compared to its counterparts in the USA. For
example, under the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, whistleblowers in the USA can be awarded up
to 30% of any penalty imposed following successful enforcement
action resulting from the information provided. The UK
whistleblower regime is therefore arguably ripe for reform.
It is worth noting, however, that the idea of paying whistleblowers
was also a notion floated by Ms Osofsky early on in her tenure as
director of the SFO1. It is notable too that neither Mr
Ephgrave's speech nor the strategy contain any details as to
how this aim of incentivising whistleblowers might be put into
practice. Whether reforms in this area are brought about and, if
so, whether they do in fact assist in speeding up the SFO's
investigations remains to be seen. However, such reforms are not in
the SFO's gift and therefore, as in the past, the plans for
reform in this area may come unstuck if the SFO fails to find
sufficient legislative support.
Disclosure reforms
Amid the string of acquittals linked to SFO disclosure
shortcomings during her tenure, Ms Osofsky sought to deflect blame
for those failings on the state of the current disclosure system.
She increasingly cited disclosure as one of the SFO's biggest
challenges and stated that the current disclosure framework was no
longer fit for purpose.
She argued that given the proliferation of data, the SFO's
disclosure obligations had become too onerous in large and complex
cases and that this was the reason that the SFO had come unstuck on
numerous occasions. Ms Osofsky talked of defendants being able to
use one mistake on the part of the SFO "to mount tactical
challenges to our cases", which could bring about the collapse
of a case. She therefore described it as a big priority
to "rebalance the system for victims and justice".
However, this explanation for the SFO's recent disclosure
shortcomings simply does not hold water.
While it is true that many SFO cases do now involve millions of
documents, it is far too simplistic to argue that the current
disclosure system is the problem, as opposed to the SFO's
inability to operate it properly. None of the high-profile SFO
disclosure failings that brought about the acquittals in the Serco,
Unaoil, or G4S cases arose due to the volume of material the agency
was required to review – instead, they occurred due to the
agency's own failings.
The answer to the SFO's problems with disclosure should not be
to push for wholesale changes to the disclosure system in the
SFO's favour, potentially to the disadvantage of defendants.
Instead, it is surely that the SFO should learn to apply the
disclosure system properly.
It is therefore disappointing, though perhaps unsurprising, that in
the wake of Ms Osofsky's departure the SFO has continued to
adopt her rhetoric with respect to the disclosure system. Indeed,
the strategy states that the SFO will "suggest new powers or
changes to the wider system that will allow us to drive cases
swiftly and efficiently" and that it will "continue to
push for a disclosure regime that is fit for today's
challenges". This kind of language gives more oxygen to the
idea that the SFO's recent shortcomings have been due to the
system rather than its own systemic shortcomings.
While no further details as to what reforms the SFO might wish for
are included in the strategy, this language is no doubt a nod to
the ongoing independent review of disclosure and fraud offences
being chaired by Jonathan Fisher KC.
The preliminary findings of that review were published on 24 April
2024, ahead of the final recommendations being
delivered to the Home Secretary in the summer of this year.
Intriguingly, those findings indicate that there is a consensus
that the problems with disclosure occur largely in the practical
application of the disclosure system, rather than in the structure
and architecture of the system itself. Mr Fisher KC states:
"Whilst I currently see there to be no compelling case for
radical reform of the [Criminal Procedure and Investigations Act
1996], I would like to consider where there may be scope for the
legislation to be modernised to simplify some of its provisions to
support greater consistency of application and to enable better use
of technology." What that means in terms of the scale of any
reforms that may ultimately be recommended following the conclusion
of the review is unclear.
Perhaps most interesting for those with recent experience of
dealing with the SFO on disclosure issues is that Mr Fisher
KC's preliminary findings go on to describe cultural issues
with respect to disclosure that need to be addressed: "All my
engagement has pointed to a need for better training and resources
for disclosure across all parts of the criminal justice system...
Many of those with whom I have spoken have referred to a poor
culture around disclosure and the insufficient value placed upon
this work in different parts of the system...The importance of
disclosure must be embedded as an inextricable part of the criminal
trial process."
Instead of continuing to lambast the current system, therefore, the
SFO might do better to focus on how it approaches disclosure and
the emphasis it places on it if it wants to avoid repeating its
recent failings.
Stuck on repeat?
Many practitioners warned that Ms Osofsky's proposals
for shaking up the fortunes of the SFO would not work and, indeed,
her tenure ultimately came unstuck partly due to the way in which
she mishandled her attempts to implement those proposals.
Despite this, and promises of a bold new approach, it appears that
the new SFO Director is unafraid of adopting not just some of his
predecessor's unsuccessful ideas but her rhetoric concerning
the challenges facing the organisation.
It will be interesting to monitor how the new Director and the SFO
go about implementing the "bold" proposals in its
strategy. Time will tell whether the agency has learnt its lessons
from past mistakes or is simply stuck on repeat.
Footnote
1 See Lisa Osofsky's speech to the American Bar
Association's London White Collar Crime conference on 8 October
2018.
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