What does 2019 have in store for white-collar defence in the UK? In this GT Alert, we list our top 5 predictions relating to Serious Fraud Office (SFO) Director Lisa Osofsky, who indicated various areas of focus for her tenure; Brexit and the potential loss of the European Arrest Warrant regime and the U.K.’s access to EU shared crime agency databases; U.K. criminal law and corporate criminal liability; litigation privilege in the context of an internal criminal investigation, and extraterritoriality in terms of the SFO’s power to compel overseas companies to produce material; and transatlantic collaboration – we expect an increasingly U.S. approach to the way the SFO operates.

To read the full GT Alert, click here.

  1. Sanctions: a new dawn for enforcement in the UK? Following Russia’s invasion of Ukraine, the UK’s sanctions regime underwent significant change at speed. The UK’s Office of Financial Sanctions Implementation (OFSI) described 2022-2023 as “a genuinely historic and transformative period for the use of financial sanctions at both global and UK levels”, and it is likely that this will continue over the next 12 months. Given OFSI’s enforcement team has nearly doubled in size in the last financial year, and the government has announced the implementation of a new unit (the Office of Trade Sanctions Implementation (OTSI)) dedicated to implementation and enforcement, the landscape for international businesses already grappling with cross-border sanctions compliance will be no smoother in 2024.
  2. Insolvency & Companies Court boom. The UK’s economic struggles have, unsurprisingly, correlated with an increase in cases in the Insolvency and Companies Court (ICC). The economic landscape for 2024 looks no rosier, and it is likely that the ICC will continue to get busier. Companies are still dealing with the fallout of the COVID-19 years, and subsequently the damage to the financial markets caused by the ill-fated Mini-Budget. Big business is not immune either and we may see a number of larger insolvencies as 2024 unfolds.
  3. Economic Crime and Corporate Transparency Act 2023 – a potential minefield for companies? Businesses will need to grapple with the impact of the Act and, in particular, the new failure to prevent fraud offence, and ensure they are taking active steps to manage their risks – whilst the cost of getting one’s house in order may be substantial, the ramifications for those business that do not are potentially huge. Going forward, corporate criminal liability will remain in sharp focus with the changes proposed in the Criminal Justice Bill. If passed in its current form the Bill will extend the scope of corporate liability for senior managers beyond certain economic offences to all UK criminal offences.
  4. Increased use of AI in dispute resolution. Generative AI and the use of large language models captured the headlines last year not least because a Court of Appeal Judge, Lord Justice Birrs, reported that he had used ChatGPT to aid the writing of his judgments. Generative AI has the potential to unlock massive datasets and allow us to interrogate data in a way that feels familiar by using natural language. In 2024, we will begin to see practical applications of AI develop in dispute resolution. These will include advancements in eDiscovery tools as well as AI assisted legal research.
  5. More litigation relating to ESG regulation. ESG-related litigation has been on the horizon for some time now. With new rules incoming from the Financial Conduct Authority designed to stamp out greenwashing and claims for misrepresentation connected with green credentials already on the rise, we can expect more litigation in this area. Crowd sourced litigation funding is likely to be deployed in certain ESG claims and, as a result, we may see some interesting questions raised about liability for costs in this area.

About our Civil Fraud & Business Disputes Practice: Our team, one of the UK’s largest teams focused in civil fraud, have collectively handled a myriad of high-profile and sensitive matters concerning allegations of fraud and wrongdoing. We advise on complex, cross-border disputes and have represented parties involved in some of the largest fraud cases in the UK courts. Our clients range from HNW individuals to companies, trusts and governments. We regularly act for both claimants and defendants, and have deep experience advising on allegations of breach of director and fiduciary duties, deceit, unlawful conspiracy, secret commissions, and dishonest assistance. Alongside our White Collar Crime team, we advise clients facing the parallel attack of civil claims and criminal regulatory investigations in the UK and overseas.

The UK Serious Fraud Office (SFO) has issued its long-awaited guidance on corporate co-operation. For the first time in one place, the SFO has set out what in its view are ‘indicators of good [co-operation] practice’ for companies under investigation. This is a helpful clarification.

In its own words the SFO defines co-operation as going ‘above and beyond’.

The list of indicators of good co-operation practice is extensive and not, as the SFO itself points out, exhaustive. That said, the SFO acknowledges that each case turns on its own facts, and some indicators on the list may not apply in some cases, perhaps hinting at a little flexibility depending on specific circumstances.

Companies dealing with the SFO and/or identifying suspected wrongdoing in their organisation must therefore carefully consider the guidance and determine whether and/or to what extent they can meet the SFO’s co-operation requirements.

Companies should also review existing policies and procedures dealing with internal investigations in light of the new SFO guidance.

Click here for the full GT Alert, ‘Above & Beyond’? Serious Fraud Office Issues Corporate Co-Operation Guidance – Part I, in which our London White Collar team outlines the key takeaways from the guidance.

Figures provided by the UK’s Financial Conduct Authority (FCA) show that in spite of the thousands of tip-offs on insider dealing it receives from banks and other financial services firms, it rarely opens an investigation.

In a response to a freedom of information (FOI) request made by Greenberg Traurig’s White Collar Defence and Special Investigations Practice, the FCA confirmed that as of 4 March 2019 it had opened 61 investigations into insider dealing since 1 April 2018.

To read the full GT Alert, click here.

For more on white collar defense & special investigations, click here.

But raids as part of asset seizure probes fall to zero

LONDON – 26 July 2018 – The UK Serious Fraud Office (SFO) launched 30 property raids to gather evidence for its ongoing criminal investigations (i.e. before prosecution takes place) in the previous 12 months year ending March 31. The number is more than triple the number of the same raids undertaken the year before and more than at any time in the preceding five years.

However, raids carried out by the SFO’s Proceeds of Crime Division fell to zero over the same period. Why?

Barry Vitou, shareholder of Greenberg Traurig and head of White Collar Defence and Special Investigations London, provides a theory: “The SFO is adopting an increasingly aggressive stance in its investigation and pursuit of white collar crime and the over tripling of the number of searches undertaken in connection with its active investigations before prosecution confirms that.”

This follows in the wake of increasing enforcement activity and investigations into large corporations and Deferred Prosecution Agreements including penalties and disgorgement running into hundreds of millions of pounds.

“In contrast, the UK Serious Fraud Office (SFO) Proceeds of Crime division, which investigates the recovery of the proceeds of crime so that fraudsters do not benefit from their offending and victims can be compensated wherever possible, did not undertake any searches,” Vitou said.

“It is important that the increasingly hard line taken investigating fraud before prosecution does not come at the cost of recovering the proceeds of crime from white collar criminals,” Vitou said.

SFO statistics show that in the 12 months year ending March 31 (the same year the Proceeds of Crime Division conducted no searches) it obtained Proceeds of Crime orders amounting to £275,000 (c 1% of proceeds of crime orders in the prior year) and .1% of the disgorgement in the biggest DPA to date.

“The lack of raids related to Proceeds of Crime investigations and associated low number of Proceeds of Crime orders in the same year is at odds with public pressure to ensure that white collar criminals are not able to keep hold of assets gained through fraud.”

Vitou warns, “It is hoped this is a blip. However, the statistics could represent a focus on investigating companies. Corporations often reach agreement and pay their fines and disgorgement, in contrast to individual wrongdoers who may be more likely to hide away ill-gotten gains and require the SFO to use its search powers in respect of them.”

Vitou, who authors thebriberyact.com blog, further notes that “telephone number penalties, Deferred Prosecution Agreements and aggressive investigation and enforcement tactics against companies are all taken from the US criminal law enforcement playbook”

“The US has been criticised for its focus on corporations. It is important that the SFO does not fall into the same trap, and simply target corporations as a cash cow for the UK government, at the expense of pursuing individual wrongdoers and recovering their ill-gotten gains,” Vitou said.

“The appointment of a former US prosecutor to head the SFO is entirely consistent with the new US-style approach to white collar crime enforcement in the UK. The increased number of raids for investigations is likely to continue but should not be at the cost of investigating and recovering ill-gotten gains from white collar criminals.”

About Greenberg Traurig, LLP

Greenberg Traurig, LLP (GT) has more than 2,000 attorneys in 38 offices in the United States, Latin America, Europe, Asia, and the Middle East. GT has been recognized for its philanthropic giving, was named the largest firm in the U.S. by Law360 in 2017, and is among the Top 20 on the 2017 Am Law Global 100. Web: http://www.gtlaw.comTwitter: @GT_Law.

Searches Undertaken by the SFO
 Proceeds of Crime Orders Obtained by the SFO
Note: The total amount of Proceeds of Crime Orders obtained by the SFO constitutes the total confiscation orders made plus any additional compensation orders not included within the confiscation orders, plus any civil recovery orders imposed. Source https://www.sfo.gov.uk/about-us/

 

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Lisa Osofsky, the new director of the UK Serious Fraud Office, says her agency should use insiders and co-operators to bring to life by way of live evidence the document-heavy cases it prosecutes.

Speaking to the Commons Justice Committee in December 2018, Ms Osofsky alluded to the slow pace of SFO investigations as one of the agency’s key criticisms and suggested that getting an ‘insider’ to help the SFO understand what was going on could be helpful in presenting cases to juries.

These comments are perhaps unsurprising from Ms Osofsky, who was previously a federal prosecutor and assistant general counsel to the FBI in the United States, where plea deals and immunity in exchange for testimony are more prevalent.

In a speech delivered earlier the same month, Ms Osofksy recognised that historically, cooperators in the UK have been used mostly in the context of gang-related and terrorism offences.

The statutory power to grant immunity and other protections can be applied in any type of case. Ms Osofsky has made clear that she and her SFO colleagues are ‘[intent on] exploring this area in the white-collar world’.

In this GT Advisory, we discuss the controversial history of ‘grassing’ in the UK and describe the process of obtaining immunity and other protections.

To read the full advisory, click here.