Regulation  

Is it worth co-operating with the Serious Fraud Office?

  • Identify the advantages of a deferred prosecution agreement with the Serious Fraud Office
  • Describe the approach to legal privilege
  • Identify differences to the US Department of Justice
CPD
Approx.30min

This is a strange and conflicting sentiment which implies a fundamental right must be waived in order to co-operate.

Ms Osofsky has said that “waiving privilege over that initial investigative material will be a strong indicator of co-operation and an important factor that I will take into account when considering whether to invite a company to enter into DPA negotiations.”

However, this statement is at odds with the SFO’s treatment of Rolls-Royce, Tesco and Serco, who each provided only a limited waiver of privilege but still received a DPA and substantial discount.

Both Standard Bank and Sarclad were considered to have provided sufficient co-operation to enter into a DPA, despite not waiving privilege.  

Waiver of privilege under the new Guidance

The SFO’s frustration with claims of legal professional privilege is clear. 

The Guidance states, “if an organisation decides to assert legal privilege over relevant material (such as first accounts, internal investigation interviews and other documents), the SFO may challenge that assertion where it considers it necessary or appropriate to do so.”

The SFO, which has been the subject of scrutiny in its handling of prosecutions of individuals, has found itself in a position where a corporate claims privilege over first accounts, but the SFO’s disclosure obligations to an individual require their  disclosure.

The Guidance on providing witness accounts is undoubtedly designed to address this. In a recent application for judicial review, the claimant, who was being prosecuted by the SFO, sought disclosure of the full records and notes of interviews conducted by his former employer, Sarclad (referred to as XYZ Ltd). 

Sarclad had entered into a DPA and the SFO did not seek to compel disclosure. The SFO was criticised for failing to challenge Sarclad’s privilege claims and not pursuing disclosure.  This approach jeopardised the claimant’s right to a fair trial.

The Guidance requires an organisation to:

  • provide witness accounts, including recordings, notes and/or transcripts of interview;
  • recognise the SFO’s disclosure obligations to prospective individual defendants; and
  • submit claims of privilege to independent counsel for certification – presumably at the cost of the organisation.

As an apparent deterrent to privilege claims, “an organisation that does not waive privilege and provide witness accounts does not attain the corresponding factor against prosecution that is found in the DPA Code… but will not be penalised by the SFO.”

The Guidance notes that “the existence of a valid privilege claim must be properly established”, although it stops short of clarifying what “properly established” means in practice.

It is also unclear whether the SFO is expressing an intent to litigate what it considers to be ill-founded privilege claims.

Does the Guidance provide sufficient incentive to co-operate?

Firms bound by the FCA’s principles for businesses must, under principle 11, deal with its regulators in an open and co-operative way and disclose anything relating to the firm of which that regulator would reasonably expect notice. 

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Which of the following does NOT constitute co-operation with the Serious Fraud Office?

  2. The corporate will be expected to do much of the evidence-gathering, and to provide it in a format requested and ready to digest and use, true or false?

  3. What is Ms Osofky's stance on legal privilege for companies that co-operate?

  4. What are the benefits of using a deferred prosecution agreement?

  5. Obtaining a deferred prosecution agreement will avoid all negative publicity, true or false?

  6. What is the US Department of Justice’s approach to privilege?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify the advantages of a deferred prosecution agreement with the Serious Fraud Office
  • Describe the approach to legal privilege
  • Identify differences to the US Department of Justice

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