'SFO director has work cut out to improve the prosecutor's status'

The appointment was unexpected.

With a strong policing background as former chief constable for Surrey Police, assistant commissioner of the Metropolitan Police Service, and most recently in a role that overlapped with his responsibilities as assistant commissioner, the chair of the National Police Chiefs’ Council's criminal justice co-ordination committee, Ephgrave’s appointment marks a radical departure for the agency.

Since it was established in 1988, the SFO has exclusively drawn from the ranks of lawyers when appointing its permanent directorship.   

So what can we expect from the new Ephgrave era?

A change of approach would give rise to a fear factor that is currently lacking.

Ephgrave’s experience as a non-lawyer should not be problematic. Under the Criminal Justice Act 1987, which provides the SFO director with their powers, the director is responsible for the SFO’s overall strategic direction, case decisions and organisational management.  

Oversight, advice and quality control of case development and trial preparation falls to the general counsel, who, alongside the SFO chief operating officer, head up a wide team.

In addition, the SFO instructs experienced trial counsel for each of its cases. Ephgrave will therefore be widely supported in the technical aspects of his role.    

The biggest challenges facing Ephgrave are more fundamental.

A change of tack

Ephgrave needs to decide whether the SFO continues to prioritise the pursuit of corporate resolutions, whether through prosecution or so-called deferred prosecution agreements (DPAs), which enable companies charged with criminal offences to avoid criminal proceedings in return for the payment of a financial penalty, or shift focus back to individual senior executives. 

The SFO’s track record suggests that it cannot do both; it is telling that there is yet to be a conviction after a contested trial of any individual relating to criminal conduct that has formed the basis of a DPA, underscoring the challenges the SFO has faced in pursuing both corporate and individual wrongdoing together.  

There are clear benefits to be had from focusing away from seeking corporate scalps. Prosecutions of individuals send a powerful deterrent message, changing both corporate and employee behaviour.

Ephgrave would also be wise to look carefully at recent criticisms levelled against the Financial Conduct Authority.

A perennial criticism of the SFO is that it lacks the prosecutorial zeal of the SFO’s counterparts around the world, most notably in the US. A change of approach would give rise to a fear factor that is currently lacking, and show that the SFO can take on individuals in senior leadership roles.  

However, the current legislative focus would appear to militate against such a change in focus, with the economic crime bill set to expand corporate criminal liability further.  

Under the bill, the number of so-called ‘failure to prevent’ corporate offences (whereby a corporation can be found guilty of failing to prevent specified criminal offences) is set to be increased to cover a wide range of fraud offences. 

Separately, the ‘identification doctrine’ (the English law rule on how criminal liability is attributed to a company or partnership via the conduct of certain senior individuals) is also set to be widened.  

Both these reforms, if enacted in their current form, suggest that Ephgrave’s focus could remain on corporate wrongdoing and extracting penalties from a larger number of companies. Although potentially cash-generative for the Treasury, this would be a missed opportunity.  

Practical issues to be addressed

Ephgrave will need to navigate the issues identified in two separate reviews of the SFO’s recent failures, which examined the collapse of the fraud and false accounting Serco trial in April 2021, and the Unaoil bribery case collapse in 2022, both as a result of significant disclosure failures.  

The review into the Serco case conducted by Brian Altman specifically identified a number of operational problems within the SFO that led to these failures; most notably, poor pay to disclosure reviewers, inexperience within these teams, undue time and resource pressures and inadequate technology and training.  

If Ephgrave wants to restore the SFO’s status as respected international prosecutor, he will need to lead with a clear vision.

Ephgrave would also be wise to look carefully at recent criticisms levelled against the Financial Conduct Authority in the Julius Baer case, in which three lifetime bans imposed on senior managers within the bank were overturned by the Upper Tribunal and involved a lengthy criticism of the FCA’s conduct and management of the investigation.  

In particular, in addition to disclosure failings, the Upper Tribunal criticised the high turnover of staff with the FCA, and the five years it took the FCA to issue one of the decision notices in the case – the average length of a typical SFO investigation stands at four years.

The Upper Tribunal was also critical of the FCA’s failure to take a step back and reconsider its case theory during the course of its investigation and the enforcement proceedings.

It is clear that if Ephgrave wants to restore the SFO’s status as respected international prosecutor, he will need to lead with a clear vision, to be given the means to invest in his team to ensure that the technical detail is not missed, and demonstrate a nimble and fast-paced attitude to the investigation, prosecution and enforcement of complex fraud and corruption cases.  

Neil Swift is a partner and Craig Hogg is an associate at Peters & Peters