SFO director appears to be levelling the playing field in latest strategy

While many of the SFO chief’s proposals are not new to regulators in other jurisdictions or to lawyers representing businesses being investigated, the SFO finally appears to be taking steps to level the playing field for its benefit.

If implemented, Ephgrave’s plans could mean speedier and more effective investigations, so it is worth businesses taking careful note.

Ephgrave appears to be building up a new armoury for the SFO.

Cash for tips

The most eye-catching of Ephgrave’s plans is to consider providing financial incentives to whistleblowers. While not currently within the SFO’s armoury, financial incentives are not unfamiliar to the UK.

UK whistleblowers and regulators – the SFO included – have long been beneficiaries of the US’s established incentivisation practices, while domestically, HMRC offers cash to individuals providing evidence about tax fraud. 

Delivering on this goal, however, will require significant institutional and legislative change.

The courts currently frown on witnesses being paid to take the stand, while the Financial Conduct Authority and Prudential Regulation Authority concluded in 2014 that introducing financial incentives would make little difference to the number of successful enforcement actions. 

Whether Ephgrave’s reformist zeal will overcome past institutional and legislative inertia remains to be seen.

Indeed, the existing Public Interest Disclosure Act 1998, intended to protect whistleblowers from negative treatment, is facing repeal through a private member’s bill in the House of Lords, which proposes an independent Office of the Whistleblower that also does not offer financial incentives.  

Even if policymakers decide that financial incentives are a step too far, there are other options available to create a more whistleblower-friendly business environment.

Changing the law to make it a criminal offence to subject a whistleblower to a detriment or other negative treatment is one idea – Australia and France already have such laws in place. 

Assisting offender and co-operating witnesses

Ephgrave proposes maximising existing ‘assisting offenders’ legislation to encourage witnesses to co-operate in order to progress their investigations under the Serious Organised Crime and Police Act 2005.  For example, sentence reduction offers can be made to offenders to secure their assistance with investigations.

Although common practice in jurisdictions such as the US, it has rarely been used in the UK. 

Speedier and more effective investigations

SFO investigations have been especially slow in recent years. Ephgrave aims to accelerate this process, in part by culling prosecutions that are unlikely to succeed early on.

This is a welcome change, as businesses under investigation often find the prolonged uncertainty most damaging.

Ephgrave also advocates for more dawn raids, a key tactic in combatting white-collar crime, as they can inject crucial momentum into investigations.

It is not yet clear if Ephgrave will be given the financial and staffing resources to make this ambition a reality.

Use of new offences under the ECTA 

The Economic Crime and Corporate Transparency Act 2023 introduced various new provisions into law, including a failure to prevent fraud offence (to apply to large organisations only, as defined under the Companies Act 2006).

ECTA 2023 also expanded the basis on which firms can be held criminally to account and bolstered the SFO’s information-gathering powers.

Ephgrave wants the SFO to be the first agency to use the new powers under ECTA. 

Rigorous and intrusive case review

Perhaps one of the most surprising of Ephgrave’s proposals is the revelation that the SFO does not already do what good lawyers acting on behalf of business being investigated routinely have done for their clients.

Ephgrave has promised that the SFO will now ensure it focuses on the core issues of its cases and not allow itself to wander off.

As some good news for corporates, it also intends to shut down investigations where it is apparent it is never going to reach the threshold for charge and redirect those resources to cases with better prospects. 

Managing disclosure more effectively

According to Ephgrave, approximately 25 per cent of the SFO’s budget is spent on managing disclosure, posing a significant burden with a slim margin for error.

For example, the SFO's investigation against former G4S executives collapsed due to exponential increase in costs and delays, many of which were connected to disclosure.

As the future could bring a more activist SFO, it is important for business to take steps to prevent becoming the subject of investigations.

To speed up its disclosure processes, the SFO is piloting technology-assisted reviews. This is not surprising, we have been using such tools for our clients for some years, and they are only becoming smarter through artificial intelligence.

For businesses that have committed wrongdoing, this could mean that the SFO is likely to find the smoking guns sooner. For those who are innocent, it could mean shorter and less costly investigations.

Domestic and international collaboration

The SFO intends to increase its collaboration with the National Crime Agency, domestic police forces and international law enforcement agencies.

Given the increasing multi-jurisdictional nature of economic crimes, it is unsurprising that the SFO is waking up to the importance of being joined up with law enforcers both in the UK and abroad.

And given the large fines that can be secured in each jurisdiction, it is also in each agency’s interests to co-operate with each other on the same investigations.

Upshot for businesses 

Whether Ephgrave’s reformist zeal will overcome past institutional and legislative inertia remains to be seen. If his proposals do translate into systemic change, it would give UK law enforcement powerful new tools in the fight against complex fraud.

As the future could bring a more activist SFO, it is important for business to take steps to prevent becoming the subject of investigations. 

Having the right culture in your organisation is key for preventing fraud. Although having the appropriate policies and procedures in place is important, a policy is only as good as the people implementing it. Having the right people in the right positions, whether in your legal, compliance or any other part of your organisation is crucial.

Honesty, transparency and proper record-keeping at all levels should be prized above all else.

Regular training for employees, a whistleblowing hotline and proper insurance coverage are also crucial for mitigating the risk and cost of lengthy investigations.

If your business does find itself caught up in an investigation, you will likely also need trusted advisers on hand to help you respond in a timely way.  

Prateek Swaika is a partner and solicitor advocate; and Sam Heitlinger is an associate and solicitor advocate at Boies Schiller Flexner (UK) LLP