The Serious Fraud Office (SFO) has recently published its Annual Report for 2016/17 which identified that for this period the SFO opened 12 new criminal investigations, concluded 16 prosecutions and brought charges against 25 companies and eight individuals. On the back of its success using a Deferred Prosecution Agreement (DPA) with Standard Bank last year, the SFO also secured two further DPAs in the period covered by this year’s report.
The SFO has stressed that the use of DPAs should not be construed as a ‘backroom deal’ for corporates, or an indication that it has softened its approach. Instead, the SFO is keen to communicate that the use of DPAs is an additional tool available to assist it in disposing of its cases in the interests of justice. The Director of the SFO, David Green CB QC, has made clear in the Report that the SFO’s focus remains firmly on reducing the harm caused by high levels of economic crime and preserving the UK’s reputation as a safe place to do business.
The Report also commented on the specialist Proceeds of Crime Division of the SFO which investigates and prosecutes cases where money laundering is alleged, primarily using the powers in the Proceeds of Crime Act 2002. It also provides assistance to overseas authorities by freezing and confiscating assets in the UK. This year, the SFO obtained 12 confiscation orders with a combined value of £25.3m and a further £9.1m was recovered for the victims of fraud by enforcing confiscation orders previously obtained. Whilst the Report doesn’t provide statistics on the total value of fraud investigated by the SFO, earlier this year KPMG reported that the value of alleged fraud reaching UK Courts exceeded £1 billion in 2016.
Kathryn Garbett, Partner and Head of the Fraud Defence Group at Mishcon de Reya says:
“Despite the recent success of the SFO in investigations, prosecutions and DPAs, the Report demonstrates that the recovery of actual sums for the victims of fraud by the SFO remains relatively low. This highlights that the SFO’s main focus is still very much on conviction of the wrongdoers, rather than the recovery of the victim’s losses. For a victim, whose primary objective is to recover that which has been lost as a result of the fraud, the civil recovery route is still more effective. Whilst the victim will shoulder the costs, they will control the ambit and timing of proceedings for the losses suffered against the wrongdoers and the result can be quicker and the recoveries higher than relying upon the SFO.”
Hannah Blom-Cooper, a Legal Director in the Fraud Defence Group at Mishcon de Reya says:
“The SFO’s role is to investigate the most serious or complex fraud, bribery and corruption cases and, where appropriate, to prosecute the cases which fall within that remit. In determining which cases to investigate, not only is the SFO constrained by the Statement of Principle requiring consideration of a number of factors such as whether there is a strong public interest and the level of financial loss suffered, the SFO also has to prove its cases before a jury beyond reasonable doubt. When considered in the context of the SFO’s budgetary restraints, it is not difficult to see why certain borderline cases of fraud may not be taken on by the SFO.
“By contrast, the burden of proof in a civil claim is on a balance of probabilities, with the case heard before a judge rather than a jury. The ability to take control of an investigation and commence civil proceedings, when there is material which reasonably shows a case of fraud, provides victims with an attractive alternative to reporting to the SFO. Not only will a victim be able to pursue civil proceedings and potentially recover its losses much faster than the SFO, there is also the possibility of providing the material from the civil proceedings to the SFO with a view to encouraging the SFO to open a criminal investigation.”