Will the SFO speed up its investigations? And if so, how?

Since taking office last year, Lisa Osofsky, the director of the Serious Fraud Office (“SFO”), has repeatedly made clear that she aims to speed up investigations. Part of that, she says, involves improving the agency’s focus and considering whether it is always necessary to look at “every last scrap of evidence”. While this sounds good in theory, it may be easier said than done.

Ms Osofsky’s desire to improve focus and efficiency is to be welcomed. The SFO’s four corporate Deferred Prosecution Agreements (“DPAs”) to date have taken an average of almost three years to conclude following the formal opening of an investigation. Individual suspects in those same cases have had to wait even longer to receive a charging decision.

What is unclear, however, is how Ms Osofsky’s intends to achieve her objective in practice. Resource constraints aside, there are procedural issues that are likely to present obstacles.

First, UK DPAs are more heavily scrutinised by the courts than their U.S. equivalents. For the court to determine (as it is required to) that a DPA is in the interests of justice and its terms “fair, reasonable and proportionate”, the SFO needs to demonstrate that it has conducted its own investigation and not simply relied on external work product. The SFO is acutely aware of this, having previously been the subject of judicial criticism for allegedly “outsourcing” an investigation which led to the collapse of the trial of Victor Dahdeleh in December 2013.

Second, prosecutors in the UK are subject to stringent disclosure obligations vis-à-vis those they prosecute. For example, the SFO must take reasonable steps to identify and consider material held by third parties that may be relevant to an issue in the case. When the SFO is investigating a company and considering a DPA, it will often be looking beyond the corporate settlement to the potential prosecution of individuals. Seeking relevant material from third parties, particularly if it is held overseas, takes time. Any failure by the SFO to do things by the book, particularly in terms of its disclosure obligations towards criminal defendants, may leave it open to challenge in any future criminal proceedings. In a recent case, the SFO was heavily criticised by the court for not having done more to require a company, in entering into a DPA, to hand over its records of internal interviews which were potentially relevant to the defence in the related criminal proceedings of individuals. (See the case of R (on the application of AL) v SFO [2018] 1 WLR 4557.) The court’s ruling has served as a reminder to the SFO that the expediency of corporate settlements cannot be allowed to supplant due process and the proper conduct of investigations.

Third, the SFO recently suffered a humiliating defeat when the trial of three former Tesco executives for fraud was discontinued by the trial judge, despite the SFO having earlier concluded a DPA with the company based on the same facts and in which the executives were publicly named. Whilst inconsistency between corporate and individual outcomes is not necessarily problematic per se (especially bearing in mind that the evidential thresholds for a DPA and a prosecution or conviction are different), the outcome of that trial has caused some to question the validity and fairness of the DPA process. In the financial regulatory context, the practice of settling cases with firms before pursuing individuals has fallen out of favour in recent years. Following some inconsistent outcomes of its own, the FCA’s stated policy is now to bring cases against corporates and individuals in parallel (see page 11 of the FCA’s Approach to Enforcement). Were the SFO to take a leaf out of the FCA’s book, it would have enormous implications for the length of investigations given that individuals are more likely than corporates to contest prosecutions. It would also arguably remove one of the key components of a DPA’s appeal, namely its relative speed as compared with a prosecution.

Ms Osofsky is right to want to make the SFO more focused and efficient in its handling of investigations, and to recognise the enormous toll that protracted criminal investigations can take on both corporates and individuals. It remains to be seen, however, how she will tackle the inherent tension that exists between the expediency of corporate settlements and the rules of due process in criminal prosecutions.