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Is the SARs Annual Report of any relevance?

Fri, 10/13/2017 - 14:48

Earlier this week, the National Crime Agency (NCA) published the Suspicious Activity Reports (SARs) Annual Report for 2017, which covered 18 months between October 2015 and March 2017. SARS are received by the United Kingdom Financial Intelligence Unit (UKFIU). Unsurprisingly, UKFIU has continued to experience a year on year increase in the number of SARs received. The next report is likely to be more interesting, given the significant number of developments scheduled to the “anti-money laundering” provisions in 2017-18.

The NCA is the UK’s principle body for receiving notifications of suspicious activity for money laundering purposes. For more information, see Practice note, National Crime Agency: overview.

Both the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 (TACT) impose a duty on firms in the regulated sector (and on their employees) to make a report where they know or suspect, or have reasonable grounds for knowing or suspecting, that another person is engaged in money laundering or terrorist financing, in respect of information coming to them within the course of business in the regulated sector (sections 330 and 331, POCA and section 21A, TACT). For more information, see Practice note, Reporting Suspicious Activities: overview and Note for the board on when to make a disclosure on money laundering

The Annual Report – overall SARs:

The overall number of SARs received by the UKFIU over the 18 month period of October 2015 to March 2017 was 634,113. This included 43,290 received in March 2017, which was the most SARs ever recorded for one month, an increase on 7,406 from the previous March. Compared with reporting periods of previous SAR Annual Reports, the UKFIU received 419,451 SARs between October 2015 and September 2016, which was an increase of 9.84% on the same period for 2014–15 (381,882).

The vast majority of SARs came from credit institutions, the number from banks totalling 525,361 or 82.85% of all SARs. Other key figures include:

  • Accountants and tax advisers: 6,693 (1.06%).
  • Independent legal professionals: 4,878 (0.77%).

The SARs report also demonstrates a significant growth in the number of cases where a “defence against money laundering” (DAML) has been requested (27,471). The UKFIU introduced the term “defence against money laundering” as it had found that the term ‘consent’ was being frequently misinterpreted. POCA  allows reporters a defence against a money laundering offence by seeking the consent of the NCA to undertake an activity which the reporter believes may constitute one of the three principle money laundering offences (see Practice notes, Acquisition, use and possession offence, Arranging offence and Concealing offence).

The report suggests that the term ‘DAML’ is aimed at improving submissions by clarifying what the UKFIU can or cannot grant. A similar procedure in place enables requests for a defence against terrorism financing (DATF).

The total amount of assets denied to criminals as a result of DAML requests (both those refused and granted) over the 18 month period was £56,541,579. In comparison to the 2014-15 figure of £46,375,449, the total for 2015-16 was £33,433,271, a decrease of 27.91%. The total restrained over 2015-16 as a result of refused DAML requests was £14,089,147, a considerable reduction from the £43,079,328  figure for 2014-15. The suggested reason for the drop is because 2015’s figures were skewed by two very large refusals, in the region of £10m and £9.2m.

However, the amount of cash seized from refused DAML requests for 2015-16 saw an increase of 1,127.09%, from £1,313,437 to £16,117,014. The reason for this was a cash detention/seizure of over £15m in 2016. For more information see Practice note, cash seizure. 

Certainly, the sums recorded in the SARs report are trivial when compared with the varying estimates of how much money is laundered every year, to such an extent that the headline cash seizure and restraint figures do not really justify the SARs process. There are however three further benefits of the SARs regime, which are touched upon in the report.

First, the extent to which the process contributes to the UK’s criminal intelligence. The UKFIU screens and analyses SARs on a daily basis for opportunities to prevent and detect crime, and can fast-track suspicions to law enforcement agencies. Over the reporting period the UKFIU  disseminated 513 SARs relating to NCA subjects of interest.

The UKFIU is also able to identify SARs containing information on potential financial crimes that target vulnerable members of society. In the reporting period 3,424 vulnerable person intelligence packages were disseminated to Law enforcement authorities (LEAs).

Secondly, over the 18 month reporting period the UKFIU also disseminated 1,955 SARs relating to politically exposed persons (PEPs) and 1,257 integrity SARs (SARs that relate to knowledge or suspicion of money laundering and/or terrorist financing that concerns an employee of an LEA or the civil service). This is the first time the UKFIU has included integrity SARs in the SARs Annual Report.

Finally, a key aspect not covered in the report is the issue of preventing the proceeds of crime entering the legitimate financial system in the UK. The great unknown is how many criminals avoid the UK banking sector, or other service sectors, because of concerns that the criminality will be picked up when applying due diligence within the regulated sector.

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (MLR 2017) make a limited number of changes to a company’s anti-money laundering provisions (see Legal update, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 published.) It is far too early to assess the impact of the 2017 regulations, but they clearly envisage that any issues of concern will be picked up before monies enter the system or particular services are instructed. The amount of money that does not enter the regulated sector due to the action taken by the various gatekeepers must be a consideration of any future reporting.

The future

In April 2016 the Government published its Action Plan for Anti-Money Laundering and Counter-Terrorist Finance. The Action Plan includes a commitment to reform the SARs regime, making the necessary legislative, operational and technical changes. This was followed by an open consultation on the anti-money laundering supervisory review (see Legal update, HM Government launches open consultation on the Anti-money laundering supervisory review).

On 15 March 2017, the government published the Anti-money laundering supervisory regime: response to the consultation and call for further information. For more information, see Legal update, HM Government publishes anti-money laundering supervisory regime: response and call for further information.

The call for further information proposed:

The reforms seek to address a key risk identified in the 2015 UK National risk assessment of money laundering and terrorist financing (the NRA). The NRA found that the effectiveness of the UK’s supervisory regime is inconsistent and, whilst some supervisors are highly effective in some areas, there is room for improvement across the board. For more information, see Legal update, UK national risk assessment of money laundering and terrorist financing.

The reforms also complement work across government to deliver on the commitments in the 2016 Action Plan for anti-money laundering and counter terrorist finance (the action plan), which set out how the public and private sector will work together to tackle money laundering. For more information, see Legal update, Home Office and HM Treasury publish Action Plan for anti-money laundering and counter-terrorist finance.

Meanwhile, the Criminal Finances Act 2017 will also make changes to the SAR regime. The changes that will eventually appear on the statute book include:

  • Law enforcement agencies will be able to apply for a court order to extend the moratorium period during which those who have filed a SAR and sought consent from the NCA to proceed with a transaction are prevented from doing so before consent is deemed to be given. An extension can be given for periods of up to 31 days, up to a total of an additional 186 days, in order to enable law enforcement agencies to conclude their investigations in relation to information contained in SARs.
  • The power of the UKFIU to request additional information from reporting entities.
  • Provisions to enable greater information sharing to take place between entities in the regulated sector to combat money laundering and terrorist financing, and an extension to the use of disclosure orders so that law enforcement agencies can compel the provision of information and documents in connection with a wider range of money laundering investigations and investigations into other offences.
  • Authorisation to obtain, discharge or vary a disclosure order will be able to be given by an appropriate officer within the relevant investigating authority.

There is no commencement date yet for these SAR provisions of the CFA 2017.

In such circumstances, there is little that can be deduced from the SARs report. The key considerations for the next year will be whether the OPBAS will be a success and whether the new legislation will make much of a difference to the reputation of UK PLC as a global hub for money laundering. The Financial Action Task Force (FATF) is due to inspect the UK’s money laundering arrangements for the first time in a decade in 2017/18. How far the UK has come will be interesting.

Practical Law David Bacon

Failure to prevent the facilitation of tax evasion: can we expect many prosecutions?

Fri, 09/29/2017 - 14:08

The criminal offence of failure to prevent the facilitation of tax evasion comes into force on 30 September 2017. The offence is the second “failure to prevent” offence, although a consultation on further offences was launched in early 2017. The offence is similar to section 7 of the Bribery Act 2010, which introduced the corporate offence of failure to prevent bribery. The offences are effectively strict liability, in that no mens rea is required on the part of those representing the corporation. Both offences also have similar defences, although described as “prevention” rather than “adequate” procedures for the tax offence. In more than six years there has not been a contested prosecution of the section 7 Bribery Act offence, which raises the question of how many prosecutions will occur under the Criminal Finances Act 2017?

What is the new offence?

Under the Criminal Finances Act 2017 (CFA 2017) there is no change to the underlying offences of tax evasion, but two new corporate offences are introduced: failure to prevent facilitation of domestic tax evasion offences (section 45) and failure to prevent facilitation of overseas tax evasion offences (section 46).

There are three elements to the offences:

  • Criminal tax evasion by a tax payer (either an individual or an organisation).
  • Criminal facilitation of the tax payer’s offence by a person acting on behalf of an organisation.
  • The lack of any proportionate procedures defence.

A criminal conviction of a taxpayer is not a pre-requisite for bringing a prosecution against a relevant body. However, the prosecutor must establish that the predicate criminal offence of evasion by the taxpayer had been committed.

The offences do not create any new classes of tax evasion, they merely change the way in which organisations that facilitate, or fail to prevent evasion, can be prosecuted. The offences cover all forms of tax evasion. For more information on the predicate offences, see Practice notes:

An organisation will have a defence to both the domestic and overseas offences if, at the time the offence was committed, either:

  • It had in place reasonable “prevention procedures”.
  • It was not reasonable in the circumstances to expect the corporate entity to have any prevention procedures in place.

Prevention procedures are designed to prevent persons acting in the capacity of associated persons from committing the domestic and overseas tax evasion facilitation offences (sections 45(3) and 46(4), CFA 2017). They are based on six principles, almost identical to those set down in the Bribery Act 2010 guidance. For more information see Practice note, Failure to prevent facilitation of tax evasion: proportionate procedures.

Although HMRC’s guidance suggests the types of processes and procedures that could be put in place by relevant bodies (see HMRC guidance: failure to prevent facilitation of tax evasion), it does not provide any guarantees as to what constitutes prevention procedures. Ultimately, only the courts are able to determine whether a corporate has got reasonable prevention procedures in place. This creates a great deal of uncertainty for firms, who can never be certain that the steps taken and policies put in place will satisfy a prosecutor and ultimately a jury that they are adequate.  So, although the Act clearly brings about a large degree of self-policing against the commission of the facilitation offences, there is no pre- charge verification of adequacy procedure that the company  can deploy as part of their eventual defence.

Will there be more prosecutions than under section 7?

Perhaps the best place to start is with HM Revenue & Customs, who will be the principle agency with the job of investigating the offence. Historically, HM Revenue & Customs have attempted a number of different methods for tackling tax evasion, from the Hansard procedure of telling HMRC everything about errors and omissions in tax affairs following which a financial settlement will be agreed, to the current Code of Practice 9 procedure. For more information see Practice note, HMRC criminal investigation policy.

Following the global financial crisis in 2007 and the resultant austerity, and a number of high profile tax evasion cases, prominently the Panama Papers (see Blogpost, Our man in Panama) there is political capital to be gained by appearing to pursue tax evasion more assiduously than before. Tax authorities have been given enhanced budgets, and consequently HMRC is under growing pressure to bring more prosecutions as a means of resolving tax disputes.

The complexity of personal tax regulations, combined with an increasingly aggressive approach by HMRC, means that a growing number of individuals and companies are finding themselves under criminal investigation. It has been reported that the number of criminal prosecutions for tax evasion had jumped by almost a third year on year (795 prosecutions in 2013/14, up from 617 in 2012/13), with HMRC anticipating 1,165 prosecutions in 2014/15, that is, a 46% increase this year to hit its target . The Financial Times reports that the number of evasion cases lined up for prosecution has nearly doubled to 1,135 in the three years prior to 2015-16.

One of the difficulties in prosecuting tax evasion was holding those who facilitate the process to account. All existing tax offences can be brought against corporate bodies or individuals, but the process of doing so is problematical (see Practice note, Corporate Criminal Liability). Such difficulties were one of the main arguments used by those in favour of the failure to prevent offence, and continue to be advocated in respect of the expansion of the failure to prevent offence to include all economic crime.

Failure to prevent offences have had a curious history. Initial plans to extend corporate criminal liability were shelved by the government in 2015, when in a response to a written question the then Justice Minister, Andrew Selous, gave two reasons for the decision not to pursue the introduction of the new offence:

  • The principle of corporate criminal liability applies in the UK already and commercial organisations can be, and are, prosecuted for wrongdoing.
  • There have been no prosecutions under the section 7 Bribery Act 2010 offence.

The plans were reintroduced at the anti-corruption summit in May 2016 and reaffirmed by the Attorney General in September 2016. For more information see Legal update,  Criminal Finances Bill in the making. In January 2017, HM Government opened a call for evidence on the reform of corporate criminal liability (see Blog, Or the beginning of corporate prosecution). This appears to have stalled again, but will no doubt be reopened at some point in the future.

The obvious question is whether a failure to prevent offence is an effective way to tackle the problem. The section 7 offence had a large impact on organisations, with considerable time and money put into creating anti-bribery policies, clauses inserted into contracts and, largely as a result of inaccurate media reporting, fears that accepting a glass of wine at a corporate reception would lead to a Serious Fraud Office investigation.

In reality, there has been a single prosecution under section 7, covered in Legal update, Sweett Group plc sentenced for first conviction under section 7 of the Bribery Act 2010 (Crown Court). The Sweett prosecution demonstrated the inability of the company to maintain the defence of having adequate procedures in place to prevent bribery under section 7(2).  However, the case provides little guidance on the extent to which measures are deemed to be adequate. Sweett was unable to show that it had procedures for requiring documentation of the fact that due diligence had been undertaken on whether subcontracted consultancy contracts signed by subsidiary companies were justified, and failed to act on internal reports by KPMG dating from 2011 indicating inadequate systems and controls. However, there was no judicial guidance on whether particular steps are adequate or not, or any indication of how a jury might perceive a firm’s anti-bribery policy.

In the same time frame, there have been successful prosecutions of two companies under the Prevention of Corruption Act 1906, applying the principles of corporate criminal liability. In January 2016, Smith and Ouzman Ltd, a UK printing company, were fined £1,316,799 for corruption offences after being found guilty by a jury at Southwark Crown Court. On 1 August 2017, F.H. Bertling Ltd pleaded guilty to conspiracy to make corrupt payments to an agent of the Angolan state oil company, Sonangol, in relation to their freight forwarding business in Angola and a contract worth approximately $20m.

There will of course be a number of organisations seeking to develop new policies to put in place proportionate procedures – see Practice note, Failure to prevent facilitation of tax evasion: proportionate procedures. There will be no lack of willingness to investigate suspected tax evasion by HMRC, although concerns of resources will of course remain. But it is difficult to get around the inherent difficulties of prosecuting failure to prevent offences when the prosecutor seeks to argue that a company’s anti-tax evasion procedures do not go far enough. It will take a very brave prosecutor to seek to prove to a jury that anything other than an absence or the most half-hearted attempt at prevention procedures are so inadequate as to amount to a criminal offence.

Practical Law has published a number of resources for the failure to prevent tax evasion offence. For more information see Legal update, Practical Law resources published to prepare you for the failure to prevent tax evasion offence.

Practical Law David Bacon

How will the criminal justice system manage cyber fraud?

Fri, 09/22/2017 - 14:13
  • 71 million individuals were dealt with by the Criminal Justice system in the last year.
  • The total number of individuals formally dealt with by the CJS in England and Wales has been declining since 2007 to a record low.
  • 43 million defendants were prosecuted.
  • The conviction ratio was 86% – the overall conviction ratio has increased by 2 percentage points to 86% (the highest in the decade) in latest year, and has fluctuated between 80% and 84% over the earlier years of the decade.
  • The overall custody rate has remained unchanged at 7.2% since the year ending March 2016.
  • The conviction ratio for indictable offences remains broadly stable compared to the previous year (83%).
  • For indictable offences, the custody rate rose to 31% and the average custodial sentence length increased to 19.5 months.
  • The custody rate for indictable offences has been increasing since the year ending March 2011, from 24% to 31%.
  • For indictable offences, a greater proportion of offenders (31%) received immediate custody than any other type of sentence.
  • First time offenders were more likely to be convicted than to be cautioned.
  • The most common sentence given for all offence groups is a fine, which accounted for 74% of offenders sentenced in the latest year.
  • The proportion of offenders receiving immediate custody rose by 2 percentage points in the last year, while the proportion of community sentences decreased similarly.

How we prosecute fraud

Statistics for the first quarter of 2017 show a record low facing prosecution, but record high in the number of convictions. Fraud, which has not previously been counted in the annual crimes recorded figures, is now the most commonly experienced crime in England and Wales, with 3.4 million incidents in the year ending March 2017. Over half of these (57%, 1.9 million incidents) were cyber-related.

The CPS records show an increase of 31% in fraud and forgery cases since 2011, although like general crime, only a small proportion of fraud is actually reported. The cost of fraud and money laundering to the UK vastly exceeds the cost of tax evasion which is the focus of the Criminal Finances Act. In 2016, HMRC estimated that the UK’s tax gap stood at £36 billion, of which tax evasion accounted for £5.2 billion. In May 2016, the Annual Fraud Indicator put the cost of fraud to the UK economy at £193 billion. The cost to the public sector is £37.5 billion with procurement fraud costing £127 billion a year.

The way fraud is committed is changing as a result of evolving technology and is increasingly enabled through the internet and the use of digital devices. It is often across borders, involving large corporate structures.

The used and unused material in a complex fraud case can reach multiple terabytes or even petabytes is a major issue for the CPS which has been repeatedly criticised for disclosure failings in HMI reports. For more information, see: HMCPSI and HMIC publishes inspection report on the disclosure of unused material in volume Crown Court cases

Keeping the scope of the case within reasonable limits to ensure that trials are manageable is a constant challenge. In the HBOS case, involving a £245 million loss, there was an excess of 200,000 pages of evidence which was served and over 8,000 items of scheduled unused material. The electronic material contained terabytes of material, including a memory stick containing over 32,000 documents which had to be manually searched.

Alison Saunders, speaking at the John Harris Memorial lecture said in terms:

“Fraud is not limited by international boundaries so it is vital that we have good and effective international relationships with prosecutors and judges overseas. The ability to secure the right evidence from abroad and collaborate effectively – especially where the jurisdiction to prosecute is shared – is central to our work. And so as Britain leaves the EU we will need to ensure we continue to have effective relationships with our European and other counterparts in the international sphere.”

For more information, see: Criminal Justice cooperation post Brexit: European Arrest Warrant, European Investigation Order and Mutual recognition

Alison Saunders cited Operation Greenyards, in which two city traders conspired to defraud a Russian bank of £141million. The proceeds of the fraud were moved around the world including the Caribbean, Switzerland and Eastern Europe in an effort to cover up its origins. The financial analysis allowed the CPS to outline the individual roles which each defendant played, resulting in a successful conviction. The men were sentenced to 12 years’ and 7 years’ imprisonment and this conviction was dependent upon evidence from abroad and the data supplied.

The CPS has a dedicated, specialist fraud division to ensure the right skills and resources are used to prosecute complex and serious fraud and corruption. Their work ranges from the prosecution of bankers and investment scams to prosecuting those who seek to defraud the taxpayer of millions of pounds. As fraud continues to evolve and there is an increase in online fraud, the CPS needs to be prepared with the necessary skills and experience to prosecute these cases. The CPS is now working more digitally as it prosecutes digital crime. The criminal justice system cannot claim to have been at the forefront of the technological revolution but progress is being made. The CPS now receives cases electronically, with cases dealt with electronically, and generally, served electronically.

Whilst the CPS has not yet used a DPA mechanism as a means of alternative disposal for a company offender, it is a designated prosecutor for those purposes. Nevertheless the SFO has made significant use of them this year.

SFO figures show 13 defendants were convicted in seven cases, giving a conviction rate of 87% (up from 32% the previous year) and by case of 100%. This conviction rate (although from a much smaller pool) matches the CPS records for fraud convictions.

The history of fraud reform

Successive governments have sought a more effective way to deal with fraud cases which, due to their complexity and in some cases the sheer volume of material, are long and expensive to try. In 1998 the Home Office consultation paper “Juries in Serious Fraud Trials” proposed four options as alternatives to the present form of jury trial. The decision as to whether or not a case should be treated as serious fraud was to be for the trial judge, based on the overriding criteria of the ‘interests of justice’. The judge was required to take into account the following:

  • Does the case require some specialised knowledge?
  • Are the factual issues complex or voluminous?
  • Does the case require prolonged examination of documents or accounts?
  • Will the trial, as a whole, be unduly long or complex?

The four options proposed by the paper were:

  • Special jury – selected from a special screening process.
  • Trial by Judge alone.
  • Fraud trial tribunal.
  • Trial by a single judge with a jury for key decisions.

The option pursued was trial by judge alone. In 2003, following three long and not entirely successful fraud trials (that of Robert Maxwell, Blue Arrow and Jubilee Line lasting 8, 12 and 21 months respectively) section 43 of the Criminal Justice Act 2003 was given royal assent but never implemented. This provision would allow cases of serious or complex fraud to be tried without a jury if a judge was satisfied that:

“The complexity of the trial or the length of the trial (or both) is likely to make the trial so burdensome to the members of a jury hearing the trial that the interests of justice require that serious consideration should be given to the question of whether the trial should be conducted without a jury. ”

However the Attorney GeneralLord Goldsmith, subsequently sought to repeal the section and to replace it with new provisions under the Fraud (Trials Without a Jury) Bill. In 2007 the Fraud (Trials Without a Jury) Bill passed its third reading in the House of Commons though it faced fierce criticism from those asserting that trial by jury is the bedrock of the criminal justice system. The government felt that long and complex trials put too much pressure on jurors. Cases such as the Jubilee line case collapsed under their own weight. The Solicitor General at the time, Mike O’Brien, thought that an application for a bench trial would only be appropriate in about 6 cases per year and that the procedure did not breach any fundamental principles.

At the time, then Shadow Attorney General Dominic Grieve said that the bill sent out “a dreadful message about the way it views participatory democracy in this country.”

In any event the Bill was defeated.  Section 43 of the CJA 2003 was repealed by section 113 of the Protection of Freedoms Act 2012 and so preserves the right of defendants accused of serious or complex fraud to be tried by a jury of their peers. Trial by judge alone in cases where there is a danger of jury tampering, provided for by section 44, remains in force.

The way that increasingly complex cases are tried continues to be debated.

The future for fraud reform

Alison Levitt at the Cambridge Symposium earlier this month proposed a new legal approach to economic crime: the Combined Fraud Court. This court would combine the civil and criminal systems, making the process quicker, cheaper and, crucially, delivering a better outcome for victims.

The court would work by having a single trial, using aspects of both civil and criminal law, heard by a specially qualified “fraud judge” sitting with a jury. At the end of the trial, the judge would ask the jury whether they are satisfied to the criminal standard that the defendant is guilty.

If the answer was yes, then the judge would deal with aspects which are currently dealt with under separate regimes:

  • Sentencing the defendant.
  • Assessing and awarding compensation to the victim.
  • Confiscating assets which represent the proceeds of the defendant’s crimes.
  • Costs.

Where a jury is not sure of guilt, then the judge discharges the jury and reverts to the civil procedure: having heard all the evidence and decided, on the balance of probabilities, whether to find in favour of the victim. If the answer is yes, the judge assesses the damages payable to the victim and the costs.

The advantages to the victim of such a procedure are that:

  • Witnesses only have to give evidence once.
  • There is one trial rather than two, and so it is both quicker and cheaper.
  • The same judge hears both the civil and the criminal aspects of the case so that there is consistency in assessing culpability in both sentencing and compensation.

The potential difficulties with this approach are that it requires a complete re-write of the rules of evidence, criminal procedure and civil procedure, and undermines the role of the jury. For more information, see:  Cambridge Symposium 2017: Alison Levitt QC speech

What is clear is that as the complexity of fraud increases in an increasingly digitised world. The way that fraud is investigated and prosecuted will have to evolve so that evidence may be collected, analysed and presented at trial in a way that is comprehensible and fair. The starkest contrast in cyber fraud commission and cyber fraud prosecution is the speed at which the former is completed. The delay in getting fraud trials to court is a huge problem for victims, witnesses and hampers any realistic prospect of compensation. All these factors mean that this will be a continuing topic for debate and may be one of the reasons that DPAs become the preferred disposal for corporate economic wrongdoing, even of the most egregious form. For more information, see blog post: The Rolls-Royce DPA: an end to corporate prosecution?

Practical Law Morag Rea

The myth of excessive health and safety legislation

Thu, 08/17/2017 - 14:51

The news that Big Ben will cease to ring following the chimes at noon on Monday 21 August was met with opposition from both MPs and the media. The restoration project has been planned since 2015 and details of the project approved by three parliamentary committees. Part of these plans include silencing the bell until 2021 while the restoration work takes place with exceptions being made for special occasions such as Remembrance Sunday and  New Year’s Eve. 

A statement on the parliamentary website set out the reasoning of the parliamentary commission which is responsible for the administration of parliament. This includes an explanation of the feasibility of having it chime at all. The full reasons include the health and safety of workers on site.

“Starting and stopping Big Ben is a complex and lengthy process. The striking hammer is locked and the bells can then be disconnected from the clock mechanism. The weights are lowered within the weight shaft to the base of the tower and secured in a safe position. The whole process takes around half a day to complete.

Following a thorough assessment, experts have concluded that it would not be practical or a good use of public money to start and stop the bells each day, particularly as we cannot fully predict the times that staff will be working on this project.”

The purpose of health and safety legislation is to ensure that people’s health is not made worse by the work that they do and to ensure that a particular work activity does not cause injury to any members of the public, for more see Note for the board on health and safety offences.

The Control of Noise at Work Regulations 2005 regulate exposure to levels of noise at work. In this case, if the bell was to toll every 15 minutes as it does now, workers in Elizabeth Tower would be exposed to 120 decibels with every bong. Noise induced hearing loss is irreversible damage to the ears caused by exposure to high levels of noise. The decision by the commission is based both on this legislative requirement and on the protection of the public purse but “health and safety gone mad” is a strong feature of many objections.

Health and safety legislation is often used as an excuse for enforcing company policy or as a reason to prevent activities going ahead.

The Health and Safety Executive (HSE) published the annual workplace fatality statistics, which show 137 deaths in 2016-2017. There were 92 members of the public fatally injured in accidents connected to work in 2016-17, for more see Legal update, HSE publishes workplace fatality statistics. 

The HSE has set up an independent ‘ Myth busting panel ‘to answer queries and deal with daily misreporting and misuse of health and safety legislation as an excuse for a specific policy. This panel has provided explanations in the past year on issues such as an employer who stopped proving funds for alcoholic drinks at Christmas night out citing health and safety and a mum who was asked to leave a café as the manager banned the use of dummies for young children for health and safety reasons. The panel provided responses that you may predict in both cases, that health and safety legislation had nothing to do with either decision and it would be better for companies to explain their reasoning and policy rather than using an excuse.

The HSE site includes their top 10 Health and Safety myths and ridiculous assertions that are blamed on health and safety law.

Children being banned from playing conkers unless they are wearing goggles

Office workers being banned from putting up Christmas decorations

Trapeze artists being ordered to wear hard hats

Pin the tail on the donkey games being deemed a health and safety risk

Candy floss on a stick being banned in case people trip and impale themselves

Hanging baskets being banned in case people bump their heads on them

Schoolchildren being ordered to wear clip on ties in case they are choked by traditional neckwear

Park benches must be replaced because they are three inches too low

Flip flops being banned from the workplace

Graduates ordered not to throw their mortar boards in the air

The uproar about the decision to silence  the Great Bell ( Big Ben)  in Elizabeth Tower of the Houses of Parliament has brought a statement from the HSE which has a regulatory as well as advisory role and has been involved in the decision making and work planning for this renovation project.

The statement explains that the HSE has worked on the project with contractors in the planning stages, The HSE has understood that the renovation is complex and challenging and setting aside Health and safety issues, the complexity of the work would have silenced Big Ben for at least two years. The HSE statement highlighted that there is broad agreement that the noise risks associated with working around the clock bells are highly significant and the principal contractor would be expected to manage those risks but how it does so is a matter for the contractor and their client.

This kind of misuse, misunderstanding and misreporting has meant that the very important work that the HSE does is diminished. It is perhaps striking that the legislators responsible for our laws are the ones most up in arms about the silencing of Big Ben, seemingly without a clear idea of the purpose of health and safety legislation. It is not about stopping people having fun for spurious reasons or making work more expensive or slow but about protecting the health and well-being of others, particularly workers.

Practical Law Morag Rea

Tackling modern slavery

Mon, 08/14/2017 - 13:02

Last week saw the disturbing news from the National Crime Agency (NCA) that the criminal offences of modern slavery and human trafficking are far more prevalent in the UK than previously thought. On 10 August the NCA released figures showing there are currently more than 300 live policing operations targeting modern slavery in the UK, including:

  • The arrests of three men in north east England with suspected links to a Romanian organised crime group using the internet to advertise the services of victims trafficked for sexual exploitation, and then forcing them to launder the proceeds through criminally controlled bank accounts. Ten women were safeguarded. Across Europe, the group and its wider network are suspected to have made around €5 million in criminal profits.
  • The rescue and safeguarding of five Slovakian men encountered during an investigation into allegations of forced labour in the Bristol area. A man and woman with links to a car wash business were arrested, and are suspected of being part of a wider organised crime group.
  • A surge in operational activity focusing on labour and sexual exploitation co-ordinated by the NCA through May and June, codenamed Operation Aidant, which led to 111 arrests in the UK and some 130 people being encountered who may be considered as victims.

Linked operational activity also took place on mainland Europe resulting in around 40 further arrests and the launch of 25 further investigations as a result of intelligence gained. In addition, the number of people being referred into the National Referral Mechanism (NRM) as potential victims of modern slavery continues to rise. For more see Legal update, New guidance published on the National Referral Mechanism for victims of modern slavery and Blog, Modern slavery reporting Q1.

It is rarely surprising when particular crimes turn out to be more prevalent than official figures suggest. The Modern Slavery Act 2015 (MSA) is a relatively new piece of legislation that consolidates the law on slavery and trafficking to create  three criminal offences:

  • Slavery, servitude and forced or compulsory labour.
  • Human trafficking.
  • Committing any offence with the intent to commit human trafficking.

For the first offence, an individual or company commits an offence if they:

  • Hold another person in slavery or servitude.
  • Require another person to perform forced or compulsory labour.

The mental element of the offence is both a subjective and an objective: the circumstances must be such that the person knows or ought to have known that this was happening. In determining whether a person is being held in slavery or servitude, the court will have regard to all the circumstances, including:

  • Any of the person’s personal circumstances which may make them more vulnerable than others (such as being a child, their family relationships or any mental or physical illness).
  • Any work or services provided by the person, including work or services provided in circumstances that constitute exploitation.

An  individual’s consent to travel or to act, whether they are an adult or a child, does not preclude a determination that the person is being held in slavery or servitude or is being required to perform forced or compulsory labour.

For the second offence, a person commits an offence of human trafficking if they arrange or facilitate the travel of another with a view to them being exploited. This may be by recruiting, transporting or transferring, harbouring or receiving a person, or transferring or exchanging control over them. Again, the mental element is tested objectively and subjectively: did the person suspected of committing the offence know or ought to have known that another person was likely to be exploited during or after the travel. Exploitation is defined as

  • Securing services by force, threats or deception constitutes exploitation, as does using force, threats or deception to induce the victim to either:
  • Provide another person with benefits of any kind.
  • Enable another person to acquire benefits of any kind.

The third offence broadens the previous trafficking offence applying it to any form of exploitation.

The report also revealed that:

  • The most common nationalities of victims brought into the UK are from Eastern Europe, Vietnam and Nigeria.
  • There are cases of modern slavery in “every large town and city in the country”, and tens of thousands of victims across the UK.
  • The more the NCA examines the problem of modern slavery, the greater the discovery of the widespread abuse of the vulnerable.
  • Modern slavery victims are put to work in many roles including prostitution, and working at car washes, in nail bars and in the construction, agriculture and food processing industries.
  • People going about their normal daily lives are likely to come across vulnerable victims engaged in these activities. Some of these victims will not appreciate that they are victims.

In response the NCA has begun a new campaign focused on sexual and labour exploitation. The campaign will highlight the signs of modern slavery which people may encounter in their everyday lives, and encourage them to report it. The public is encouraged to look for signs of modern slavery, such as visible injuries, a distressed appearance and any indication that they are being controlled by another person, for more on guidance for health visitors see Legal update, Guide to spotting signs of domestic slavery published by Institute of Health Visitors.

The NCA’s Will Kerr said:

“This is a crime which affects all types of communities across every part of the United Kingdom. It is difficult to spot because often victims don’t even know they are being exploited. Nevertheless we need those communities to be our eyes and ears. There will be people living and working where victims come into contact with everyone else’s so-called normal lives. They may see something they feel is not quite right. That might be someone seeming afraid, vulnerable or being controlled, moved around or forced to work against their will. If they do, we need the public to speak to us”.

One of the difficulties faced in tacking modern slavery is getting victims to cooperate with the police. A story from 11 August 2017 confirms the problem, where four Vietnamese workers detained in a disused nuclear bunker in order to work on a cannabis factory refused to cooperate with the police, leading to charges being dropped.

New legislation and awareness campaigns are of course welcome. But the key issue in tackling modern slavery will be building trust with those trafficked and enslaved, and encouraging more people to give evidence. This will require acceptance that those involved in lower levels of criminality, for example the cultivation of cannabis or prostitution, do not feel that going to the authorities will result in either their prosecution or their deportation. Similarly, as another prosecution made public last week demonstrates, those involved in exploitation are often the most vulnerable in society, perhaps less likely to seek the protection of the authorities.

This also involves challenging the perception that criminal cases can be routinely prosecuted without the use of criminal informants. In another very sad case revealed this week, the prosecution of a number of men in the north of England for the sexual exploitation of girls and young women, the disclosure that a convicted sex offender was acting as a covert human intelligence source (CHIS) for a police force, and paid a reward of £10,000, was met with “outrage” in the media and from some charities. This ignores the reality that organised criminal networks are very hard to tackle without outside information.

For more information see Note for the board on offences under Modern Slavery Act 2015 and Practice note, Sentencing modern slavery offences.

Paul Brooks of Practical Law will be speaking on modern slavery at the Cambridge Symposium at Jesus College Cambridge on Thursday 7 September.

Practical Law David Bacon

Corporate manslaughter: the facts

Fri, 07/28/2017 - 15:48

There has been much confusion and misreporting about corporate manslaughter in the last 24 hours. To correct some common misunderstandings, and in the light of the Lord Chancellor’s  plans for a greater public understanding of the legal system, here are some facts on corporate manslaughter prosecutions in England and Wales. 

There have been 24 convictions for corporate manslaughter since it became a criminal offence in 2008, all of which are detailed at Corporate convictions tracker. 

Section 1(1) of the Corporate Manslaughter and Corporate Homicide Act 2007 defines the offence of corporate manslaughter and as the title suggests only applies to corporate bodies.  It builds on key aspects of the common law offence of gross negligence manslaughter which is the offence an individual (a real person as opposed to a legal person) can be prosecuted for.

Liability for corporate manslaughter is not contingent on the guilt of one or more individuals but depends on a finding of gross negligence in the way in which the activities of the organisation are run. It is not necessary to identify the directing mind and will of the company.

Corporations, which are defined as any “body corporate, whether incorporated within the UK or elsewhere”, can be liable for corporate manslaughter. Partnerships or entities of a similar character formed outside of the UK, trade unions and employers’ associations may also be liable for corporate manslaughter, if the organisation concerned is an employer. For more see Note for the board on corporate manslaughter, Practical Law UK Standard Document 

An organisation will be guilty of corporate manslaughter if all of the following factors are present:

  • It owed a relevant duty of care to the victim.
  • It is in breach of its duty of care as a result of the way in which its activities are managed or organised by its senior management.
  • The way in which its activities were managed or organised caused the victim’s death.
  • The management failure amounts to a gross breach of the duty of care.

An individual cannot be guilty of committing, aiding, abetting, counselling or procuring the commission of the offence of corporate manslaughter. However, individuals can be prosecuted either for gross negligence manslaughter or for associated health and safety offences (and have been in several cases to date).

Whilst there have been hundreds of convictions for health and safety offences in recent years largely because they are strict liability offences, there have been far fewer convictions for corporate manslaughter -just 24 since the Corporate Manslaughter and Corporate Homicide Act 2007 was implemented in 2008, although this may be increasing as there were three convictions in the same week in May see Legal Update, Two companies fined £500,000 and £300,000 following conviction for corporate manslaughter (Crown Court).

There has been a rise in gross negligence manslaughter convictions where individual directors and site managers or foremen are prosecuted as well as the company. The courts have indicated that where lives are put at risk a custodial sentence will usually be appropriate. See   Suspended sentence for gross negligence manslaughter unduly lenient (Court of Appeal) (Northern Ireland), Practical Law UK Legal Update Case Report 

There were 137 work place deaths recorded between April 2016 and March 2017.

Practical Law Morag Rea

Disclosure – can we avoid another critical report in a few years’ time?

Thu, 07/20/2017 - 16:42

This week saw the publication of two reports: a joint report from HM Crown Prosecution Service Inspectorate and HM Inspector of Constabulary, and The Mouncher Investigation Report by Richard Horwell QC, both highly critical of the way the police and the CPS handle disclosure, and calling for significant change.

Many criminal practitioners will feel a strong sense of déjà vu when reading another report detailing the various failings of the disclosure process. In 2013, the DPP published a report by HMCPSI into serious failings in the disclosure process that led to a miscarriage of justice in R v Mouncher. A decade earlier, a number of prosecutions brought by HM Customs & Excise were overturned when customs officers deliberately withheld information that a critical prosecution witness was a registered informant in the infamous LCB prosecutions.  A common theme in the failings seems to be some police officers and prosecutors treating the disclosure process as some form of side issue, rather than a vital part of the criminal justice system.

The purpose of disclosure:

Disclosure is the process in which material obtained by the prosecution in a criminal investigation, but not used in the prosecution, is provided to the defence as meeting the criterion for disclosure under section 3 of the Criminal Procedure and Investigations Act 1996. The CPIA 1996 creates two general obligations on the Prosecution:

  • The obligation on the prosecution to notify the accused of and disclose to them all the evidence on which they intend to rely.
  • The obligation on the prosecution to make available to the defence any material which meets the disclosure test but which they do not intend to use. These materials are often referred to as unused material.

This is normally done by the police and prosecutors preparing a schedule of material, and periodically reviewing any material gathered in the course of an investigation that isn’t served as evidence.  For more information see Practice note, Disclosure in the Crown Court.

Although disclosure can seem like a dull, administrative process, an unnecessary addition to already strained workloads, it is a vital part of ensuring fair trials and due process. The CPIA 1996 requires investigators to pursue lines of enquiry that may point away from the guilt of the principle suspects, and consequently helpful exculpatory material can often be found. In fraud cases, this can of course include evidence pointing to the consent or connivance of the offence by senior managers.

The failures of disclosure can be stark: it will often cause delays to trials, which wastes resources and causes unnecessary distress to victims and witnesseses. In more serious failings, it can lead to innocent people being convicted, or the staying of otherwise viable prosecutions as as abuse of process. It is therefore vital that the various parties involved in disclosure take the various reports seriously and ensure the recommendations are implemented. For more information see Practice note, Dealing with failures in disclosure.

The joint report:

HM Crown Prosecution Service Inspectorate and HM Inspector of Constabulary have published a joint report on the disclosure of unused material in volume Crown Court cases. The report has identified a number of aspects of concern regarding how Crown Court trials are handled by the prosecution, and how police and the Crown Prosecution Service (CPS) manage unused material.

The inspection found a number of flaws with the disclosure process, including:

  • That police scheduling (the process of recording details of both sensitive and non-sensitive material) is routinely poor.
  • Revelation by the police to the prosecutor of material that may undermine the prosecution case or assist the defence case is rare.
  • Prosecutors fail to challenge poor quality schedules and in turn provide little or no input to the police.
  • Neither party is managing sensitive material effectively and prosecutors are failing to manage ongoing disclosure.
  • The auditing process surrounding disclosure decision-making falls far below any acceptable standard of performance.
  • The failure to grip disclosure issues early often leads to chaotic scenes later outside the courtroom, where last minute and often unauthorised disclosure between counsel, unnecessary adjournments and – ultimately – discontinued cases, are common occurrences.

Some particularly stark figures emerged in the joint report. Of a total of 146 files reviewed to assess the overall quality of handling of unused material by the police, not a single one was rated “excellent”, and 42% of files were rated “poor”. Of the 56 cases reviewed that were identified on the CPS computer system as “unsuccessful outcomes or ineffective trials due to prosecution disclosure failings”, 62.5% were rated as “poor”. The CPS fared little better: no cases were rated “excellent” and 33% were “poor”.

The inspection has identified a number of reasons for failures in the process of disclosure which form the basis of recommendations:

  • There needs to be improvement in the training provided to police and in the supervision provided to both police and prosecutors.
  • There must be better communication between the two parties and in the information and communications technology (ICT) systems used to support the transfer of information.
  • There needs to be a greater level of importance given to disclosure by those in key strategic roles in both agencies, especially for non-complex cases which form the majority of cases going to court.
  • There needs to be a cultural shift that approaches the concept of disclosure differently, that sees it as key to the prosecution process where both agencies add value, rather than an administrative function.

The report made the following specific recommendations:


  • Police or CPS must correctly identify all disclosure issues relating to unused material at the charging stage and this must be reflected fully in an action plan.

Within six months:

  • The CPS should comply with the Attorney General’s Guidelines on Disclosure requirement and ensure that every defence statement is reviewed by the allocated prosecutor prior to sending to the police and that prompt guidance is given to the police on what further actions should be taken or material provided.
  • Police forces should improve their supervision of case files, with regard to the handling of unused material. This process should be supported by the requirement for supervisors to sign the Disclosure Officer’s Report each time this is completed.
  • The CPS Compliance and Assurance Team should commence six monthly disclosure dip samples of volume Crown Court files from each CPS Area, with the findings included in the CPS Area Quarterly Performance Review process.
  • All police forces should establish the role of dedicated disclosure champion and ensure that the role holder is of sufficient seniority to ensure they are able to work closely with the CPS Area Disclosure Champions using the existing meetings structure to ensure that disclosure failures are closely monitored and good practice promulgated on a regular basis.
  • The CPS should provide a system of information sharing between the Areas and Headquarters that enables the effective analysis of Area performance on disclosure.
  • The CPS and police should develop effective communication processes that enable officers in charge of investigations and the allocated prosecutor to resolve unused material disclosure issues in a timely and effective manner.

Within 12 months:

  • The College of Policing should produce guidance on training that is of sufficient depth to enable police forces to provide effective training on the disclosure of unused material to all staff involved in the investigation process. The guidance, which may best be served by the use of classroom based or a similar form of interactive training, should concentrate on ensuring that staff fully understand their responsibilities in relation to the revelation of both sensitive and non-sensitive material and how to schedule material correctly.
  • The police and the CPS should review their respective digital case management systems to ensure all digital unused material provided by the police to the CPS is stored within one central location on the CPS system and one disclosure recording document is available to prosecutors in the same location.

The Mouncher Investigation Report by Richard Horwell QC

In 1988, a female was murdered in Cardiff. Five men, later referred to as the “Cardiff Five”, were convicted of her murder. Their convictions were quashed in 1992 as some evidence was obtained by oppression. Later, in 2003, DNA evidence revealed the murderer to be an individual entirely unconnected with the Cardiff Five. He subsequently pleaded guilty.

An investigation commenced into how and why civilian witnesses had lied and, in particular, into the police officers who had taken their witness statements. In 2009, 13 police officers and two civilians were charged with offences of conspiracy to pervert the course of justice and perjury. The case against the police officers was that they had “moulded, manipulated, influenced and fabricated” the evidence against the five innocent men.

There were to be two trials, the first of which commenced in July 2011 at Swansea Crown Court against eight of the police officers and the two civilians. The trial was beset by disclosure problems and on 1 December 2011 the prosecution offered no further evidence and the police officers in that and the following case were acquitted.

This investigation by Richard Horwell QC commenced in March 2015, was directed at discovering what had caused the trial to collapse and at investigating many related issues, principally involving the conduct of police officers and prosecution lawyers in the disclosure process.

The report is 327 pages long and makes a number of specific comments about the case handling, in general that:

  • Bad faith played no part in the errors of either the police officers or the prosecution lawyers. It was human failings that brought about the collapse of the trial.
  • The evidence reveals a rather chaotic trail of poor management by police officers and the prosecution lawyers, particularly the CPS.

The report makes the following observations on the disclosure process:

  • The CPS Disclosure Manual is too long, running to more than 100 pages and comprising 37 chapters and 11 annexes.
  • The Lord Justice Gross: Review of Disclosure in Criminal Proceedings of September 2011 stated the CPS Disclosure Manual “would greatly benefit from substantial shortening”. It was frustrating that this recommendation had been ignored.
  • The use of the word “strict” is inappropriate as a description of or a qualification to the disclosure test.
  • Disclosure counsel has to make an assessment of unused material and if it is thought that it “might reasonably be considered capable” of undermining the prosecution or assisting the defence, then it “must” be disclosed. Disclosure counsel does not have to be “sure” that material is disclosable, the test requires a lower standard, and descriptions of arguments over disclosure and concern that decisions to disclose would constantly have to be justified, are anathema to disclosure where one simple principle should dominate namely, “if in doubt, disclose”.
  • Disclosure is not performed in timeless academia; it is performed often in police stations under significant pressures of time and weight of work. If the principles of openness and generosity are employed, disclosure errors should be rare.
  • There must be a significant change in attitude, emphasis and approach from prosecuting authorities to build the confidence necessary for the criminal justice system to work efficiently. Our system may be adversarial but disclosure must not be.
  • The failures in Mouncher should not be met by a change in the law but by a change in the approach and commitment of prosecuting authorities to the discharge of their disclosure obligations in complex cases.
  • In the triumvirate of prosecution, defence and judge, however, there can be no doubt that the principal responsibility lies with the prosecution; only if it is discharging its obligations comprehensively and properly can the defence and especially the judge be fully engaged.

The way forward:

The two documents have much in common. Both documents call for a change in the approach of the prosecution: the HMCPSI and HMIC joint inspection calls for a “change in attitude to ensure that disclosure is recognised as a crucial part of the criminal justice process and that it must be carried out to the appropriate standards”. The Mouncher Investigation Report, states “the failures in Mouncher should not be met by a change in the law but by a change in the approach and commitment of prosecuting authorities to the discharge of their disclosure obligations in complex cases”.

Many criminal practitioners will feel a strong sense of frustration that this issue has not been dealt with before. A review of disclosure in criminal proceedings, by the Rt Hon Lord Justice Gross, was published in September 2011. The report stated that:

“Improvements in disclosure must – and can only – be prosecution led or driven. To achieve such improvements, it is essential that the prosecution takes a grip on the case and its disclosure requirements from the very outset of the investigation”.

There is clearly a need to make considerable improvements in the process. The joint report recognises that the consequences of matters failing to improve include more cases referred to the Criminal Cases Review Commission and subsequently appeal, the potential for miscarriage of justice and a waste of court time, particularly as matters are dealt with at the last minute.

However, the report does not consider the key aspect of funding in ensuring the disclosure process runs efficiently. Both the police and the CPS have experienced funding cuts over the past few years, with no commensurate fall in their workload. The recommendations proposed are all very welcome, but as the report states:

“Inspectors were informed during interviews with both police and CPS staff that they believed the main causes for poor disclosure practices were down to limited resources and lack of time. Given some of the files examined pre-dated the BCM (better case management) process, it is clear that these issues are long standing and predate recent budget restrictions”.

This significant and crucial deficiency in the justice system cannot be resolved without the issue of resources being addressed.

In addition to adequate resourcing, the following should be considered:

  • Disclosure must be treated as an integral part of the prosecution process, as significant as conducting a lawful arrest, search or obtaining a witness statement, and not as a tedious process to go through at the conclusion of the investigation.
  • Disclosure is easiest if the process is integrated into the investigation, rather than undertaken at the conclusion (although not without its historic problems, the SFO seems to suffer less disclosure problems despite handling some of the most material-heavy cases). The starting point is ensuring every item is entered onto a schedule at the time it is obtained, which is then subject to regular review.
  • In order to improve the understanding of “assists the defence” and “undermines the prosecution”, both the CPS and police forces should consider using defence practitioners for training purposes and to audit their own processes.
  • Although the return to a “keys to the warehouse” approach would be unhelpful, those conducting the process must operate a non-adversarial policy and if in doubt disclose, rather than entering into sometimes lengthy and repeated arguments as to whether such material meets the CPIA criteria.

Both the joint report and the Mouncher report should be the incentive for all parties to finally resolve the long-standing disclosure failures. It is in the interest of all parties, especially the prosecution, to create a sea change in this simple yet highly problematical part of the criminal justice system.

Practical Law David Bacon

SFO saved, for now or for the foreseeable future?

Mon, 07/03/2017 - 14:48

Somewhat discreetly, as reported in CivilServiceWorld, the government has suggested that its plan to abolish the Serious Fraud Office has been put on hold. The 2017 Conservative manifesto committed to disbanding the SFO and incorporating its responsibilities into the National Crime Agency.  This was a decision not well received by practically every practitioner and commentator, including the former Chancellor George Osbourne, who dedicated the lead editorial in the Evening Standard to  setting out the reasons for retaining the organisation.   The reasons to save the SFO as expressed by business crime practitioners were covered in detail in Blog, Ten reasons to save the SFO.

There was no mention of the proposal in last week’s Queen’s Speech, which led to speculation that the idea had been dropped. The Attorney General Jeremy Wright suggested that the government was rethinking the idea.

The government is continuing to review options to improve the effectiveness of the UK’s response to economic crime, and any measures resulting from this work will be announced in due course. The government is committed to strengthening the UK’s response to bribery, corruption, money laundering, fraud and other forms of economic crime.

The timing of the manifesto commitment, with the Cabinet Office review of economic crime in progress, and before the findings of the consultation on expanding the failure to prevent economic crime offence seemed illogical and ill-timed,  leading some to speculate it was based on a personal animosity towards the SFO by the Prime Minister rather than any practical reasoning. The wafer-thin majority of the Conservative/DUP coalition, the significant number of backbench Conservative MPs who have spoken in support of the SFO in the past and the significant Brexit-related workload of the government all make the legislative changes less likely. The life expectancy of the independent SFO may be longer than the May premiership.

However, the SFO cannot afford to relax just yet. At the G5 conference on Anti-Corruption in London on 27 June 2017, David Green, while being non-committal on giving any further guidance on the circumstances when a company can guarantee being offered  a DPA or what constitutes a minimum of cooperation, did confirm he will be leaving the SFO at 5:00PM on Friday 21 April 2018, after six years in the job. This timetable means that the advertisement for his successor will be published in the next months, and a successor announced before the end of the year. One side effect of the current uncertainty may be fewer applicants for this vital role. Mr Green’s successor may receive a better hand than that dealt to him in 2012, and would no doubt be far more interested in building on recent success than managing a problematical incorporation with the NCA.

Resources will continue to be a key issue. The blockbuster funding method of high profile SFO cases has been criticised for many reasons, including challenging the independence of a prosecutor, and not allowing the SFO to make the long-term investment in staff that would be ideal. It is to be hoped that the response to the SFO surviving legislative change will not be death by funding cuts.

The G5 conference reinforced the notion that any change to the SFO as the main body dealing with corruption in the UK will not be welcome: discussion regarding the agency, to self -report, or not to self -report, the extent to which internal investigations should take place and (especially) privilege after the ENRC judgement were the key discussion topics over two days, eliciting a number of different views. There are no firm answers to any of these questions, but previous speeches from the SFO and the judgement of LJ Leveson provide pretty good guidance, if not the fine lines that some may prefer. One thing that will clearly not be welcomed is having to learn the various steps from scratch with a new organisation. For more information see  Legal update, Third deferred prosecution agreement approved between SFO and Rolls-Royce (Crown Court).

The SFO is subject to almost continuous speculation as to its future, and is never going to get a guaranteed long term period of operation. However, this was the first time a commitment to effective abolition was written down as a manifesto commitment, somewhat ironically at a time of relatively successful performance. The Cabinet Office report and consultation will no doubt come up with helpful suggestions. In the meantime, the government should back the SFO, both verbally and financially, and ensure a successful transformation from the Green era. Perhaps this commitment will depend on the success of the Barclays prosecutions.  The pressure to deliver results continues.

Practical Law David Bacon