Written evidence submitted by the Serious Fraud Office (SFO) (IEF0014)

The Serious Fraud Office (SFO) welcomes the Foreign Affairs Committee’s interest in illicit and emerging finance. This is a policy area of critical importance to our operations. SFO is the law enforcement agency tasked with investigating the most serious and complex cases of fraud, bribery and corruption, and many of our cases span multiple jurisdictions, so we are grateful for the opportunity to share our views with the Committee.

The SFO fights complex financial crime, delivers justice for victims and protects the UK’s reputation as a safe place to do business. Our objectives are:

To investigate and prosecute the most serious or complex cases of fraud, bribery and corruption;
To uphold the rule of law, deliver justice for victims and recover the proceeds of financial crime;
To deter criminals and require offending companies to reform in order to protect the UK’s economy and global reputation as a safe place to invest and do business; and finally,
To collaborate with partners in the UK and overseas to ensure there is no safe haven for those who commit serious financial crime.

The SFO was created by the Criminal Justice Act 1987 (CJA 1987) with power to investigate and prosecute serious or complex fraud, including bribery and corruption. The SFO takes on a small number of large economic crime cases and operates in multidisciplinary case teams comprising lawyers, investigators, forensic accountants and other specialists working together through the lifetime of a case. This joint structure is known as the ‘Roskill’ model.

At any time, the SFO has roughly 40 open cases, excluding our proceeds of crime cases and our provision of international assistance. While our cases are roughly split equally between fraud and bribery and corruption, our remit is broad—the SFO has prosecuted economic crimes such as LIBOR rigging and unlawful financial assistance, and can prosecute for cartel behaviour.

There is flexibility as to the cases that the SFO takes on. While many involve very significant proceeds of crime, the SFO does not automatically reject cases below a certain monetary threshold. Instead, we look at the overall level of harm inflicted through the suspected criminality in a case. The SFO takes on cases that meet the Director’s Statement of Principle:

The Director may investigate any suspected offence which appears to her on reasonable grounds to involve serious or complex fraud, bribery or corruption.
In considering whether to authorise an investigation the Director will take into account the actual or intended harm that may be caused to:

the public, or
the reputation and integrity of the UK as an international financial centre, or
the economy and prosperity of the UK

and whether the complexity and nature of the suspected offence warrants the application of the SFO’s specialist skills, powers and capabilities to investigate and prosecute.

How effective are existing international governance regimes and other measures to tackle illicit finance, and what gaps remain?

As we reported to the Justice Select Committee in January, the current Mutual Legal Assistance (MLA) framework functions adequately, albeit generally slowly.

In addition to formal regimes such as the MLA framework, the SFO makes use of informal networks to cooperate with other jurisdictions (as appropriate).

It is critical that any new initiatives take in to account the existing landscape. There is a risk that, in the desire to enhance cooperation, the landscape becomes cluttered and duplicative.

What measures beyond sanctions can counter illicit finance, including bilateral and multilateral approaches?

The Proceeds of Crime Act 2002 (POCA) contains extensive powers to counter illicit finance. In particular, the powers under Part 5 POCA, which allow for the freezing and recovery of assets without a criminal conviction in the UK. This can allow UK law enforcement agencies to seek to recover the assets of those who have, for example, embezzled funds abroad and brought them to the UK. In November 2020, the SFO secured £1.2m from a Brazilian national implicated in Lava Jato (Operation Car Wash), which uncovered systematic bribery to win contacts from the Brazilian state oil company, Petrobras.

The MLA regime is critical to the fight against illicit finance. Nearly all SFO cases involve multiple jurisdictions, so nearly all cases require extensive MLA. In our investigation in to Rolls Royce (which resulted in a DPA), our International Assistance team sent requests 29 requests to 17 countries, of which 23 resulted in provision of evidence.

It is our experience that many other jurisdictions are willing to assist the SFO in our cases (and the SFO regularly assists with other jurisdictions’ economic crime cases). Should the SFO experience difficulty in obtaining assistance from another jurisdiction, we may consider using our contacts in the European Judicial Network, or speaking to the officers based in embassies in country (usually those working for the National Crime Agency or Crown Prosecution Service) to understand whether they could provide assistance.

The existence of Deferred Prosecution Agreement [1] (DPA) regimes across the world allows the SFO to take joint coordinated action with foreign agencies. In January 2020, the SFO agreed a Deferred Prosecution Agreement with Airbus, which formed part of a record-breaking global settlement involving the US Department of Justice and the French Parquet National Financier. Should more than one jurisdiction seek to prosecute the same criminality, it would be necessary for one jurisdiction to be granted primacy. Where those jurisdictions have DPA regimes or equivalents, it is possible for each jurisdiction to seek an agreement with the company in question (avoiding, as far as possible, making the company pay twice for the same criminality). This ensures that companies face some form of justice in the UK.

The SFO is an active participant in a number of multilateral groups aimed at tackling illicit finance. Of note, we attend the OECD Working Group on Bribery in International Business Transactions as part of the United Kingdom’s delegation. The working group is responsible for monitoring the implementation and enforcement of the OECD Anti-Bribery Convention, which includes identifying and promoting best practice in detecting, investigating and prosecuting foreign bribery.

We also have close bilateral relationships with many law enforcement agencies in financial centres, including the US DoJ. Since 2017, we have had a US DoJ staff member seconded to the SFO to facilitate this cooperation.

What is the potential impact of new distributed ledger technologies and digital currencies (both cryptocurrencies and central bank digital currencies) on illicit finance and money laundering?

The SFO is seeing crypto assets appear in an increasing number of referrals. We must ensure that we have the right powers to seize, investigate and—where appropriate—recover crypto assets. We also need to ensure that companies that handle crypto assets cooperate with law enforcement, noting that in the UK these companies fall within the regulated sector, therefore have a legal obligation to do so.

Of most interest to this committee will be questions of jurisdiction. While owning property (such as a house) abroad is the preserve of a limited number of people, anyone can purchase crypto in another jurisdiction. We anticipate more criminals purchasing crypto assets outside the UK to facilitate laundering and storage of their proceeds of crime. It is imperative that questions of jurisdiction are considered in the development of any new powers that relate to crypto assets.

March 2022

[1] A Deferred Prosecution Agreement is a public settlement reached between prosecutors and an organisation. The agreement allows the SFO (or Crown Prosecution Service) to impose conditions upon an organisation for criminal behaviour, including payment of compensation and financial penalties and/or arrangements to monitor the organisation’s governance.