The challenges facing the SFO

The Serious Fraud Office (SFO) has, it should be emphasised, a lot resting on its shoulders.

What’s their role?

Created by the Criminal Justice Act 1987 for the purpose of tackling the highest levels of serious and complex fraud, bribery and corruption, it takes on a small number of large – and often high-profile – cases, which tends to mean that its successes, when they occur, are notable. And its failures never escape notice or criticism.

What’s the problem?

Unfortunately for the SFO, it appears to be going through a period where failures outweigh the successes. When you also consider the SFO is now having to face new matters as diverse as pandemic-related fraud, environmental, social and governance (ESG) issues, cryptocurrency –and the need to function on an international level in the wake of Brexit, the present appears to be a challenging time for the agency. But, arguably, its present problems stem from the relatively recent past and, in particular, from some of the major missteps the agency has chosen to take.

Case study: Unaoil (R v Akle and Bond [2021] EWCA Crim 1879)

The Unaoil case has been one of the SFO’s biggest cases. But it also encapsulates the SFO’s problems. Having secured the convictions of four individuals over the use of bribery to secure oil contracts in Iraq, the SFO’s own disclosure mistakes led to two of the convictions being quashed, its conduct being criticised, in the bluntest of terms – and the Attorney General commissioning a review into SFO failings in the case.

Some of those disclosure failings relate to what can only be called unusual contact between SFO Director Lisa Osofsky and a private investigator acting as a ‘fixer’’ for some figures in the investigation. There was also the eventual conclusion Kevin Davis, SFO chief investigator, had somehow deleted data on his mobile phone that logged his interactions with this private eye.

As a result, we now await the report from former High Court judge and ex-Director of Public Prosecutions, Sir David Calvert-Smith, who was asked by the Attorney General to examine the SFO’s Unaoil disclosure shortcomings.

Not the first example?

What should be remembered is that there is also a report due into the collapse of the fraud and false accounting trial of two former Serco executives, which happened months before the Unaoil fiasco. That trial was another that fell apart because the SFO failed to disclose evidence to the defence. When viewed in tandem, the two cases raise major concerns about the SFO’s approach to disclosure.

Unaoil: the latest

The Unaoil case is notable for the SFO having been outmanoeuvred by the US authorities when it came to prosecuting the Ahsani family, which controlled the company. As a result, two Ahsani brothers, Cyrus and Saman, currently await sentence in the US, after pleading guilty to Foreign Corrupt Practices Act charges. Their father, Ata Ahsani, has reached an agreement with the US Department of Justice that he will not be prosecuted. For the SFO, which initiated the Unaoil investigations – and made most of the running when it came to probing the activities of this oil industry giant – this outcome is both embarrassing and damaging to its reputation.

Lack of conviction(s)?

The SFO’s standing has also taken a pounding due to the number of major investigations which it has either dropped or been unable to secure a conviction in. Nisar Afzal, Libor, BAT, GSK and Barclays are just some that come to mind. The SFO could, possibly, point to its use of deferred prosecution agreements (DPAs) as a mitigating factor in its lack of convictions. But a track record of 12 companies being granted DPAs since 2015 hardly represents an effective alternative to a consistent string of successful prosecutions. It also doesn’t stand well alongside the US’ statistics, where DPAs are more commonplace and routinely involve larger financial settlements than the SFO obtains. And the fact there has still been no prosecution of an individual after a corporate has gained a DPA is hardly a ringing endorsement of the SFO’s prowess.

R (on the application of KBR, Inc) v Director of the Serious Fraud Office [2021] UKSC 2

The UK Supreme Court’s 2021 judgment in the case of R (on the application of KBR, Inc) v Director of the Serious Fraud Office [2021] UKSC 2 made it clear the SFO could not use s2 Criminal Justice Act 1987 to force KBR to hand over documentation held abroad. This should not be viewed as a total bar on the SFO’s international use of s2 notices. But it may prove restrictive. And it is just one more issue that the SFO has to manage.

Concluding observations

To have to square up to the colossal scale of pandemic-related fraud - never mind the other new issues mentioned earlier - is a battle the SFO may have to take on when it appears to be far from fighting fit. The HM Crown Prosecution Service Inspectorate (HMCPSI) pulled no punches in criticising the SFO’s sluggish response to complaints and inadequate record keeping. The long-running court battle involving Eurasian Natural Resources Corporation, US law firm Dechert and the SFO has also shed a far from favourable light on the conduct of some at the agency.

It may be difficult, however, to point the finger of blame at one individual - or even a number of them - for the SFO’s woes. It would also be misleading to attribute the problems to one factor. It could be argued that the SFO is under-resourced. But it can request extra Treasury funding for the blockbuster cases. Allegations of poor leadership could be made. But the problems appear to go down the chain of command, rather than be contained at the top. And to say it is not fit for purpose would be unfair, as it has had successes.

But there appears little doubt that if the SFO is to enjoy a change of fortunes, it may have to make changes to how it functions.

Aziz Rahman is senior partner with Rahman Ravelli, and was part of a panel discussing international enforcement at the New York State Bar Association’s 2022 Summer Conference addressing challenges facing the SFO: rahmanravelli.co.uk