SFO’s approach to tackling bribery and corruption in the UK


Financier Worldwide Magazine

July 2018 Issue

Over the past 12 months, UK businesses have reported an increase in the occurrences of bribery and corruption, according to PwC’s 2018 Global Economic Crime Survey. There is clearly a growing awareness and vigilance by companies to identify and address these issues, particularly in light of the incentives for cooperation offered by UK law enforcement.

As the Serious Fraud Office (SFO) reaches its 30th year and enters a new chapter with the appointment of a replacement for David Green QC, we examine the developments over the previous years and comment upon the future of SFO investigations.

Self-reporting and DPAs: is self-reporting really necessary?

The issue of self-reporting misconduct to the SFO and the consequences of doing so has been a matter of focus during the last few years. Historically, the practice of the SFO was to offer civil remedies in exchange for self-reporting. The SFO, under the tenure of David Green QC, has moved away from this, often criticised, practice and is keen to emphasise that cooperation can still lead to prosecution, although ‘credit’ could be given – in the guise of a deferred prosecution agreement (DPA).

The importance of prompt self-reporting and full cooperation was underlined in the prosecutions of Standard Bank, XYZ Ltd and Sweett Group plc.

To illustrate the point, focusing on Sweett in particular, a Wall Street Journal article dated 21 June 2013 linked Sweett to Middle Eastern bribery but Sweett only reported the payments to the SFO a week before the article was published. The following year, the SFO formally began its investigation into Sweett. However, it was not until December 2014 that Sweett self-reported certain other connected payments as being potentially suspicious. During the course of the investigation, the company also refused to hand over certain witness interviews to investigators and selectively characterised categories of payments as legitimate under a finder’s fee agreement, even continuing to make such payments during the course of the SFO’s investigation. The company was convicted of failing to prevent bribery and ordered to pay £2.25m.

In a speech delivered by the SFO’s Ben Morgan in late 2015, he advised corporates in strong terms about early engagement with the SFO and stated: “Each case will turn on its facts, but if you want a DPA coming to us before we come to you is a very good start.”

The DPA framework was introduced in the UK in February 2014. DPAs are a form of agreement reached between a prosecutor and an organisation which could be prosecuted. Under the supervision of a judge, a DPA allows the prosecution to be suspended for a period, in exchange for the organisation meeting certain specific conditions. DPAs can be used for fraud, bribery and other economic crime. Although an expensive process, for commercial organisations the advantages of this route are obvious: DPAs avoid lengthy and costly trials, provide some certainty to businesses as to the outcome of the matter at an earlier stage and, as transparent, public events, can enable corporate bodies to make full reparation without the collateral damage of a criminal conviction.

Despite these strong messages from the SFO, last year, however, saw a shift in focus away from early self-reporting, to cooperation on a more general level.

Rolls-Royce was charged for its part in a conspiracy to commit bribery, spanning seven jurisdictions over three decades, in connection with the Civil Aerospace and Defence businesses of Rolls Royce. Rolls Royce did not self-report. Nevertheless, in 2017 the SFO entered into a DPA with Rolls Royce, emphasising the “extraordinary” cooperation with the SFO’s investigation. As part of the DPA, Rolls Royce obtained a 50 percent discount on its penalty (reducing it to £239m), paid a disgorgement of profits amounting to approximately £258m, paid the SFO’s costs and agreed to implement a robust compliance programme.

At the time, some commentators suggested that DPAs were no longer a panacea limited to those who bare all to the SFO at the earliest opportunity, so self-reporting was not necessary.

This is perhaps too strong a reaction. DPAs are still very much in their infancy in the UK and so it is difficult to draw any concrete conclusions about when they will or will not be available. So far, the SFO has only reached agreement on four DPAs in the UK – compared to hundreds in the US.

Self-reporting and full cooperation still appear to be key to the possibility of entering into a DPA. The SFO has been at pains to emphasise that although Rolls Royce did not self-report, its high level of cooperation meant that the SFO was able to expand its investigation and address misconduct in different business areas.

Companies will need to conduct a detailed risk vs. benefit analysis when determining whether it is appropriate to self-report, and much will turn upon the individual circumstances of the case.

Going forward, there is no doubt that DPAs will remain a useful tool in the SFO’s armoury and we are also likely to see more use of them in conjunction with other regulatory bodies such as the FCA. The investigation into Tesco’s overstatement of its 2014 profits by £326m due to the company’s incorrect booking of payments it received from suppliers is a case in point. In April 2017, the SFO announced it had entered into a DPA with Tesco in which it agreed to pay a penalty of £129m. Although the DPA has yet to be published (while the individuals charged are tried), the SFO once again emphasised the “exemplary cooperation” of Tesco and also made reference to the FCA’s concurrent investigation.

An interesting development will be to see how DPAs entered into by companies interplay with action taken against employees. If Alun Milford of the SFO is to be taken at his word, the SFO will want to see “[r]eform, including the removal of senior managers who are either implicated in or who should have been aware of the criminality” as part of its determination as to whether a DPA is available. This potentially encourages companies to expose employees to evidence their “cooperation” with the SFO. The SFO was recently criticised in R (AL) v SFO [2018] for failing to fulfil its disclosure obligations towards AL, a former employee of XYZ Ltd prosecuted for bribery offences. XYZ Ltd had entered into a DPA in 2016 for the same offences. AL had sought disclosure of documentation created during the internal investigation by XYZ, including the notes taken of the interviews with AL and other employees during the investigation. XYZ refused to cooperate and AL sought judicial review of the SFO’s failure to compel XYZ to produce the interview notes from XYZ despite XYZ having agreed to cooperate with the SFO in the DPA. The case was dismissed on technical grounds, however it does highlight the difficulties that can and will be faced by former employees who are prosecuted for offences for which the corporate has entered into a DPA.

Internal investigations: privilege

There have also been significant developments over the past 12 months in relation to the way that corporate bodies investigate issues that are brought to their attention.

The recent high-profile case of SFO v Eurasian Natural Resources Corporation Ltd [2017] signalled a significant change in the way that internal investigations must be conducted going forward. In particular, it was determined that a criminal investigation by the SFO did not constitute adversarial litigation for privilege purposes. Since a claim for litigation privilege can only be made out where a prosecution is in reasonable contemplation and an SFO investigation is only a first step toward any decision to prosecute, the judge took the view that ENRC did not contemplate a prosecution when the documents in question were produced, so those documents were not protected by litigation privilege.

This decision does not mean that parties can no longer obtain legal advice in the context of an internal investigation, but it does have significant consequences for the examination of those issues. In particular, although communications between a lawyer and a client for the purposes of legal advice continue to be protected, the fact-finding communications between a lawyer and anyone other than the true client are not privileged. In addition, the findings made on when litigation can be said to be in contemplation in a criminal context, make it difficult for parties or their lawyers to claim privilege over factual enquiries necessary to allow that advice to be given.

As a result, businesses must be cautious when communicating with third parties, which include employees within a business who are interviewed as part of investigations being conducted into allegations.

Even where litigation can be said to be in contemplation, in order for a claim to privilege to succeed, the documents in question must be produced for the dominant purpose of the conduct (including settlement) of the litigation, rather than avoiding litigation or with a view to being shown to an adversary (although the distinction between settling and avoiding litigation in this context is at best difficult to discern).

Strangely, the reasoning in this case appears to suggest that a company threatened with civil proceedings in relation to allegations of misconduct can investigate them protected by litigation privilege, but a company under criminal investigation for those same allegations cannot. Despite this anomaly, it was said in R (AL) v SFO that it is “settled law” that notes taken from first interviews in internal investigation are rarely privileged.

The appeal of the ENRC decision is hotly anticipated.

SMEs: a difference in approach?

In another key development, the House of Lords announced in May 2018 that anti-bribery legislation would be reviewed to examine if its requirements were too onerous for small businesses.

This is a particularly timely announcement given the landmark prosecution of Skansen Interiors Limited earlier this year. The small British interior design company, which had just 30 employees working in a single open-plan office, was convicted of failing to prevent bribery, after the company uncovered improper payments of £10,000 made by one of its former directors to a prospective client for confidential information during the tendering process for a contract. The case examined what companies should be expected to demonstrate as “adequate” anti-bribery procedures and processes. Skansen argued that as an SME it had limited resource and that, on its own assessment, the risk of bribery was low, so detailed policies and procedures were not necessary. This was rejected by the courts and Skansen was found guilty of failing to prevent bribery. The judges referenced a number of issues (from a lack of records documenting compliance discussions to not appointing a senior executive in charge of compliance). At the same time, the director in question was sentenced to 12 months’ imprisonment and was disqualified as a director for six years. Many have commented that this response was overly harsh and could discourage SMEs from self-reporting such issues.

The output of the review will be hotly anticipated by SMEs and their executives. In the meantime, it appears that the judiciary’s view is that the bar for assessing the “adequacy” of anti-bribery and corruption procedures is set high and defences based on proportionality should be carefully considered.


Whether the SFO will be rolled up into the National Crime Agency remains to be seen, however it is clear that the forthcoming SFO director will be joining the organisation at a very interesting time in its development.


James Carlton and Sona Ganatra are partners, and Julianna Tolan is an employed barrister, at Fox Williams LLP. Mr Carlton can be contacted on +44 (0)20 7614 2634 or by email: Ms Ganatra can be contacted on +44 (0)20 7614 2544 or by email: Ms Tolan can be contacted on +44 (0)20 7614 2595 or by email:

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