The new SFO Director, Nick Ephgrave, was formerly Assistant Commissioner of the Metropolitan Police and Chief Constable for Surrey. It is therefore notable that his tenure began with an extension to the SFO’s statutory investigation powers.
Section 211 of the Economic Crime and Corporate Transparency Act 2023 expands the SFO’s powers so that they can now compel individuals and companies suspected of any potential SFO case to provide information before a formal investigation has been opened if the Director has reasonable grounds to believe that a crime has been committed.
Prior to the introduction of these new powers, the SFO could only compel the provision of information in international bribery and corruption cases. They can now exercise these powers in relation to complex fraud cases, as well as domestic bribery and corruption.
How will the new SFO powers be exercised?
The new powers will continue to be exercised under the now amended s2 Criminal Justice Act 1987 and would ordinarily be prefaced with the service of a ‘Section 2 notice’ which enables the SFO to:
- Compel the attendance of a potential witness at an interview in which questions must be answered or information furnished.
- Compel a potential witness to produce any ‘specified documents or documents of a specified description.
Defence lawyers may be permitted to represent a witness during a Section 2 interview, provided they are independent of the company to whom the notice applies.
Do I have to comply with a Section 2 notice?
Where a person or entity does not comply with a Section 2 notice, or when someone is interviewed and is found to have given false or misleading information, they can be prosecuted.
Can the SFO apply for a search warrant under Section 2 powers?
Where the SFO believes that serving a Section 2 notice might seriously prejudice the investigation, or it is not practical to serve a notice or the subject of a notice has not complied, the SFO also has the power to apply to a court for a search warrant under their Section 2 powers.
According to the law as it currently stands, the SFO have to be accompanied by a police constable to execute a search warrant, although the Law Commission has recommended that this requirement should be dispensed with once the SFO have entered the premises. The SFO have no power of arrest, but they can ask the police to make an arrest and the SFO will conduct their own interviews under caution.
If you or your business are the subject of a Section 2 search warrant, the SFO are required to be accommodating of any request by your legal team for disclosure of the material that has been laid before the Court in support of the search warrant application.
What will the new SFO powers mean in practice?
The government suggests the expansion of powers will:
- Allow the SFO to determine promptly whether a crime has taken place by giving it early access to information and evidence held by individuals or companies.
- Ensure that the early stages of an investigation are delivered more quickly. Currently, complex fraud cases can take over a year to develop, which can have a detrimental effect on victims and take up a large amount of taxpayer-funded resources.
- Ensure that proceeds of crime are identified more quickly, ensuring that assets can be preserved for confiscation or compensation.
- Ensure that fewer fraud investigations are shut down after a case has been formally accepted by the SFO, as referrals that do not meet reasonable grounds to suspect criteria can be identified and sifted out more effectively at the intelligence stage.
How does the SFO decide whether to open an investigation?
Information about potential criminal activity is assessed by the SFO’s Intelligence Unit. The Unit is comprised of intelligence operatives, lawyers, accredited financial intelligence officers, analysts and investigators who undertake their own research to determine whether to exercise the SFO’s pre-investigatory powers.
Having analysed any information received and elicited via the Section 2 process, a formal SFO investigation will only be opened where it appears to the Director that there are reasonable grounds to suspect the commission of serious or complex fraud, bribery or corruption.
In deciding whether to authorise a formal 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.
The SFO announced that one of Nick Ephgrave’s early priorities is ensuring that the SFO is best placed to fulfill its mission. It is no coincidence that the SFO recently launched a recruitment drive with a view to expanding their workforce by up to a third, employing 100–150 more permanent staff, some of whom no doubt are intended to help meet the demands on these new powers.
We can therefore expect to see an increase in the deployment of Section 2 notices, searches and arrests in serious fraud, domestic bribery and corruption cases.
If you or your business are the subject of a Section 2 notice, search or arrest, it is critical that you seek expert advice as soon as possible, especially before answering any questions. Our SFO defence lawyers have decades of experience advising clients in complex fraud, bribery and corruption cases, including search and arrest and challenging Section 2 notices. If you require assistance, please call us on 020 7014 2020.