SFO informants: more questions than answers

Lisa Osofsky, director of the Serious Fraud Office (SFO), has outlined proposals to introduce a US-style informant system in the UK, modelled on US plea-bargaining arrangements. This would see the SFO working closely with HM Revenue & Customs (HMRC) to grant individuals leniency should they choose to become an informant.  

The director has been under increasing pressure to improve the speed and success of SFO investigations. However, these latest proposals – although currently no more than mere overtures – raise a number of practical and theoretical issues which, if not addressed, would only serve to compound the SFO’s woes.  

Background 

On 26 April, speaking to the London Evening Standard, Osofsky expressed a wish for the SFO to work more closely with HMRC to uncover corporate crime. This co-operation, Osofsky suggested, would result in offenders being presented with a stark ultimatum: ‘Spend 20 years in jail… or wear a wire and work with us.’

In the same interview, Osofsky also cited collaboration between the Internal Revenue Service and US prosecutors in the FIFA corruption case as a good example of where inter-agency and offender-focused co-operation has worked in the past. ‘If law enforcement can share enough about the bad guys, we can figure out who are the most worthy targets,’ Osofsky said.

This is not the first time Osofsky – a former US Department of Justice and FBI lawyer – has advocated the use of radical US-style investigatory methods to uncover white-collar crime. In December 2018, she addressed the notoriously slow pace of SFO investigations, suggesting that ‘insider’ help might further assist in the review of documentation, and presentation of cases to juries.  

Comment 

There is no equivalent to a US-style plea deal in the UK, and therefore little guidance on how it would work in practice. The closest equivalent is section 71 of the Serious Organised Crime and Police Act 2005 (SOCPA), which grants the SFO the power to offer an individual immunity from prosecution by issuing a written immunity notice.  

However, section 71 – which is rarely used by the SFO and is not available to HMRC as a prosecutor – is likely to give rise to a number of practical issues. Perhaps most notably, it is unclear how a section 71-based informant scheme would work in parallel with deferred prosecution agreements (DPAs), which are only available to corporates and have become the leniency mechanism favoured by the SFO. Unlike the Competition and Markets Authority leniency programme, the Joint SFO-Crown Prosecution Service Code of Practice for DPAs makes no provision for, or mention of, cooperating offenders. 

The SFO may therefore look to use section 73 of SOCPA instead, a more frequently utilised provision, which provides an alternative to section 71, and creates a presumption that if an offender pleads guilty to offence(s) and also offers assistance to an investigator and/or prosecutor, then the sentencing court may impose a sentence substantially less than that which would otherwise have been imposed, but for the cooperation.

Unhelpfully for the SFO, the prosecutor has had unsuccessful experiences of cases collapsing on the basis of evidence provided by an offender pursuant to a section 73 agreement. Moreover, the conditions imposed by such agreements can be onerous and prolonged, and require an offender to make admissions under caution at an early stage. 

Any cooperating offender will also be alive to the possibility that, even if a section 71 or 73 agreement is secured, they may still be at risk overseas. Theoretically, if a suspect pleads guilty to a criminal offence in the UK (pursuant to a section 73 agreement), they can seek to rely on the internationally recognised principle of ne bis in idem (or double jeopardy), if prosecuted elsewhere in respect of the same conduct. However, outside the EU such protection is not universally applied, and separate agreements may need to be negotiated from overseas authorities conducting parallel investigations.

Osofsky’s proposals are also silent as to precisely at what stage cooperation with offenders is likely to take place, an omission compounded in the area of tax offending. HMRC – pursuant to its Code of Practice 9 investigation procedure, and more specifically its Contractual Disclosure Facility – may currently grant taxpayers, who voluntarily disclose deliberate conduct resulting in irregularities in their tax affairs, an opportunity to avoid criminal prosecution. It is therefore unclear how Osofsky’s proposals would dovetail with this, as well as the section 71 and 73 SOCPA regimes.

Certainly, for any chance of success the SFO would need to set out its expectations from cooperating offenders and how the process will work. It will need to clearly state when and how offenders are expected to come forward, what their options are (if the SFO approaches them), whether waiver of privilege will be required and whether any continuing obligations apply. Indeed, detailed guidance, similar to the CPS’s regarding ‘assisting offenders’ cooperating under SOCPA, will be a pre-requisite for any potential cooperating offender to weigh up their options.   

Conclusion

Last week, Osofsky, speaking at the 2^nd annual GIR Live Women in Investigations conference, appeared to temper the position she took in April: distancing the SFO from an ’Americanised’ leniency system; and avoiding any mention of crossover between SFO immunity deals and HMRC investigations.

Until the SFO clarifies precisely how it proposes the US-style informant system will operate in practice, questions will remain as to what extent offenders will be attracted to collaboration with the prosecutor, and whether victims of corporate crime, and public interests, will be well-served.

Maria Cronin is a partner and Craig Hogg an associate at Peters & Peters