National Crime Agency plan: a real reprieve for the SFO? | Practical Law

National Crime Agency plan: a real reprieve for the SFO? | Practical Law

On 8 June 2011, the Home Office published its proposals for the creation of the National Crime Agency. Following vociferous criticism, the initial plan to hive off the SFO’s investigative function to the NCA and transfer responsibility for prosecutions to the Crown Prosecution Service has been shelved. This development is to be welcomed. Splitting the SFO would have been a backwards step in the fight against complex economic crime.

National Crime Agency plan: a real reprieve for the SFO?

Practical Law UK Articles 2-506-6235 (Approx. 4 pages)

National Crime Agency plan: a real reprieve for the SFO?

by Jeremy Cole, Hogan Lovells International LLP
Published on 30 Jun 2011 • United Kingdom
On 8 June 2011, the Home Office published its proposals for the creation of the National Crime Agency. Following vociferous criticism, the initial plan to hive off the SFO’s investigative function to the NCA and transfer responsibility for prosecutions to the Crown Prosecution Service has been shelved. This development is to be welcomed. Splitting the SFO would have been a backwards step in the fight against complex economic crime.
On 8 June 2011, the Home Office published its proposals for the creation of the National Crime Agency (NCA). Home Secretary Theresa May had initially planned to split the Serious Fraud Office (SFO) by hiving off its investigative function to the NCA and transferring responsibility for prosecutions to the Crown Prosecution Service. Following vociferous criticism by anti-fraud practitioners, the SFO and (reportedly) members of the cabinet, the Home Secretary, in an apparent policy U-turn, confirmed that the SFO "is continuing to exist and to operate as it has done".
This development is to be welcomed. Splitting the SFO would have been a backwards step in the fight against complex economic crime. However, the Home Secretary has so far stopped short of making an unreserved, long-term commitment to the SFO. Despite denying that the SFO has been put on 12 months’ notice, the Home Secretary confirmed that the Home Office will, in due course, review the relationship between the NCA, the SFO and other agencies dealing with economic crime. It therefore remains to be seen whether the SFO's reprieve is temporary or final.

Key points of the plan

The NCA plan describes the Home Office's overarching vision. It is light on detail but the following key points emerge:
  • The government has abandoned its plan to establish a separate Economic Crime Agency (ECA). In the May 2010 coalition agreement, the government pledged to create a single agency to tackle serious economic crime and take on the work done in this area by, among others, the SFO, the Financial Services Authority (FSA) and the Office of Fair Trading (OFT). However, the NCA plan contains no reference to the ECA. In addition, following vigorous lobbying, the SFO, the OFT and the FSA have been excluded from the plan.
  • The NCA will comprise four units, one of which will be the Economic Crime Command (ECC). The ECC will be tasked with ensuring a "joined up" approach to economic crime by driving closer liaison between specialist agencies (including the SFO and the Fraud Intelligence Bureau of the City of London Police). The plan does not specify exactly how the SFO and the ECC will interact. For example, will the SFO report to the ECC? What, if any, operational control will the ECC have over the SFO? With implementation of the NCA still some way off, these points should be addressed as further detail emerges.
The current timetable expects legislation to be introduced in spring 2012 and the NCA to become fully operational by December 2013. In the interim, an Economic Crime Coordination Board will be established by autumn 2011. The Board will bring together key agencies involved in pursuing economic crime, and encourage better inter-agency co-ordination.
These proposals suggest that the government's focus will now be on fostering co-operation between existing agencies rather than full structural reform. However, the plan also states that the Home Office will review in due course what the appropriate relationship is between the ECC and the SFO, the FSA and the OFT.

Where next for the SFO?

By leaving the door somewhat ajar, the NCA plan risks a degree of continued uncertainty at the SFO. This would be an unwelcome distraction at a time when the SFO wants to focus on pursuing prosecutions under the Bribery Act 2010 (2010 Act) and reversing the trend of employee departures (see feature article "Bribery Act 2010: what does it mean for your company?", www.practicallaw.com/8-505-9543).
It looks as if the SFO is attempting to strengthen its position by appointing Simon Duckworth as a non-executive director. Mr Duckworth is an investment fund chairman and chairs the City of London Police Authority. In keeping with the NCA plan's emphasis on inter-agency co-operation, Mr Duckworth is tasked with helping the SFO and City of London Police work more effectively together.
While its reprieve following the publication of the NCA plan should make it easier for the SFO to replace some of its depleted talent pool, the government could further assist the SFO's rebuilding task by clarifying the scope of the forthcoming review.

Businesses beware?

The SFO will be the lead prosecuting authority under the 2010 Act, which came into force on 1 July 2011. Had the plan to split the SFO gone ahead, this would have weakened the SFO's ability to prosecute. It would also have cast doubt on the degree to which organisations could rely on the Joint Prosecution Guidance issued by the SFO and the Director of Public Prosecution (www.practicallaw.com/6-505-7347).
It will now be particularly interesting to monitor the approach that the SFO takes towards the 2010 Act and whether the SFO uses it as an opportunity to demonstrate and reinforce its capabilities to the Home Office.
The SFO is also expected to call for legislation handing it expansive new powers. The SFO's approach has been to encourage companies to self-report overseas corruption and, where appropriate, enter into voluntary settlements. However, this approach has been undermined by recent decisions such as R v Innospec Limited (where the Crown Court made it clear that, under present law, settlements reached between the SFO and defendants are not legally binding and are subject to court approval) ([2010] EW Misc 7 (EWCC)).
As a result, the SFO is likely to seek a legal footing for the ability to enter into plea bargains and deferred prosecution agreements based on the US model. (For more information, see News brief "Self-reporting corporate corruption: where are we after Innospec?", www.practicallaw.com/2-502-1218 and feature article "Global investigations: managing the risks", www.practicallaw.com/9-505-4470.)
Such extended powers are not mentioned in the NCA plan, but the Attorney General is reportedly looking into this issue. Adding new weapons to the SFO's armoury would certainly strengthen its hand, but there are clearly no overnight solutions.
With the threat of a review still hanging over it, the SFO has an even greater incentive to continue to prove itself on the world anti-bribery and corruption stage so as to cast away any doubts as to its future. The SFO is therefore likely to view a string of successful, high-profile prosecutions as the most persuasive argument it can make to the government.
Jeremy Cole is head of the Global Bribery and Corruption Taskforce at Hogan Lovells International LLP.
The NCA plan is at www.homeoffice.gov.uk/publications/crime/nca-creation-plan?view=Binary.