On 15 January 2024, legislation came into force that enhances the Serious Fraud Office's (SFO) compulsory information-gathering powers and streamlines the investigative process whilst imposing fresh obligations on companies on the receiving end of an SFO information request.
Section 211 of the Economic Crime and Corporate Transparency Act 2023 revises the powers available to the SFO in section 2A of the Criminal Justice Act 1987. Under the latter provision, the SFO may require an individual or corporation to provide documents or information, prior to the formal opening of an investigation, through the issue of a 'section 2 notice', to enable the SFO to determine whether to start an investigation where it appears to the SFO that relevant conduct may have taken place. Prior to the amendment, relevant conduct was limited to suspected international bribery and corruption. The new law expands these powers to all SFO cases, bringing fraud and domestic bribery within its orbit.
SFO Director Nick Ephgrave, who took up the role in September 2023, called the new powers the 'most significant addition to the Serious Fraud Office's armoury in recent years' and declared the SFO 'ready to put them into action.1 Using these new powers, the SFO will be able to obtain data, such as banking records, allowing them to restrain assets at an earlier stage and to take more informed decisions on whether to open a formal investigation.2 This will also help the SFO progress an investigation more quickly once it has been opened.3 This will facilitate the more efficient allocation of resources, reducing the risk of the financial and reputational impact of dropped investigations.
The strengthening of the SFO's investigatory arsenal is bolstered by the expansion of the identification doctrine, through which companies can now be prosecuted for the criminal acts of their senior managers, not only those identified as the 'directing mind and will' of the company, and the introduction of a corporate offence of failure to prevent fraud.4
As the SFO starts to put its new weaponry through its paces, companies should be mindful of the need to ensure the adequacy of the policies and procedures in place to prevent fraud offences and to engage legal counsel during any pre-investigatory enquiries to ensure that responses comply with the requirements of the new legislation and reduce the risk of the commencement of a formal investigation. Both the failure to comply with a section 2 notice and the provision of false or misleading information in response to a section 2 notice are criminal offences.
Footnotes
1. Maria Ward-Brennan, City A.M., SFO chief: We're ready to use our new powers to clamp down on fraud (15 January 2024), https://www.cityam.com/sfo-chief-were-ready-to-use-our-new-powers-to-clamp-down-on-fraud/.
2. See, Serious Fraud Office, What does the Economic Crime and Corporate Transparency Act mean for the SFO? (15 January 2024), https://www.linkedin.com/pulse/what-does-economic-crime-corporate-transparency-act-mean-sfo-uksfo-z8y4e/.
3. SFO Chief Intelligence Officer, John Kielty (15 January 2024), https://www.linkedin.com/posts/uksfo_these-new-powers-will-allow-us-to-progress-activity-7153409061303033856-fRVi?utm_source=share&utm_medium=member_desktop.
4. See, Lloyd Firth & Fred Saugman, Law Society Gazette, Nick Ephgrave – the first 100 days (12 January 2024), https://www.lawgazette.co.uk/practice-points/nick-ephgrave-the-first-100-days/5118404.article.
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