Engage now or hide behind smoke and mirrors at your peril

9 Nov 2018 03:11 PM

Hannah von Dadelszen, Joint Head of Fraud, at the Pinsent Masons Business Crime and Compliance conference, London.

I am pleased to be here today and thank you, Pinsent Masons, for the invitation to speak. For those of you who haven’t met me, my name is Hannah von Dadelszen and I am Head of an Operational Division at the SFO. I am a lawyer and I have been at the SFO for over 10 years. I started out as a Grade 7 investigative lawyer, then became a case controller, then in September 2016 became a Head of Division. My job as Head of Division means that I attempt to manage a division of about 95 people all of whom work in teams headed by a case controller. A case controller is the person who has day-to-day conduct of our cases, but I wade in on complex or strategic operational issues. I sit on the Executive Group, manage a budget and deal with people issues.

The teams themselves consist of a mix of investigators, lawyers, accountants, sometimes police officers, analysts, document reviewers and case progression officers. This model brings together different disciplines into one team, and gives us the best platform upon which to deal with the cases that come our way.

In terms of how we decide whether to accept a case for investigation, we have a statement of principle that provides guidance as to what cases our Director will take on:

• whether the apparent criminality undermines UK PLC commercial or financial interests in general and in the City of London in particular
• whether the actual or potential financial loss involved is high
• whether actual or potential economic harm is significant
• whether there is a significant public interest element, and
• whether there is new species of fraud.

In each case we will also think whether the Roskill model is either essential for or adds value to the case. The cases we have taken on in recent history illustrate this point – Rolls-Royce, Airbus, Libor, Barclays/Qatar, Weavering, Tesco and G4S/Serco. These are all big, complex cases.

In the course of my time at the SFO I have seen a lot of different cases. I have worked on both bribery and corruption, and fraud cases. I have had successes and failures. I have been in the trenches, and have a bit of perspective on how the SFO has changed, but also, I think, on how the private legal sector has changed during this period. Without doubt, the SFO is now bigger and stronger. The private sector dealing with our case work is also bigger and stronger, and now we see all of the magic circle with a criminal practice. Ten years ago this would have been the exception rather than the rule. In terms of the SFO’s growth and strength;

• Our new Director, Lisa Osofsky, started her term with the Attorney-General’s support and commitment to maintaining the independence and prominence of the SFO. The Director expects this to continue throughout her tenure as Director as this was the basis on which she accepted the job.
• The SFO has paved the way with the development of the Deferred Prosecution Agreement regime within the UK. We have brought four DPAs to conclusion and in doing so we have opened a new chapter on how corporates can engage with law enforcement.
• Our funding agreement with Treasury is now set at £53 million for the next three years. We have lost the traditional divide between blockbuster and core cases, and at an operational level this gives us a lot more flexibility to move staff around and to cover more work.

We have had some big wins, and also some defeats, but it does not necessarily follow that we were wrong to challenge important issues in those cases. I think that part of the function of the SFO is to apply that academic, analytical outlook to developing areas of the law, and where appropriate, to apply our resource to that issue. We have to be able to take on big complex cases and provide robust challenge. I think civil society is supportive of this, and even though we are often on different sides of legal arguments, I feel that the legal community is supportive of this concept.

On the issue of DPAs, I take the view that the SFO has been formative in the development of the law in this area. DPAs are designed to encourage corporates to undertake ethical corporate behaviour. Ethical corporate behaviour is good for society in general and good for business in the UK. It is important that the UK is both perceived to be, and is in fact, a clean place to do business. Ethical corporates are a vital part of that. It is also good business for the corporate concerned. No one would choose to work for a company that hides unlawful behaviour. It can place employees in very difficult positons. These issues present ongoing high risk for the corporate. The DPA provides an incentive for the corporate to monitor itself in terms of the risks around this type of behaviour, and where appropriate, to report it to law enforcement.

How does a corporate engage with the SFO if it chooses to self-report?

I think there are in essence two broad choices for a corporate that has decided to self-report. Those choices are captured in the title of today’s conference. A corporate can choose to be open, honest and transparent – we ask for genuinecooperation. The alternative is that a corporate can choose to play a game of smoke and mirrors. I thought you might be interested to hear about some examples of smoke and mirrors:

• reporting minor wrongdoing in one jurisdiction, but omitting to mention significant wrongdoing elsewhere
• providing us with a bundle of key documents that are not key, and omitting those that are
• omitting to provide a sensible narrative of the suspicions around what actually took place and who was involved
• blocking access to documents because of commercial sensitivity.

If you want to report, please be prepared to do so properly. We do not, and never have, required the waiver of privilege, but if you want to waive privilege that will be viewed as a positive feature. We are very disinterested in privileged material that is the proper legal advice you are receiving from your solicitors. We have obviously more interest in internal investigation material and specifically interviews with witnesses, but that issue has now been clarified by the Court of Appeal. But even in light of that, do not expect engagement with us to be a civil negotiation about what a corporate can and cannot produce. We have powers to compel the production of documents and we’ll use them if we need to. We are going to ask a lot of companies who self-report to us.

I wanted to spend some time talking about the issue of compliance. I suspect for many of you this is a much more natural habitat for you than it is for me. I have never worked in compliance and I am not a compliance expert, but others in the SFO have worked in compliance and are experts. In recent years at the SFO I have observed an increasing need for prosecutors to consider compliance issues. For bribery matters, there is guidance published by the Ministry of Justice on Bribery Act compliance programmes. If you are not familiar with it, you may want to have a look. There are some fairly familiar themes which you can draw on; tone from the top, a need for risk-based analysis, accessible and up-to-date policies and procedures, training for staff, confidential internal reporting mechanisms, amongst others. If your organisation hasn’t considered these matters, then this may be the place to start.

One of the things you can expect from us going forward is an increasing interest in the detail of your compliance programmes. Some of you may be pleased to hear we are taking an increased interest in these matters, some less so, and I would certainly be interested to hear any comment after this speech as to how you view this issue. I would suggest that this increased focus on compliance is a good thing for people who end up sitting at a table with us. It will help you know what we view as important.

I have been asked to mention the topic of international engagement. Our work very often has international elements. Europe is a key partner, and we currently rely extensively on the mechanisms provided by the EU framework to assist with the investigation and prosecution of our offences. Without doubt, that will change once the UK exits the European Union. I expect that those relationships will continue, albeit on a different platform. I can’t say with certainty what that platform will be – there are a number of options. I would expect that the personal relationships we have established between people in our office and European partners will remain.

Some of you may have queries about how you manage a situation where suspicious conduct appears in multiple jurisdictions and would engage the interest of multiple law enforcement agencies. The principle to guide your decision making in this context is that you should report to the law enforcement authority where the conduct in question bites upon that agency’s jurisdiction. This may mean multiple reports to different law enforcement agencies. It would be a mistake to leave a jurisdiction out and have them find out through collaboration with other law enforcement agencies. The SFO will certainly ask you if you have reported to other jurisdictions and what exactly you have reported. My advice is that transparency is absolutely the best policy.

The title of this conference asks whether transparency is the new orthodoxy. Transparency is the wind change in all aspects of civil society. It might not yet be the orthodoxy but it might become increasingly difficult in the future to justify why a corporate wasn’t transparent. I think society is becoming very unforgiving of those who might have historically been called “white collar criminals”. The world is getting smaller and there are fewer places to hide. My advice: engage now or hide behind smoke and mirrors at your peril.