Serious fraud describes a range of financial crime and can include the offences of theft, conspiracy to defraud, false accounting, fraudulent trading, as well as offences under the Fraud Act 2006 (fraud by false representation, fraud by failing to disclose information and fraud by abuse of position).
While each case turns on its own facts, when allegations of serious fraud are made they can be hugely disruptive and have far reaching consequences for individuals and businesses alike.
In the UK, serious fraud is investigated and prosecuted by different agencies depending on the seriousness and complexity of the case.
As the UK’s leading law enforcement and prosecution agency for serious and complex financial crime, the Serious Fraud Office (‘SFO’) handles the country’s most significant financial crime investigations and prosecutions.
SFO investigations often involve allegations of fraud and false accounting at large public and private companies and their subsidiaries. These cases usually rely heavily on data (such as emails, messaging and other communication records and financial data) with the SFO exercising its compulsory powers to seize material and compel answers from witnesses.
SFO investigations are long running and usually take years to conclude.
The National Crime Agency (NCA) and specialist police units such as the City of London Fraud Squad and regional Fraud Squads also deal with a range of fraud allegations. CPS specialist fraud prosecution units often bringing these cases to court.
HMRC investigates tax fraud and there are a number of other agencies such as the NHS Counter Fraud Authority who investigate and prosecute serious fraud in particular industry sectors.
The SFO has far-reaching investigatory powers which include those under section 2 Criminal Justice Act 1987. Using the powers under this section the SFO may compel attendance at an interview and the answering of questions.
Although answers given at a section 2 interview cannot usually be used against an individual in any subsequent criminal prosecution, the SFO’s recent practice has included interviewing individuals using this power and subsequently treating them as suspects.
Anyone facing the prospect of a section 2 interview should seek expert advice in order to best navigate this process.
Every case will turn on its own facts, but there are some fundamental building blocks in defending allegations of serious fraud that are common to most.
These cases usually involve large amounts of data which requires expert analysis, and a thorough understanding of forensic accounting issues.
A key first step is often to understand how the business under investigation truly functions, mapping out its internal controls, organisational responsibilities, accounting obligations and the role played by auditors.
The landscape for serious fraud cases changed significantly with the introduction of Deferred Prosecution Agreements (DPAs) in 2014.
DPAs give corporates the option of admitting wrongdoing in exchange for the certainty of avoiding criminal prosecution, albeit with conditions that are likely to include significant financial penalties. The SFO has taken the lead with DPAs and they are increasingly becoming a favoured resolution for a company under investigation for serious fraud or bribery.
A DPA includes a statement in which the company sets out admissions, with the SFO and the company agreeing this narrative which identifies those individuals blamed for the wrongdoing. Any such individual will be at grave risk of being prosecuted following the DPA. This raises a serious risk for individuals under investigation in serious fraud cases who may find themselves being prosecuted following a narrative in which they are blamed having been agreed between the SFO and the company.
In these cases there is always the risk of a conflict of interest between the company and the individual. This may arise at an early stage such as when an individual is called on by the company to answer questions as part of an internal investigation, especially if there is any prospect the company may in due course seek to blame the individual for wrongdoing as part of a DPA.
Any individual caught up in such an investigation is well advised to consider taking independent advice at an early stage.
Serious fraud investigations sometimes involve more than one investigating agency. This is especially likely to be the case where regulated professionals are involved such as lawyers, accountants and those regulated by the FCA.
In these situations, it is important to build a strategy that considers the multiple and related issues that can arise from the involvement of various agencies.
Similarly, many serious fraud cases straddle more than one jurisdiction. Here it is important to have a coordinated strategy between the various legal teams and to be cognisant of the how decisions in one country might impact investigations and prosecutions in another.
Hickman & Rose has significant experience and expertise acting for individuals and corporates in some of the SFO’s biggest fraud investigations as well as those of other agencies in the UK, and those that involve overseas jurisdictions.
Our financial crime team is at the forefront of cases involving individuals who have been prosecuted following a DPA. This includes the successful defence of Chris Bush, the former Managing Director of Tesco, who was prosecuted by the SFO for fraud and false accounting after the company agreed a DPA in which he was named as a wrongdoer in an alleged £250m profit overstatement.
The case against him was dismissed by the trial Judge who, having heard six weeks of prosecution evidence, concluded there was no case to answer.
The team currently act for former senior executives in two similar SFO prosecutions that have followed DPAs.
The team has significant experience in:
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