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Economic Crime and Corporate Transparency Bill introduces expanded investigatory powers for the SFO

  • United Kingdom
  • Financial services disputes and investigations
  • Fraud and financial crime

29-09-2022

Introduction

On 22 September 2022 the Economic Crime and Corporate Transparency Bill (the “Bill”) was published. 

The Bill includes provisions to expand the Serious Fraud Office’s (the “SFO”) pre-investigative information gathering powers. 

This article focusses on the expansion of the SFO’s powers. However, the Bill also increases the powers of Companies House (including through the introduction of identification verification requirements for company owners) and creates new provisions in the Proceeds of Crime Act 2002 to enable the rapid sharing of information between certain businesses for the purposes of preventing, detecting and investigating economic crime.

The Bill can be accessed here. The Government have also published factsheets detailing the measures contained in the Bill which can be found here.

Background

The Bill was announced in the Queen’s speech in May 2022. The second reading of the Bill is scheduled for 12 October 2022.

The Bill aims to strengthen the UK’s economic crime laws.  It comes in response to concerns that the UK’s historic lax approach to money laundering has led to it being an easy target for criminals and terrorists to funnel illegal money through the system which has led to the facilitation of corruption globally.   

The reforms have been accelerated by the conflict in Ukraine and the Government’s crackdown on Russian oligarchs hiding illicit wealth in the UK. 

The Bill builds upon the reforms introduced by the Economic Crime (Transparency and Enforcement) 2022 Act which:

  1. allowed the government to move faster and harder when imposing sanctions;
  2. created a Register of Overseas Entities to help crack down on foreign criminals using UK property to launder money; and
  3. reformed and strengthened the UK’s Unexplained Wealth Order regime to better support law enforcement investigations

Overview of new powers

Strengthening the SFO’s powers

The SFO investigates and prosecutes cases of serious or complex fraud, bribery and corruption.

Section 2A of the Criminal Justice Act 1987 (as amended by the Bribery Act 2010), provides the SFO with powers to compel individuals and companies to disclose information (whether by way of documents or answer questions)  at the pre-investigation stage.  Currently, the s.2A powers only apply to suspected cases of international bribery and corruption.  The Bill will expand the s.2A powers to all SFO cases, including domestic bribery and corruption cases, and fraud cases.

One of the hurdles for the SFO in cases that have not involved international bribery and corruption, has been the collection of evidence (at the pre-investigation stage) from banks and financial institutions; information is held subject to confidentiality and cannot easily be provided voluntarily.  By expanding the scope of s2A powers to all types of case, this will allow such institutions to provide confidential information at an earlier stage.

What impact will this have?

The Government hopes that the expansion of s.2A powers will:

  1. allow the SFO to promptly determine whether a crime has taken place, by giving it early access to information and evidence held by individuals or companies;
  2. ensure the early stages of an investigation are delivered more quickly. Currently complex fraud cases can take over a year to be developed, which can have a detrimental effect on victims and take up a large amount of tax payer funded resources;
  3. ensure that proceeds of crime are identified more quickly, ensuring that assets can be preserved for confiscation or compensation; and
  4. ensure that fewer fraud investigations are shut down after a case has been formally accepted by the SFO as referrals that do not meet reasonable grounds to suspect criteria can be identified and sifted out more effectively at intelligence stage.

In practice, if s2A powers are expanded to cover all bribery and corruption/fraud cases within the SFO’s remit, this could lead to an increase in the use of s2 powers more generally since cases would not need to have been formally accepted by the SFO  (i.e. the Director of the SFO would not need to have ‘reasonable grounds to suspect’ a crime) before s2 powers can be used. 

Given the extent of these powers of compulsion, together with the serious criminal sanctions for failure to comply, advice should be sought at an early stage. This is particularly the case where there are concerns regarding information subject to legal privilege, and the nature of the s2 interview process.

Who will this apply to?

The SFO has jurisdiction in England, Wales and Northern Ireland. The extension of the s2A powers will apply in these jurisdictions.