SFO sets out policy on treating self-reported fraud

The head of UK’s graft buster has set out the conditions under which the country’s Serious Fraud Office will pursue self-reported incidents of fraud by companies as either a civil or criminal matter.

In an open letter to New York-based lawyer Marcus Asner, a partner at law firm Arnold & Porter, Richard Alderman, the UK agency’s director, said that when considering whether to treat self-reported fraud as a civil or criminal case, it would primarily look at a number of factors. This would include the seriousness of the wrongdoing, whether it was an isolated incident, and whether the company in question had been previously warned that its internal controls were inadequate.

He also said it would depend on whether the company reported the wrongdoing in a timely and reasonable manner, and whether it provided a report to the SFO which was detailed and complete.

Mr Alderman also touched upon other topics, such as how far should companies go in conducting internal investigation to avoid additional probing by the SFO, and the circumstances under which monitors will be appointed to make sure that a company does not commit the same offense again.

He said that the SFO expects companies to present a report which allows the agency to determine whether the wrongdoing was thoroughly investigated, and discussing remediation measures.

On the latter issue, he said that the SFO will not appoint a monitor in cases where a company’s board can prove that it is committed to enforcing a culture against corruption. With serious cases, he said that the SFO will expect companies to actively propose measures to monitor compliance. He also said the agency will work with its counterparts in other countries if the wrongdoing involved multiple jurisdictions.

On attorney-client privilege, he said the SFO acknowledged that the concept of waiver of attorney client privilege was different in the US, when compared to the UK. He will not expect US companies to provide documents consisting of legal advice it received on how it should conduct an internal investigation, the types of remedial options that are open to them, or how it should negotiate with the SFO. The agency will expect companies to provide a full factual report on the investigation, including notes taken during investigation interviews.

Finally, he said that the SFO would consider closing a case, without further action, where a company self-reported violations. There would have to be “special circumstances”, and the company would have to offer to pay remediation.

Alternatively, he said it could also happen if a company conducts its investigation into a suspected violation, and the report on the investigation that does not support the initial suspicions. However, Mr Alderman added that he expected such cases where cases are closed without further action to be rare.