The investigation and prosecution of significant or complex fraud, bribery, and corruption are the responsibilities of the Serious Fraud Office (SFO) of England and Wales. If there is a “substantial connection” to the UK, the SFO can look into and prosecute criminal activity outside the country (Moylan, 2022). This essay will examine and explore the pertinent legal issues surrounding the SFO’s authority to look into and punish behaviour that it deems to fall under its statutory authority, but that occurs outside the UK, even though the repercussions affect people and businesses there.
The SFO’s Jurisdiction
According to the UK’s extraterritorial rules, the Serious Fraud Office (SFO) has the authority to look into and prosecute behaviour that occurs outside the UK but has an effect on people or businesses there. These rules ensure that people and businesses cannot avoid prosecution by engaging in unlawful actions abroad.
The Bribery Act 2010 establishes a range of charges related to bribery and corruption, including bribery of foreign officials in the private sector and failure to prevent bribery, the primary extraterritorial legislation in the UK. Companies may be held accountable for failing to prevent bribery by their employees or agents under Section 7 of the Bribery Act, even if it occurs abroad (Bowles, 2021); this means that if a UK-based corporation fails to put in place sufficient procedures to prevent such behaviour, the company may be prosecuted in the UK if its workers or agents engage in bribery in another nation.
Additionally, regardless of where the crime was committed, the UK’s Proceeds of Crime Act 2002 permits the recovery of assets that are the profits of the crime (CPS, 2021). The SFO can utilise the Proceeds of Crime Act to recover those assets if a crime is committed abroad, but the proceeds are brought into the UK.
The Criminal Justice Act of 1987 (CJA 1987) and the Bribery Act of 2010 provide the SFO with authority to look into and punish illegal activity. Manfredi (2021) asserts that the CJA 1987 gives the SFO authority to look into and prosecute crimes involving fraud, bribery, and corruption. The SFO has the authority to investigate any violation, according to Section 2 of the CJA of 1987, “where the Director [of the SFO] believes there is sufficient cause to believe the offense involves substantial or complex fraud, Office for Serious Fraud (2019).” According to Section 3 of the CJA 1987, the SFO has the authority to look into crimes committed outside the UK if they entail behaviour that violates UK law or impacts a UK interest.
The SFO is authorised by the Bribery Act 2010 to look into and punish bribery charges committed outside the UK. According to Section 12 of the Bribery Act 2010, the SFO has the authority to look into any crime outside the UK if it would be a crime if it had been committed there (2021). The Bribery Act of 2010 further stipulates in section 12(2) that the SFO has the authority to look into any crime committed outside the UK by a person with a “close relationship” to the UK.
Various international accords guide jurisdictional issues in cross-border matters and the statutory framework. Several international agreements offer guidance on jurisdictional issues in cross-border cases, including the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the Organisation for Economic Cooperation and Development (OECD), and the United Nations Convention Against Corruption. These agreements offer guidelines for investigating and prosecuting global bribery and corruption.
The Concept of Substantial Connection
The Serious Fraud Office (SFO) of England and Wales uses the idea of “substantial connection” as one of the main criteria to evaluate whether it has the authority to look into and prosecute criminal activity outside the UK. The test is intended to ensure that the SFO has the required jurisdictional reach to look into and prosecute complicated cases of fraud, bribery, and corruption that impact UK citizens and businesses (Milford, 2022). The legal definition of “substantial relationship” is ambiguous, and case law has helped to shape how it should be interpreted. The SFO will typically take into account the following elements to evaluate if there is a substantial connection to the UK:
- The suspect’s or the victim’s nationality or place of residence: If the suspect or the victim is a UK citizen or resident, the SFO may have the authority to look into and prosecute a crime that was committed outside of the UK.
- The location of a company’s incorporation: Even if the conduct took place outside of the UK, the SFO may have the authority to look into and prosecute a company formed in the UK.
- The location of the firm’s significant operations or headquarters: Even if the activity occurred outside of the UK, the SFO might have the authority to investigate and prosecute a corporation with significant operations or a UK headquarters.
- The impact of the behaviour on the UK: The SFO may have the authority to look into and prosecute behaviour that significantly affects the UK, such as when it affects people or businesses with UK addresses or damages the UK’s reputation.
- The existence of a treaty or agreement: If a crime is covered by an international treaty or agreement that gives the UK jurisdiction, the SFO may have the authority to investigate and prosecute it.
The test is not a rigid or unbending standard, and the SFO may, in a given situation, consider other factors in determining its jurisdiction. Taking into account elements like the seriousness of the conduct, the availability of evidence, and the public interest in taking action, the SFO will also determine whether it is appropriate to take action (UK Parliament, 2019). The Court of Appeal ruled in R v. Smith [2006] EWCA Crim 1868 that the SFO can look into and prosecute criminal activity outside of the UK if there is a “substantial connection” to the country. The location of the perpetrator, the victim, the location of the applicable property or assets, and the effect of the conduct on the UK are among the factors that the court considered when determining whether there is a “real and substantial connection” between the conduct and the UK.
The Court of Appeal further clarified the idea of substantial connection in R v. GH [2012] EWCA Crim 2290. The court decided that if criminal activity has a “sufficient nexus” to the UK, the SFO can look into and prosecute it (UK Parliament, 2019). The nationalities of the perpetrator, victim, and relevant property or assets are all considered as part of the concept of sufficient nexus, which the court found to be broader than the concept of a real and substantial connection.
Impact on Individuals and Companies within the UK
It is well-established that the SFO has the authority to look into and prosecute illegal activity that occurs outside the UK but has an effect on people or businesses there. The Court of Appeal ruled in R v. Evans [2015] EWCA Crim 1507 that the SFO has the authority to look into and prosecute criminal activity outside the UK but affects people and businesses there (UK Supreme Court, 2021a). In this instance, the SFO investigated and prosecuted two people for participating in a scheme to pay corrupt bribes to foreign officials to win business for their UK-based employer. The behaviour occurred outside the UK but significantly affected the UK company and its reputation.
According to the Court of Appeal, the activity had a “sufficient link” with the UK, which determined that the SFO had jurisdiction to look into and prosecute the defendants. According to the court’s findings, the UK corporation and its reputation were severely harmed by the fraudulent payments paid to gain contracts for a company with a UK base (Ridley, 2022). The court also pointed out that because the behaviour entailed bribing foreign officials, it was terrible for the UK’s standing abroad. Ziad Akle, a former Unaoil executive, was found guilty in July 2019 for his involvement in a bribery conspiracy concerning a contract to provide offshore mooring buoys in Iraq, according to a statement from the SFO (Ridley, 2022). Two former Unaoil executives, Stephen Whiteley and Paul Bond were also found guilty of participating in the fraud in November 2020.
In conjunction with the same plot, Unaoil itself was found guilty of conspiracy to offer illicit payments in December 2020. The business was hit with a $6.5 million fine and had to pay $1.3 million in legal fees. The UK Bribery Act 2010, which defines the offences of bribing another person, being bribed, and bribing a foreign public official, was the primary piece of legislation that the SFO relied on (Ridley, 2022). The Bribery Act has extraterritorial application, which means that if a person or company is based outside of the UK but is connected to the UK, they may still be prosecuted for bribery offences committed abroad.
One of the most extensive and most complicated corruption investigations ever carried out in the UK, the SFO investigation into Unaoil showed how committed UK law enforcement agencies are to fighting bribery and corruption at home and abroad. The persons stationed outside the UK experienced a significant impact due to the investigation (Swil & Orr, 2021). For instance, one of the Unaoil executives was detained in Italy and sent to the UK for prosecution. The defendant went through a court proceeding in the UK, where he was found guilty and given a five-year prison term.
The investigation’s results also impacted companies in the UK. For instance, the assessment of the anti-bribery and corruption practices of businesses in the oil and gas sector was spurred by the inquiry by the UK’s financial regulator. According to the evaluation, several businesses had insufficient policies to guard against bribery and corruption, which prompted increased scrutiny and regulatory action.
The SFO started looking into the Malaysian state fund 1MDB in 2018 due to suspicions of corruption and money laundering. The SFO requested the assistance of foreign agencies for the inquiry, including the US Department of Justice and the Switzerland Attorney General’s Office (Reuters, 2018). The investigation found that billions of dollars had been stolen from the fund and spent on yachts, expensive real estate, and fine art. Outside of the UK, the probe significantly impacted people and businesses. For instance, the US Department of Justice initiated civil cases to recoup assets bought with stolen money, such as a $250 million yacht sold for $126 million (Shukry & Tan, 2018). Criminal charges were also brought against some people due to the inquiry, including two former Goldman Sachs bankers suspected of aiding in the money laundering.
The Criminal Finances Act of 2017 added new corporate offences of failing to curb the facilitation of tax evasion, and the facilitation of bribery was the legal foundation upon which the SFO relied. Even if the corporation was not directly involved in the misconduct, it is still illegal for businesses to fail to stop their workers or agents from engaging in criminal activity. The Proceeds of Crime Act 2002, which empowers law enforcement organisations to seize assets that are thought to be the profits of illegal activity, may also have been cited by the SFO.
The investigation’s results had an impact on people and businesses in the UK as well. For instance, the UK’s banking regulator penalised the Royal Bank of Scotland (RBS) £5.6 million for failing to adequately screen customers connected to the 1MDB crisis (Arnold, 2018). The SFO also obtained a court order freezing $540 million in assets held in the UK by three people charged with participating in the crime.
According to suspicions of bribery and corruption in Airbus’s aircraft sales branch, the SFO announced in 2020 that it had opened an inquiry into the company’s operations. After the inquiry, Airbus settled with the SFO, agreeing to pay fines and penalties totalling €3.6 billion (SFO, 2020). The investigation’s results considerably affected Airbus, which has operations in numerous nations worldwide, including the UK. For instance, the settlement hurt the business’s earnings and reputation, which decreased the value of its shares (Vick, 2020). The probe also sparked a review of the aerospace industry’s anti-bribery and corruption procedures by the UK’s financial regulator.
The investigation’s results had an impact on people and businesses in the UK as well. For example, the agreement resulted in Airbus being prohibited from bidding on government contracts in the UK, which might considerably impact the business’ activities there (Ridley, 2021). The study also clarified the importance of robust anti-bribery and corruption procedures for businesses operating in the UK to stop similar behaviour.
The UK Supreme Court ruled in February 2021 that the SFO cannot use its authority under Section 2(3) of the Criminal Justice Act 1987 to compel foreign businesses that do not have a presence in the jurisdiction to deliver documents maintained abroad (CJA 1987). The verdict of the extraterritorial reach of its investigative powers was a blow for SFO after it lost the capacity to utilise European Investigation Orders to gather evidence situated in other European Union member states due to Brexit (Swil & Orr, 2021). It may, in some cases, limit its capacity to probe severe cross-border fraud cases thoroughly. The SFO will have to rely on mutual legal assistance when asking for electronic data or documents from foreign businesses that do not conduct business and are not registered in the UK.
Due to alleged improper payments from KBR UK to Unaoil in April 2017, the SFO investigated KBR UK’s businesses. The payments were routed through the company’s treasury function in the United States, and it looked that KBR and the compliance unit had to approve them (Swil & Orr, 2021). The US Department of Justice and the Securities and Exchange Commission conducted a separate investigation of KBR’s connections with Unaoil because the company is American-incorporated (Willis et al., 2021). KBR is not officially registered in the UK and has never done any business there.
Per Section 2(3) CJA 1987, the SFO sent KBR UK a notice (the “Section 2 notice”) requesting that it turn over specific data and documents “owned by KBR UK.” KBR UK’s response to the SFO stated that specifically requested papers were not in its possession or control but were kept by KBR in the United States (Willis et al., 2021). KBR disputed the Section 2 notice because KBR’s general counsel needed to be appropriately served with it. It illegally demanded the production of records kept by a firm incorporated and located outside of UK jurisdiction.
Practical Impact
The SFO’s ability to demand the release of documents held abroad by foreign businesses without a presence within UK territory has been limited by the Supreme Court’s decision in KBR. The verdict also raised questions about the legitimacy of records that the SFO had previously collected from these businesses under the pretext of exercising its Section 2 powers (Swil & Orr, 2021). Subject to the protections under the applicable agreement or treaty, the SFO can still rely on mutual legal assistance to get papers from foreign businesses. In some circumstances, the SFO may even request overseas production orders.
As a result, the decision might particularly affect the SFO’s ability to access records, such as witness interviews, that might be protected by privilege under foreign law but not English law. For instance, witness interviews in the United States are typically confidential, while under English law, such testimonies are unlikely to be confidential unless the criteria for litigation privilege are met (Seeger et al., 2021). Before the Supreme Court’s ruling, the SFO might have independently tried to compel the release of any privileged witness accounts kept abroad by foreign businesses with just a tenuous connection to UK law.
The Supreme Court was careful to note that, although KBR did not involve a foreign entity with a registered office in the UK or conducting business there, the SFO may still be entitled to use its Section 2(3) powers in such situations. According to the Supreme Court’s ruling, a UK-registered firm could be obliged to disclose records that were kept abroad under these circumstances (Seeger et al., 2021). At the commencement of any investigation with a potential link to the UK, corporations must carefully assess where specific documents are maintained, by which entities, and if those entities may have any connection to the UK. Businesses should, in this case, consult with English law experts as soon as possible.
Conclusion
In conclusion, if there is a “substantial relationship” between criminal activity and the UK, the SFO can look into and prosecute it. The idea of a substantial connection is meant to guarantee that the SFO has the authority to look into and prosecute criminal activity with a good relationship with the UK, even if that activity occurs outside the UK. It is well-established that the SFO has the authority to look into and punish illegal activity outside the UK that affects people or businesses there. For their involvement in bribery and corruption offences conducted outside the UK but significantly affecting people and enterprises inside the UK, the SFO has successfully prosecuted several people and businesses.
Overall, the SFOs show how seriously UK law enforcement agencies are taking the fight against bribery and corruption at home and abroad. The Bribery Act and other pertinent laws offer practical tools for pursuing people and businesses engaged in corrupt activities. The SFO has successfully prosecuted Unaoil and its management, conveying that this behaviour will not be accepted.
References
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