Challenges facing the new director of the UK’s Serious Fraud Office

October 2023 | SPOTLIGHT | FRAUD & CORRUPTION

Financier Worldwide Magazine

October 2023 Issue

The appointment of Nick Ephgrave as the new director of the Serious Fraud Office (SFO) could be viewed as the beginning of a new era for the agency. If he introduces changes, they will have implications for the SFO – and for the corporate world the SFO has the task of policing.

At this stage, it is far too early to say with any certainty exactly what changes the new director may introduce, but what we can say is that there are many issues that he will need to get a firm grip of if his tenure is to be a successful one. Mr Ephgrave is coming to an agency that has been criticised for a wide range of shortcomings. Any chances of him having a successful tenure as head of the SFO will depend on him addressing these shortcomings – and putting them right.

Challenges

Mr Ephgrave will certainly be aware of the challenges that he faces as he takes the reins at the SFO. Some of them have been abundantly clear to anyone who has been observing the agency in recent years.

Perhaps the most pressing issue he needs to address is disclosure. Disclosure has led to failed SFO prosecutions, reports commissioned into its mistakes, and criticism from many informed figures. Last year saw the SFO having to take the criticism aimed at it in two external reviews that had been commissioned as a response to major SFO failures. One was conducted by Sir David Calvert-Smith, former director of public prosecutions and retired High Court judge, while the other was carried out by Brian Altman KC. Sir David’s report was commissioned in the wake of the SFO’s disastrous Unaoil bribery investigation, while the Altman report followed the collapsed Serco fraud trial. The SFO’s failings relating to disclosure were at the heart of both cases.

The Altman report made it clear that staffing and resources at the SFO were not adequate. It pointed out that large and complex cases were being run by inexperienced and temporary personnel. The Calvert-Smith report stated that the SFO should be revising its handling of sensitive and high-risk cases as a matter of urgency. Those who may want to defend the SFO regarding this issue could point to the fact that an HM Crown Prosecution Service Inspectorate report a matter of months ago did state that the agency was making progress in relation to the two reviews and to its own 2019 report. And yet the UK government law officers – the attorney general, the solicitor general and the advocate general – have asked the Inspectorate to open an investigation into the SFO’s handling of disclosure.

Tackling the SFO’s disclosure problems is an issue that must be at the top of the new director’s to-do list if he is to ensure the agency’s fortunes improve. But it is far from the only pressing matter.

The Altman and Calvert-Smith reviews have painted a very stark picture of an SFO that is struggling to reach its goals while having to wrestle with staff recruitment and retention difficulties. High staff turnover, low morale, a lack of resources and unattractive rates of pay at the SFO have hampered its effectiveness. It is very hard to see it being able to meet its objectives if these problems remain.

These, of course, are not problems unique to the new director. But putting them right is now his task. How he goes about this – or more to the point, how successful he is when going about this – will go a large way to determining just how effective the SFO will be in the coming years. If these issues are not tackled head on, it is hard to see Mr Ephgrave engineering any substantial improvement in how the SFO functions. He is taking over an SFO that has been lambasted for a lack of oversight and continuity, and even an unwillingness to respond appropriately when evidence uncovered during disclosure review runs counter to the original case theory. There is a clear need for a strategy to remove these problems.

Changes

Mr Ephgrave is coming to an agency that has been criticised for its well-publicised shortcomings. There are changes for him on a personal level that he will have to manage to ensure the effectiveness of both himself as SFO director and the agency itself.

In taking up his new position, he now must ensure that he is able to transfer the in-depth experience he has gained from years of policing to the corporate world. The corporate environment can pose difficulties that are more complex or involved than those often seen in the more routine world of ‘regular’ policing. The approach he adopts and the methods he employs may, as a result, need to differ significantly from those he has relied on in his policing career.

He will also have to master the art of running an organisation that both investigates and prosecutes. This will be a new situation for him, as his policing career will have involved the Crown Prosecution Service bringing the prosecutions. But while his experience to date has been in investigating rather than prosecuting, this should not prove problematic. At the SFO he can rely on in-house counsel – and even external counsel – as well as case controllers, as all his predecessors have done. Any support he requires in relation to charging will be available to him. Nevertheless, he will have to show an ability to change and adapt.

The future

The big question that requires an answer, however, is what the appointment of a former senior police officer will mean for the SFO and its activities in the future. To some degree, this will depend on exactly what Mr Ephgrave views as his mandate. He may come into the agency viewing his role as being to make sure that the SFO does the very best at what it was created to do: tackle international corporate crime. Yet he may believe he should prioritise tackling boardroom culture.

These challenges could make it hard for him to be fully effective when it comes to meeting either objective. But his and his agency’s work does look set to be aided by the Economic Crime and Corporate Transparency Bill. This Bill, which could be law before the end of the year, will expand the notion of corporate criminal liability, introduce an offence of failure to prevent fraud, false accounting or money laundering, and increase the SFO’s section 2A Criminal Justice Act 1987 powers across all cases.

The Bill will extend the identification principle so that the definition of individuals who would represent the ‘directing mind and will’ of a corporation includes senior managers. This would be a major boost for the SFO. It has the potential to remove what has been a major obstacle to many SFO attempts to prosecute corporates for the activities of those working for them. The Bill’s proposed failure to prevent offence also must be seen as a tool that will enable Mr Ephgrave’s SFO to take a more aggressive, US-style approach to prosecuting corporates.

There is an argument to be made that the Bill could have as big an impact on the SFO as having a new person at the top of the agency.

Implications

Yet while Mr Ephgrave’s eyes will be firmly set on the SFO’s future, he will also need to look at its past. One of his priorities will need to be an examination of the SFO’s current caseload. The decisions he takes regarding the cases that began before his arrival could be as significant for corporates as any plans he has for the coming years.

He will have to examine a caseload that will require some big decisions being made fairly quickly. The SFO caseload includes cases that have been on its books for years without any charges being brought. The new person at the top will be deciding which of these cases should be taken no further and which are worthy of further work to see charges brought. These are set to be major decisions for many in the corporate world. Many corporates that are currently the subject of live SFO investigations may face a tense wait to discover their fate. A decision either way regarding their investigation may have huge implications for them.

Nobody would dispute that Mr Ephgrave has some major decisions to make about various aspects of the SFO that he is taking over. Those decisions may go a long way to shaping the future of both his agency and the corporate world.

Aziz Rahman is senior partner at Rahman Ravelli. He can be contacted on +44 (0)20 3911 9339 or by email: aziz.rahman@rahmanravelli.co.uk.

Aziz Rahman

Rahman Ravelli