Category: White collar crime

White collar crime

UK law enforcement powers stretch even further overseas – with worrying implications

A recent piece of unheralded legislation, the Crime (Overseas Production Orders) Act 2019 (COPOA), has provided UK law enforcement with significantly extended powers to compel the production of electronic data stored overseas.

Key points

  • COPOA came into force on 12 February 2019 – it gives UK law enforcement agencies the means to apply for a UK court order to compel production of stored electronic data directly from a company or person based outside the UK.
  • It overhauls the system previously known as Mutual Legal Assistance (MLA).
  • To date, the only cooperation agreement (which is currently still in draft) is between the UK and USA so COPOA will only apply to requests between these countries…BUTit is expected that other countries will sign up to similar reciprocal arrangements (based on these terms) in the near future.
  • The power to apply for an Overseas Production Order (OPO) is available to all major investigating agencies, including the Serious Fraud Office, National Crime Agency, police, HMRC and FCA.
  • The recipient of an OPO has, as a default, just seven daysto produce the data stipulated in the order, but can apply to the English court to vary or set aside the order.
  • There are carve-outs for legal privilege and data protection considerations.

Under the old regime, if a UK law enforcement agency wanted to obtain electronic documents or data from a party based outside the UK, it would make an MLA request to the relevant law enforcement agency in the country where the recipient of the request was based, which would then need to be sanctioned by the judicial authorities in that jurisdiction. This process takes on average 10 months to complete.

The introduction of COPOA is a significant departure from this process. It gives UK law enforcement the right to apply to the English court for an OPO. If this is granted, the UK law enforcement agency can serve the OPO directly on a party based in another jurisdiction and order them to produce data, provided that the host country has signed an international agreement. At the moment, the only country with an advanced agreement is the US, but a similar EU instrument is planned.

The are several criteria which must be satisfied before the Court will make the order including that the data is likely to be of value to the proceedings or investigation by law enforcement and that the OPO is in the public interest. Importantly, COPOA also contains carve outs for legally privileged information and confidential personal information (which would result in a breach of data protection legislation, such as the GDPR).

Practical implications

The introduction of COPOA has attracted significant criticism due to the potential access it grants to individuals’ emails and social media messages, given much of this communication is stored on overseas servers, for example in the USA. It is expected those most likely to receive OPOs will be communications providers. It is a concern that these companies (often with no “skin in the game” as the data is not theirs) will be the ones determining whether the request is appropriate and whether legal privilege applies.

If a company or individual is served with an OPO, they have seven days in which to produce the data stipulated in it; alternatively they may apply to a judge in the English court to vary or revoke it. Failure to comply with an OPO renders the recipient in contempt of court. While this is not an offence for which an individual/director could be extradited, it may lead to significant reputational damage for not doing the ‘right thing’ and could mean the relevant individual is arrested if they travelled to the UK. Some critics have suggested this is the principal shortcoming of the COPOA, as it lacks teeth in enforcement.

Overall, this legislation provides a powerful tool to UK investigating agencies in their efforts to gather data from abroad. While at present its scope is limited by a lack of reciprocal agreements, it is expected that this will change over years to come. Any parties served with an OPO should seek legal advice as soon as possible.

For more information please contact Sascha Grimm or Ollie McGlashan.

White collar crime

Skansen Interiors Limited: The UK’s first contested prosecution under S7 of the Bribery Act

The recent conviction of UK company Skansen Interiors Limited (SIL), for the corporate offence of failure to prevent bribery has caused controversy. This is the first conviction under S7 of the Bribery Act after a contested trial where the company self-reported but was still brought to trial. Commentators are asking if this decision means that there is a shift in the UK’s Deferred Prosecution Agreement (DPA) mechanism.

Since the Bribery Act came into force there has only been one other prosecution under S7, that of Sweett Group in 2015[1] which pleaded guilty.

The Facts

It was alleged that SIL agreed to pay a fee to a senior project manager at a company (DTZ) in order to ensure that SIL won the tenders for two office refurbishment contracts in London worth approximately £6m. This was achieved through the project manager passing confidential information to SIL, giving it an advantage over other tenderers.

The payment was to be made in three stages: two payments totaling £10,000 followed by a third payment of £29,000. The third payment was never paid after SIL’s newly appointed CEO became concerned by the legitimacy of this arrangement. He launched an internal investigation and implemented a new anti-bribery policy. SIL did not previously have an anti-bribery policy. It was a small company with only thirty employees. Despite agreeing to comply with the new anti-bribery policy, the Managing Director tried to make the third payment of £29,000. The payment was stopped and he was dismissed. SIL then submitted a suspicious activity report to the National Crime Agency and self-reported the matter to the City of London Police.

During the criminal investigation, it was not disputed that SIL cooperated fully and even voluntarily providing confidential and legally privileged documents to the City of London Police.

SIL became dormant in 2014 whilst the investigation was ongoing.

The Section 7 Offence

Section 7 of the Bribery Act imposes liability on a company for failing to prevent bribery and has a statutory defence of “adequate procedures”.

The Ministry of Justice Guidance on this offence (which mirrors the general CPS guidance on prosecution) states that: “whether to prosecute an offence under the Act is a matter for the prosecuting authorities. In deciding whether to proceed, prosecutors must first decide if there is a sufficiency of evidence and, if so, whether a prosecution is in the public interest… The more serious the offence, the more likely it is that a prosecution will be required in the public interest.”

Self-Reporting and Deferred Prosecution Agreements (“DPAs”)

The narrative from the SFO in various speeches and public statements of policy has been that whilst a DPA will not automatically follow self-reporting, co-operation is strongly encouraged in order to maximise chances of receiving such an agreement.

The outgoing SFO director, David Green, giving a speech in January 2018, said “Companies feel they need certainty and now they have certainty. They know that if they cooperate with us, and I mean fully cooperate, then odds on they are heading for a DPA. If they do not they will be prosecuted.” [2]

It has been reported that the SFO justified the decision not to offer SIL a DPA because, as a dormant company, SIL did not have the assets or resources to pay any fine that a DPA would carry.

The decision to prosecute

The judge, at an abuse of process hearing, queried why SIL had been prosecuted given its status as a dormant company and willingness to cooperate. It was said that a successful conviction would send a message to other small and medium-sized companies that bribery needs to be taken seriously, and appropriate procedures must be put in place regardless of the number of employees.

SIL was convicted of breaching s7 of the Bribery Act because the jury was not persuaded that the company had adequate procedures in place to prevent bribery. However, owing to its status as a dormant company and lack of assets, the only sentence available to the judge was an absolute discharge.

The question has been raised whether the decision to prosecute a dormant company was a proportionate and appropriate use of resources, given the end result, meaning that the conviction will not be registered on SIL’s record and it will not face any penalties.


Whilst the prosecution of SIL has certainly shown that small and medium-sized companies will be prosecuted, the lack of a DPA means that some now query whether there is any meaningful incentive for offering DPAs to companies that self-report and cooperate throughout an investigation. SIL provided extensive documentation, conducted its own internal investigation and dismissed all senior executives previously involved. However, others argue that this case can be distinguished because of its particular facts, and does not represent a change to UK DPAs.

For more information please contact Louise Delahunty, Prina Patel ( or Julia Maskell (



White collar crime

Unexplained Wealth Orders coming into force

The regime for Unexplained Wealth Orders will come into force on 31 January. This is a novel power in the UK.

Law enforcement agencies such as the National Crime Agency and Serious Fraud Office will be able to apply to Court, without notice to the recipients, for an Order requiring foreign politicians, and their family members and close associates, to identify any interest in an asset worth over £50,000 and explain how it was obtained.

An Order can be made only where the assets appear disproportionate to known legitimate income.   An application can also be made for a UWO against individuals or companies suspected of involvement with other forms of serious criminality, again if their assets appear disproportionate.

A failure to respond to a UWO will create a rebuttable presumption that the assets it targets are recoverable as the proceeds of crime in civil recovery proceedings brought by law enforcement under the Proceeds of Crime Act.

Injunctions can be obtained to secure assets pending a satisfactory response to a UWO, and again can be sought without notice to the defendants.

Deliberately providing false or misleading information or documents in response to a UWO will be a criminal offence.

The regime is based on proposals made in a paper published in March 2016 by Transparency International UK entitled ‘Empowering the UK to recover corrupt assets: Unexplained Wealth Orders and other new approaches to illicit enrichment and asset recovery’.   Our partner James Maton was one of the external experts that assisted TI to prepare the proposal after an evaluation of the problems faced by the UK authorities in securing and recovering the proceeds of corruption.

The authors concluded that a UWO could be most effective when UK law enforcement have material to suspect that an asset has been corruptly acquired but need more time to collect evidence.  That is a common problem, for example, after the filing of a suspicious activity report.

It is a testament to the hard work and quality of research of the TI team that the proposal has been adopted into law.  Its true utility can, of course, only be demonstrated by the use of the power by law enforcement, and it is just one tool that can be used to tackle the problem of identifying and recovering the proceeds of corruption (and other serious crimes).

A final Code of Practice outlining the circumstances in which UWOs will be used is awaited.  There are various factors that will need to be weighed when considering whether to deploy UWOs, including whether there will be any adverse impact on an ongoing investigation, and we wait to see whether law enforcement will be proactive in using this innovative investigatory tool where meaningful action could not otherwise be taken.  The draft Code of Practice is here.

The original TI paper is here.

White collar crime

Sanctions: what tech companies should consider

While sanctions restrict trade and dealings with specified individuals, entities and states, export controls restrict the distribution of specified products & services, namely military goods and items that can have a dual civilian and military use.

In the past, compliance with sanction and export regimes was largely seen to be an issue for companies that dealt with military hardware or products that had a clear potential military use & for banks supplying financial assistance to sanctioned entities. That mind-set is now dangerously outmoded.

Technological advancement in ‘civilian’ products and software has resulted in many of these products and services being caught by sanctions and export control regimes. The most obvious example being the now widespread use of encryption software in civilian products and services used to secure data that is transmitted wirelessly between electronic devices. This presents significant challenges for tech companies. These challenges are compounded by the ease with which technology and software services can be transferred globally and the difficulties with identifying and restricting potential access. With the ever-increasing use of cloud services, this is a growing issue.

Tech companies considering sanction and export compliance must address three fundamental questions:

  • Are any of our products or services (or part of them) controlled?

To establish the status of products/services, tech companies operating in the UK must refer to the UK Strategic Export Control Lists (which incorporate EU controls). They should also be aware of the US export control regime, which has wide-reaching extraterritorial effect. Exemptions may apply. For example, certain open source software and “mass-market” software products using encrypted technology are exempt from requiring a license.

  • To whom do we supply our products/services?

Companies should have a method of screening customers and related parties before access is given to products/services to ensure they are not on any sanctions list. This can be managed internally with specialised software or subcontracted to third party providers. These checks should also be carried out periodically on existing customers to capture any updates to sanction lists.

  • What is our geographic scope?

This can often be the hardest question for tech companies that supply goods/services electronically. All companies should understand their potential geographic scope of supply to ensure they are not providing goods or services to sanctioned states or entities. For companies supplying controlled products or services, it is essential that access is geographically limited or that appropriate export licences are obtained. Limitation can be achieved in a number of ways: by restriction of supply to specific servers; or, if cloud services are being used for distribution, ensuring that the cloud service itself has appropriate restrictions in place.

Navigating the complexities of international sanctions and export control regimes is daunting but crucial. Where there is any doubt as to the status of goods, the geographic scope of supply, or the application of sanction and/or export control regimes, legal advice should be sought as a matter of urgency.

White collar crime

High Court supports SFO bid to obtain documents claimed as privileged

In a landmark ruling on 8 May 2017, the High Court ordered that the Eurasian Natural Resources Corporation (“ENRC”) should hand over to the SFO documents prepared during an internal investigation, despite the fact that the documents had been generated by lawyers (including external solicitors).

In 2011, ENRC began an internal investigation into allegations of corruption, bribery and fraud within its operations, remaining in regular contact with the SFO whilst doing so. In 2013, the SFO launched its own criminal investigation into the company.

As part of their investigation, the SFO compelled ENRC to hand over certain documents under a Section 2 Notice. ENRC refused on the basis that the documents were protected by legal professional privilege (“LPP”).

Mrs Justice Andrews largely rejected ENRC’s claims to privilege. She held that there was no legal advice privilege because the documents in question, which included interview notes, did not contain legal advice. With regard to litigation privilege, Andrews J held that this could not protect the documents as they were not prepared with the sole or dominant purpose of conducting litigation. She made a distinction between “the reasonable contemplation of a criminal investigation” and “the reasonable contemplation of a prosecution”.

Part of her reasoning was that ENRC had, when conducting its investigation, intended to report to the SFO: documents produced with the intention of later disclosing them to the SFO could not attract privilege. In addition, she cited the fact that at the time ENRC was conducting its investigation, it did not know what had occurred and whether litigation or prosecution was in reasonable contemplation.

The Judgment has been met with concern by many commentators. The Law Society of England and Wales has branded it as “harmful” and an erosion of the fundamental right of LPP. Others see it as a logical interpretation of the rules of privilege.

It remains to be seen whether companies will be dissuaded from self-reporting and engaging with the SFO, as by doing so they may find themselves dealing with a ‘contemplated investigation’, rather than a ‘contemplated prosecution’. In the meantime, companies should be aware that all documents produced during internal investigations could potentially be disclosable to the SFO if they do not attract LLP.

ENRC has indicated that it intends to appeal the decision.

SFO v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (QB)

White collar crime

Court clarifies jurisdiction to exempt bank from potential criminal liability for making payments before NCA approval received

What happens when a company’s bank accounts are frozen and, as a result, faces imminent collapse, but the bank opposes a court application to process key transactions on the basis that if the bank is made to do so by the court, the bank may be guilty of a criminal offence under the Proceeds of Crime Act 2002 (POCA)? Are the court’s hands effectively tied by the requirements of POCA?

The facts of the recent case of The National Crime Agency v N and Royal Bank of Scotland [2017] EWCA Civ 253 were that RBS froze certain of the accounts of a customer, N (a foreign exchange trading business), and sought consent from the NCA under s335 POCA to return the funds to N upon termination of the banking relationship. NCA gave consent. RBS did not request consent from the NCA to perform specific transactions, which N was seeking to undertake but merely to return all funds to N. The effect of RBS’s freezing of the accounts was to bring N’s business to a halt with potentially catastrophic consequences. N sought interim injunctions and declarations to require the Bank to process its transactions. RBS opposed the applications on, among other grounds, that it had no consent from the NCA to process the particular transactions, only to return the funds to N, and that if it did so without the NCA’s consent, it would be potentially liable to a criminal offence under POCA. The NCA, appearing on the application, and at first having been neutral, adopted the position at the hearing that the Judge had no jurisdiction to override the statutory regime by granting any orders, that RBS was obliged to seek consent for the specific transactions from the NCA, and that the statutory period the NCA would have to respond could not be shortened. N argued that its business would collapse before the statutory period elapsed.

At first instance, Burton J granted N’s applications. The balance of convenience favoured N given the catastrophic position it would be in if the relief were not granted given the statutory periods which would be required if the consent process for the specific transactions. Moreover, as the NCA had consented to the return of the money to N, it could be inferred that there was no suspicion that the money was or was suspected to be criminal property under s340 of POCA and therefore that RBS could be guilty of an offence if they transferred the funds prior to seeking the NCA’s consent. The Judge considered that he had jurisdiction to make the orders, the Court’s jurisdiction not having been ousted by the POCA statutory regime, and that he could also make a declaration that RBS would not be guilty of any criminal offence under POCA in effecting the transfers. He considered that the overall balance of convenience favoured the making of the orders so as to (a) protect N’s business from catastrophic failure and (b) not expose RBS to criminal sanction for complying with the order to effect the transfers.

The NCA appealed against the orders on several grounds, including that the Judge lacked the relevant jurisdiction to make the orders thereby overriding the POCA statutory framework, that the consent given by the NCA to transfer the funds to N did not mean that there was no evidence the monies were or were suspected to be criminal property, and that if the Judge did have jurisdiction this was not a sufficiently exceptional case to justify the interim declaration.

The Court of Appeal concluded that the Judge had been wrong to make the orders. The Court of Appeal, importantly, accepted that the Court’s jurisdiction to make such Orders was not ousted by the POCA statutory provisions. However, they were a highly relevant consideration to whether the discretion should be exercised to which the Judge had given insufficient weight. The Judge had also been wrong to conclude that the NCA’s consent to transfer of the funds back to N showed the funds were clean or that there was no criminality associated with them; judges should generally be careful about reaching similar conclusions at an interim hearing. A bank would be unlikely to be able provide sufficient evidence at an interim stage to allow a court to be satisfied that there was no criminality associated with the funds, and it would therefore be proper to make a declaration that the bank was not committing any offence by transferring the funds. Moreover, there could be many legitimate reasons where NCA consent might be given to release the money where there remain suspicions that it is criminal property and the Judge’s reliance on the NCA’s consent to transfer the funds to N as demonstrating that there was no evidence of criminality was misplaced. Moreover, the Judge had failed to consider that the tipping off provisions of POCA might well prevent the bank from adducing evidence at the application that would allow the court to determine the issue with sufficient certainty. It followed from all of that that the judge had been wrong to declare that RBS would not commit any criminal offence by transferring the funds.

As the Judge’s view that he could make the declaration that RBS would not be committing any criminal offence by transferring the funds was fundamental to his reasoning that he could then order the funds to be transferred, the appeal succeeded on that basis alone. However, the Court of Appeal also criticised the Judge’s weighing of the balance of convenience. He had been heavily influenced by the potential problems N would face if the transfers were not immediately permitted. The Court of Appeal considered that the balance of convenience would generally always favour the bank, as the potential prejudice the bank would face by being ordered to perform an act that could be a criminal offence would usually outweigh the inconvenience to the customer of the transactions not being processed. Although the prejudice against the bank could be overcome if there was no real evidence that the money could be criminal property, the Court of Appeal observed that there is rarely likely to be enough evidence before the court to determine this, which is why such orders would likely be truly exceptional.

The Court of Appeal was also influenced by a change in position of the NCA between the first instance hearing and the appeal. At first instance the NCA had indicated it was not willing to commit to any shortening of the statutory timelines for it consider whether to give consent to transactions under POCA. By the time of the appeal, the NCA noted in a case of real urgency, where a customer could face significant loss the NCA would act much faster than the periods specified in the statute, even within hours. A future court considering such an application is likely to be heavily influenced by whether the appropriate application has been made to the NCA as a matter of urgency, and how they have reacted.

As the Court of Appeal observed, the stringent and sometimes difficult provisions of POCA are Parliament’s carefully struck balance between the fight against money laundering and organised crime, and permitting commercial transactions to take place in a sensible and uninterrupted manor. Where those principles collide, as they did in this case, the court has jurisdiction to intervene, but will only rarely do so in truly exceptional circumstances.

This is an eminently sensible answer to a complex question. While the importance of the POCA regime has been underlined, the NCA’s commitment to act quickly to clear transactions should assist to avoid the worst injustice that the regime might provoke.

White collar crime

Failure to Prevent Criminal Facilitation of Tax Evasion

The new UK “failure to prevent criminal facilitation of tax evasion” domestic and overseas offences will almost certainly become effective in or before September 2017. What does this mean for companies and firms? The offences threaten criminal liability in connection with policing the acts of others. Strict liability is imposed on firms and companies worldwide for the criminal acts of their “Associated Persons”. The offence incorporates a reverse burden of proof, meaning that to defend itself, the firm or company must show that it put “reasonable prevention” procedures in place.

European and UK financial services firms, accountants, and lawyers have been here before. When they were brought into the anti-money laundering regulatory world they were transformed into “gatekeepers”. A big cultural shift had to follow, as organisations and professionals, (some under protest), eventually subscribed fully to the notion of being responsible stakeholders with government in the international fight against terrorism and organised crime. This time though, the net is wider. This offence is not just for regulated firms in the EU/UK. All corporates and firms in all sectors, and potentially anywhere in the world, will be affected.

Section 7 of the UK Bribery Act (“UKBA”), upon which this new offence is modelled, brought in strict liability for UK and international corporates, making them responsible for the acts of their “Associated Persons”, so this concept is familiar. Compliance procedures are in place, with the UKBA being perceived as the new post “FCPA “gold standard”. International firms and partnerships must in the same way pay attention to this new law. Both the UK and the foreign tax evasion offences could affect them.

The law first creates a corporate offence of failure to prevent UK tax evasion by an entity’s “Associated Persons”. The one available statutory defence is that reasonable procedures were in place to prevent the facilitation, or at the time it was reasonable not to establish additional procedures. A second offence, the “foreign tax offence” is also created, effective as long as the “foreign tax” and facilitation crimes would be recognised as offences in the UK. The UK Government ostensibly plans to prosecute, or encourage overseas governments to prosecute foreign tax evasion by international companies which have a link to the UK. Potentially this offence has enormous scope. It could cover foreign tax evasion facilitation by an employee of an overseas company, which has no links at all with the UK but which sends an employee on a flying UK visit, if such visit plays a part in foreign tax evasion. Will this actually happen, and will foreign governments support the UK in this initiative?

Is this new law a positive step in the right direction, to discourage “professional enablers” from aiding and abetting criminals, or does it go too far in imposing yet further regulatory and criminal risk burdens on UK and international entities which are already incurring substantial costs for regulatory compliance?

Whatever the pros and cons of this legislation, it is crucial for firms and corporates to undertake a risk assessment for this offence now. How will you draft your procedures after your risk assessment? The UK Government draft guidance (incorporating core principles as in the Bribery Act), is now being scrutinised by the various sectors, who will want to assist their members with some specific guidance. Such guidance can be submitted to Government for approval.

For the UK legal profession, Louise Delahunty is chairing the group that is assisting the Law Society of England and Wales to draft such guidance. The group includes Natasha Kaye and other Cooley lawyers.