Giving his first public speech yesterday as the new Director of the Serious Fraud Office (SFO), Nick Ephgrave set out his stall for how the agency will become faster, bolder and stronger in tackling the evolving threat of economic crime under his leadership. Here are our key takeaways from Ephgrave’s ambitious vision for the SFO.
1. Evolution: investing to keep pace with threats
First, Ephgrave reflected on the constantly evolving threats the SFO must tackle, which – driven by dramatic technological advances – have become much more complex than the insurance fraud attempted by Greek sea merchant Hegestratos, who was caught in the act of trying to sink his empty cargo ship in 300 BC.
Keeping up with this challenge means the SFO must also evolve. Competing with private sector salaries to recruit and retain top talent has always been tough. So Ephgrave’s emphasis on creating an attractive working environment is welcome. But with over 25% of staff wanting to leave within the next 12 months (much higher than the civil service average of 14%) according to the latest 2022 survey, the new Director has his work cut out.
While getting the SFO’s working culture right is important, as Ephgrave pointed out, investment in the systems and technology that underlie the agency’s operations is just as essential.
Smart investment and a motivated workforce will be key to the SFO making the most of new powers in the Economic Crime and Corporate Transparency Act 2023, including:
- reforms to the underlying rules for holding corporates to account for economic crime-related wrongdoing (soon to be expanded to all crime in the Criminal Justice Bill),
- the new failure to prevent fraud offence, and
- new Section 2A powers allowing the agency to compel individuals and companies to provide information at a pre-investigation phase in all cases, not just international bribery cases.
As the new Director highlighted, the SFO, which he said generated £1.1 billion over the last five years – a 317% return on budget – provides a great return on investment.
The logical conclusion (not taken up by Ephgrave in his speech) is that more of the funds generated by the SFO and other agencies should be reinvested back into key systems and technological capabilities. Careful thought would be needed to avoid perverse “policing for profit” incentives, but a single pooled fund for law enforcement (as suggested by parliamentarians) might do the trick.
2. Case progression: The need for speed
Second, Ephgrave emphasised that keeping pace with the evolving threats of economic crime means the SFO must progress cases much faster. While recognising the challenges posed by the scale and complexity of the SFO’s cases, he warned that extended time frames can also be dangerous, as memories fade and evidence degrades.
Echoing the aspiration of his predecessors to go from investigation to prosecution in three years, Ephgrave set out several concrete strategies for making this a reality:
- Introducing a “rigorous and intrusive review” strategy on cases to ensure investigations stay focused on core issues and don’t “drift”;
- Using technology-assisted review to enhance disclosure;
- Adopting a bolder, more pragmatic approach to shutting down investigations, recognising this is a “hard message to give” but sometimes must be done;
- Developing new investigative techniques to secure key evidence at the early stages of an investigation.
This faster, bolder approach is already visible, with the SFO undertaking more dawn raids in the last three months than in the preceding three years.
3. Innovation: the “big reveal”
The most eye-catching moment of the speech was Ephgrave’s support for bold new ideas to access “smoking gun” evidence. In addition to drawing on covert tactics he’s familiar with from his days on the homicide beat, Ephgrave pushed for two gamechangers to unlock critical intelligence and accelerate investigations:
- Whistleblower compensation: blowing the whistle involves huge risks. Ephgrave argued that, if there’s a chance of getting compensation, people are more likely to come forward. People may want to do the right thing, but it’s easier said than done.
- Assisting offender and cooperating witnesses: Ephgrave also called for much better use of cooperating witnesses, a practice that while almost second nature for US prosecutors is underdeveloped in the UK.
We strongly agree with both of these ideas, but Ephgrave could have linked them more explicitly to holding senior executives to account, which wasn’t a focus of the speech.
As our recent report sets out, senior executives leading large British companies that engage in economic crime, financial wrongdoing or regulatory breaches almost never face any consequences at all. The SFO for example has secured just two individual convictions in 20 corporate enforcement actions.
This leads to poorer corporate governance standards, and greater risks that the huge costs of corporate failure and misconduct are borne by ordinary people. We very much hope that Ephgrave will succeed in using cooperating witnesses and whistleblower compensation to enhance enforcement, including against senior managers for corporate criminality.
4. Disclosure: a “tough nut to crack”
Another key area where Ephgrave has appetite for reform is disclosure, emphasising that it “gobbles up” roughly 25% of the agency’s operational budget. The scale of the task – with the number of documents in a single case now reaching 48 million – combined with the consequences of getting it wrong, means the SFO has “the spectre of making a mistake hanging over [them] all the time”.
Ephgrave recognised that disclosure is a “tough nut to crack” and called for pragmatism in finding a way through the current challenges. Sticking closely to the SFO’s past script on this issue, the new Director suggested it’s time to:
- Refine the definition of “relevance” to narrow the evidence subject to disclosure;
- Ensure the prosecution and defence engage at an early stage, with the judiciary playing a more proactive role in bringing the parties together;
- Simplify some of the more onerous aspects of the Attorney General’s guidelines, such as the requirements for disclosure scheduling;
- Address the tension between the prosecutor’s disclosure duties and data protection requirements to redact private information.
Although saying he has an open mind as to potential solutions, Ephgrave suggested the “keys to the warehouse” approach is superficially attractive but may not actually solve many of the underlying problems. It also risks exacerbating inequalities by tying disclosure to the resources of the defendant. In a different vein, Ephgrave said he sees a “a great future” for AI-assisted disclosure.
This debate may seem technical, but it’s undoubtedly one of the most pressing priorities to prevent disclosure challenges stifling effective prosecution of economic crime. The independent review of the disclosure regime being led by Jonathan Fisher KC is a crucial opportunity to ensure creative solutions are put on the table.
5. Motivation: the victims
A key thread throughout the Director’s speech was the victims who drive his motivation to tackle economic crime. He described his reaction to reading about the harm caused by fraud and corruption as “visceral”.
While readily recognising the importance of compensating victims of fraud in the UK, it was disappointing that Ephgrave’s ambition didn’t stretch to the overseas victims of corruption (which we asked him about in the Q&A). He expressed scepticism about recognising the people of countries affected by foreign bribery as “victims”, yet he had little difficulty perceiving that in many ways “the UK itself is the victim” in fraud cases like Pattiserie Valerie, where 70 stores were closed and more than 900 jobs were lost.
As Ephgrave himself noted, some of the SFO’s “signal successes” have been against corporations – such as Airbus and Glencore – who engaged in egregious offending overseas. Since 2014, the SFO has brought in £1.8 billion in financial penalties to the UK Treasury relating to foreign bribery cases following criminal investigations into 15 companies.
Yet the victims of corruption in these international corruption cases have been let down, time and time again. In just four of these cases did any money — £16.2 million in total — make it back to the countries harmed by these corrupt practices.
If the new Director is really serious about putting victims at the heart of the SFO’s mission, it’s essential that the overseas victims of corruption are properly recognised and compensated in SFO cases.
6. Collaboration: locally and globally
Finally, it was encouraging to see Ephgrave set out his ambition to make the SFO a “collaborator of choice” for other law enforcement agencies both at home and abroad. This would involve the SFO playing a greater part in the national effort to tackle fraud, contributing to the intelligence picture and the strategic threat assessment.
Ephgrave also touched on other partners with whom the SFO will seek to “strategically” engage under his leadership:
- The press: the SFO has had a torrid time in the press of late. Ephgrave emphasised the importance of “positive, accurate” reporting on its cases to bring the SFO’s work to the public’s attention.
- The judiciary: judges are essential in holding both the SFO and defence teams to account on issues like disclosure.
- Lawyers: the SFO needs top-draw barristers on their counsel panel to ensure the agency can go toe-to-toe with multinational companies.
- The City: Ephgrave talked about engaging with companies and their senior executives on improving corporate governance and encouraging self-reporting. We hope this “carrot” approach is also, when necessary, combined with the stick.
One group Ephgrave didn’t name explicitly was civil society. But we’ve seen encouraging early signs of the new Director’s openness to engaging with a broad range of stakeholders, including civil society organisations. We look forward to working together on our shared mission to end impunity for economic crime.
The new Director has set out a bold vision for the SFO. The agency’s mission is clear and Ephgrave’s motivation is palpable. Now the government must provide the resourcing and reforms that the agency needs to deliver fully on this ambition.
