New SFO Director promises a bolder, more pragmatic approach to the fight against economic crime

The new Director of the Serious Fraud Office was generous with his time, and candid in setting out the challenges for the agency. Highlights in his speech included:

• Optimism regarding the SFO’s role in the UK’s crime-fighting ecosystem, as a “collaborator of choice”
• The promise of many more dawn raids by the SFO because, as Ephgrave put it, “why wait?”
• A plea to lawmakers regarding legislative reforms on incentivizing whistleblowers and “flipping” defendants
• A nod towards a more domestic focus in economic crime enforcement
• A commitment to engage more with large corporates, including the possible introduction of an SFO ‘kitemark’ for robust corporate compliance programmes
• Transparency that the SFO’s culture needs to improve
• An acceptance that the SFO benefits from the revolving door

New Director optimistic about the SFO’s role in the crime-fighting ecosystem

Ephgrave acknowledged the challenges facing the SFO, but remained optimistic about the future as he set out his priorities for the coming years. 

The new Director began his speech on a personal note, saying that he has a “visceral reaction” to the impact of economic crime on victims in the UK, and that he was absolutely committed to the fight against serious and complex fraud, bribery and corruption.

Ephgrave rejected any suggestion that his background leading murder investigations for the Metropolitan Police (describing himself as a “homicide man”) might hold him back in his new role. Indeed, there was plenty in the new Director’s speech to suggest that his experience in the police will be a real benefit to the SFO, in particular his focus on deploying a wider range of innovative investigative techniques in the agency’s cases, and his appreciation of the SFO’s role in the crime-fighting ecosystem.

In this respect, Ephgrave has committed the agency to playing a greater part in the national effort to tackle fraud, including through preventative and intelligence-gathering work. The new Director expressed a desire for the agency to be the “collaborator of choice” with other crime-fighting agencies in the UK and internationally, celebrating recent joint endeavours with the Metropolitan Police and the National Crime Agency. He cited the recent Axiom Ince dawn raids – where the Metropolitan Police arrested suspects and the SFO interviewed them in London police stations – as an example of positive collaboration.

Moving fast and breaking things

Ephgrave promised that cases would progress more quickly under his leadership, and he explained that he was confident the SFO could cut the time from investigation to prosecution through the use of a wider range of investigative techniques, as well as more innovative approaches to disclosure.

The new Director signalled that the SFO would undertake a more rigorous and intrusive review process with respect to active investigations to ensure that the agency doesn’t waste time and resources on doomed cases.

Most significantly, perhaps, Ephgrave committed to a bolder, more pragmatic and more proactive approach for the SFO.

This means more dawn raids. He said the SFO had gone through more doors in the past three months than it had in the previous three years. His view is that raids bring momentum to investigations and give the SFO the opportunity to interview suspects at an early stage. This allows the SFO to “look in the eyes” of possible suspects and put pressure on them.

Ephgrave added that the legislative reforms of ECCTA would form an important part of the SFO’s toolkit during his tenure.

A plea to lawmakers

Ephgrave concluded his speech with what he called two “provocations”.

The new Director wants to be given new powers – the ability to incentivise whistleblowers and greater powers to ‘flip’ defendants.

He noted that 700 UK nationals had blown the whistle to the U.S. authorities since 2012, and explained that the SFO and other agencies were potentially missing out on ‘smoking gun’ evidence as a result. In his view, the benefits of paying whistleblowers far outweigh the downsides.

On ‘flipping’ informants, Ephgrave again celebrated the U.S. model of trading reduced sentences for intelligence and evidence.

Ephgrave’s speech was followed by a fireside chat, during which the new Director also made clear that he felt that reforms to criminal disclosure rules were necessary.

His view is that the legislation in place is outdated and imposes unreasonable requirements on the SFO in the context of data-heavy investigations in the modern age. There is an ongoing independent review into the disclosure regime being undertaken by Jonathan Fisher KC and the Director was clear that he wants changes to the law. Among other things, Ephgrave said that the definition of relevance under the current laws was too broad, that the scheduling requirements were too onerous and that the Data Protection Act meant SFO staff spent days redacting documents rather than doing valuable work on investigations.

The new Director is not, however, a fan of one proposal: handing the ‘keys to the warehouse’ to criminal defence teams. He thinks that this wouldn’t save the SFO that much time, because they would still need to review the documents provided to the defence. This solution wouldn’t overcome the data protection issues referred to above. And it would weight the justice system in favour of those with the deepest pockets. 

A domestic focus?

The Director emphasized that his focus was on pursuing financial crime affecting UK victims.

When pressed on this, Ephgrave said that he did not have any specific agenda to stay away from international fraud and corruption, but he reiterated that his emphasis was on crime affecting large numbers of victims in this country.

When asked if he wanted to secure compensation for overseas victims of fraud and corruption, the new Director said in terms that this was not a priority for him.

From this it is safe to infer that Ephgrave’s SFO will focus on domestic rather than international offending. 

Ephgrave added that he was a “fan of DPAs” – but this answer came in the context of a question about funding and the SFO’s success in filling the coffers of His Majesty’s Treasury. This suggests that the SFO will continue to pursue DPAs as a way of showing that it offers good value for money, even if this is not the main focus of the agency.

A new campaign of prevention for corporates

There was enough in Ephgrave’s speech to suggest that his key focus for UK corporates will be prevention, rather than investigating and prosecuting wrongdoing.

He spoke of the benefits of reaching out to CEOs, and encouraging good compliance programmes.

The Director indicated that he was prepared to be creative in partnering with big corporates, and mentioned the possibility of an SFO ‘kitemark’, as a seal of approval for companies who had been given a “clean bill of health” by the agency in terms of training and procedures in place to prevent fraud. 

Ephgrave made clear that the SFO needed intelligence as a precursor to investigating and prosecuting wrongdoing. He suggested that building relationships with corporates would lead to increased self-reporting.

Cultural change more important than increased funding

The SFO’s Acting Chair Claire Bassett posed the final question of the night, noting Ephgrave’s ambitious goals and asking what he needed to deliver on those ambitions. 

Rather than asking for more money from the UK Government, the new Director alluded to cultural issues faced by the SFO in recent years, saying that he wanted to make working at the agency a “career-enhancing experience” where staff felt comfortable and supported. 

Ephgrave explained that staff should feel like they could leave the SFO and come back to the agency; in other words, like Director Lisa Osofsky before him, he thinks the revolving door is a good thing. 

The new Director said that he wanted people to behave the right way in the agency. Those who did not do so “were like a cancer” eating away at the morale of staff. 

Ephgrave’s approach to this issue could be very significant as the SFO seeks to recruit and retain high quality staff, and his comments clearly reflect an acknowledgement that staff morale had hit rock bottom under his predecessor, as shown by the agency’s exceptionally poor results in the most recent Civil Service People Survey.

What next?

A good start for the new Director, but the proof is in the pudding. 

Nick Ephgrave is bursting with ideas, but can he deliver on them?

As the UK faces a fraud epidemic, it remains to be seen whether the SFO is capable of turning the tide.

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Authored by Michael Roberts, Liam Naidoo, and Reuben Vandercruyssen.