UK Economic Crime Group: Enforcement Update

• Published date: 10 October 2020
• Subject Matter: Media, Telecoms, IT, Entertainment, Criminal Law, Gaming, White Collar Crime, Anti-Corruption & Fraud, Crime
• Law Firm: Arnold & Porter
• Author: Ms Kathleen Harris, Sean Curran, Melissa Dames and Maya Paunrana

Executive Summary

In this edition of the UK Enforcement newsletter, we provide an update on recent anti-corruption, fraud and bribery developments in the UK. We consider recent enforcement actions by the Serious Fraud Office (SFO), the National Crime Agency (NCA) and the Financial Reporting Council (FRC). We comment on the most recent Deferred Prosecution Agreement (DPA) between the SFO and G4S, the ongoing investigations into Rio Tinto and 1MDB, and how documents leaked from the Financial Crimes Enforcement Network (the FinCEN files) show suspicious funds flowing through global banks. We set out the FCA's newly announced approach to medicinal cannabis companies and introduce the new Global Human Rights Sanctions Regulations.

We also consider some of the issues arising out of the COVID-19 pandemic, including the impact of court shortages and potential fraud against the UK's furlough scheme. As part of our wider commentary, we continue to discuss themes of diversity and inclusion in the workplace, and in particular, efforts made by Her Majesty's Courts and Tribunals Service (HMCTS) and the Financial Conduct Authority (FCA) and to promote these areas.

In terms of enforcement, we consider:

• The DPA agreed between the SFO and G4S;
• Discussions between Rio Tinto and the SFO over bribery probe deal;
• Europol's warning that banks are used to launder match-fixing cash;
• The 1MDB bribery scandal; and
• The FinCEN files.

In terms of legislative reform and government matters, we consider:

• The FCA's approach to medicinal cannabis companies;
• UK Human Rights sanctions;
• The NCA's Annual Report 2019-20;
• The FRC's Annual Enforcement Review;
• The ongoing impact of COVID-19 on the criminal justice system;
• The Coronavirus Job Retention Scheme and the Finance Act 2020;
• Tackling racial bias in UK courtrooms; and
• Diversity and the FCA.

Enforcement Update

DPA Agreed Between SFO and G4S

On 17 July 2020, a DPA between the SFO and G4S Care and Justice Services (UK) Limited (G4S C&J) was approved in court. This is the eighth DPA that the SFO has successfully negotiated with companies and is related to the DPA that was agreed with Serco in July 2019. The draft indictment in this matter included three counts of fraud by false representation by G4S C&J, in relation to financial models reporting costs to the Home Office and Ministry of Justice. Under the DPA, G4S C&J will pay a penalty of '38.5 million, as well as the SFO's costs of '5.9 million, and maintain a corporate renewal programme. KPMG has been appointed as a third-party reviewer to monitor G4S C&J's progress going forward. In order to avoid prejudicing any subsequent criminal proceedings reporting restrictions remain in place and the Statement of Facts associated with the DPA has not been published.

Although this DPA resolves the matter in respect of the company (barring any breach of the DPA), the result of criminal proceedings against individuals remains outstanding. On 8 September 2020, three former executives of G4S C&J were charged with seven offences of fraud relating to false representations made to the Ministry of Justice between 2009 and 2012.

The DPA and judgment provide further insight into the considerations by the court in determining whether a DPA should be approved on the basis that it is in the interests of justice not to prosecute the relevant company. As has been the case with previous DPAs, cooperation is emphasised. Although the company cooperated from the outset of the investigation in January 2014, it was noted that the level of cooperation intensified significantly after October 2019, when the company granted a limited waiver of privilege, providing access to all interviews conducted by its solicitors and accountants in its own internal investigation. Other examples of the assistance provided include: responding voluntarily to investigative requests from the SFO; providing digital and hardcopy material to the SFO; providing notification of when and how other data had been destroyed; and assisting the SFO with tracing relevant third parties. Mr Justice William Davis emphasised that the overall level of cooperation is what matters and that any initial reluctance to cooperate fully can be dealt with when considering the discount on any financial penalty.

The court also considered the remedial steps taken by G4S C&J's parent company and the fact that the relevant conduct was not recent (having been undertaken between 2005 and 2013). Mr Justice William Davis was also keen to emphasise that resolution by a DPA did not allow the company to avoid the consequences of its criminality as it had been required to compensate the Ministry of Justice in full and had undertaken remedial actions. Moreover the basis of the financial penalty ordered was the same as would follow a conviction.

In respect of the financial penalty, the six steps of the Sentencing Council Definitive Guideline on Fraud, Bribery and Money Laundering are clearly set out in the judgment. Of particular interest is that the culpability in this matter was determined to be high, such that a multiplier of 300% was applied to the gross gain by the company. In determining the discount to be applied for assistance to the prosecution and reduction of sentence for a guilty plea, earlier DPAs were considered where in all but one instance, the financial penalty had been discounted by 50%. Mr Justice William Davis considered that as it was not until October 2019 that G4S C&J's showed an exemplary level of cooperation, the company should not receive a 50% discount. Instead, a discount of 40% was applied.

Rio Tinto in Discussion With SFO Over Bribery Probe Deal

In November 2017, we wrote about the SFO's investigation into Rio Tinto for suspected corruption in the conduct of business in Guinea after the company self-reported in 2016. The investigation was triggered by the discovery of emails from 2011 which referred to a payment of $10.5 million made to a consultant, François Polge de Combret, for work carried out on the Simandou iron ore mining project in the Republic of Guinea. The emails revealed Combret's links to Guinean government officials, and in particular, Combret's facilitation of a $700 million payment in 2011 to the then new government of Guinea's President Alpha Condé in exchange for mining rights.

Rio Tinto is now seeking a DPA from the SFO in relation to fees paid to Combret. Although no details have been reported, the company dismissed a senior executive in charge of the project at the time and its head of legal affairs, stating that they had "failed to maintain the standards expected of them under our global...