In April, Lisa Osofsky, Director of the Serious Fraud Office (SFO), announced plans to introduce a US-style informant scheme in the UK, sparking fervent debate over the use of undercover sources in white-collar crime investigations. Although Osofsky has since downplayed the proposals, informants could help the agency to overcome intensifying pressure to increase its success rate and speed up its investigations. However, questions remain about the practical, and cultural, viability of such a scheme in the UK context.
US style informants
On 26 April 2019, in comments reportedly made to the London Evening Standard newspaper, Osofsky outlined her desire for the SFO to work with potential offenders to uncover corporate crime. Through co-operation, potential offenders would be presented with a blunt ultimatum: “spend 20 years in jail … or wear a wire and work with us.”
This is not the first time that Osofsky – a former US Department of Justice (DOJ) and FBI lawyer – has advocated the use of US-style investigatory methods; the SFO Director has previously indicated that the agency was “intently exploring” the use of informants in the UK, highlighting how “valuable co-operators can be in cracking white collar cases”.
The primary factor driving these proposals is clear: speed. Giving evidence before the Commons Justice Committee in December 2018, Osofsky bemoaned the slow pace of SFO investigations as being “probably the biggest criticism [she was] hearing”, and expressed a desire to make the prosecutor more “proactive” and “nimble”.
Legislative framework: RIPA
A key concern is how the proposal would work in practice: there is, for example, no direct equivalent to a US-style plea deal here. However, there is provision for informants. Part II of the Regulation of Investigatory Powers Act 2000 (RIPA) provides the legislative framework through which informants, or Covert Human Intelligence Sources (CHIS) as they are known in the UK, can operate.
Under section 26(8) of RIPA, a CHIS is defined as an individual who establishes a “personal or other relationship” with another person for a covert purpose, essentially requiring the target of a covert operation, or those that the CHIS receives information from, to be unaware of the relationship that the CHIS has with the law enforcement agency concerned. This is exactly the type of wire-wearing informant envisaged by Osofsky.
Pursuant to s.29 and Schedule 1 of RIPA, a CHIS may operate on behalf of a so-called “designated authority”, which includes the SFO, the Financial Conduct Authority (FCA), the Competition and Markets Authority (CMA) and the DOJ. Through RIPA, informants are given certain safeguards: a designated authority must be satisfied that the use of a CHIS is both necessary and proportionate, and the security and welfare of the CHIS must be protected.
There is an established body of case law demonstrating a willingness by the courts to protect the interests of CHIS, protections that are now largely encoded in the 2018 CHIS Code of Practice. However, many issues in a financial crime context remain: namely, concerns have been raised about how CHIS are protected from self-incrimination, as well as how a CHIS-based informant scheme would fit within the framework of a typical SFO investigation and prosecution.
What mechanism exists, for example, for willing co-operators to reach out to the SFO, with a view to acting as a CHIS? Equally, what safeguards exist to prevent informants from lying and obstructing justice, and how would the SFO test the robustness of information provided? Further, what status would informants hold when compared to whistleblowers, and what protections would they have? And, finally, does the SFO have the necessary resources and infrastructure to adequately safeguard the interests of informants?
These questions are not straightforward, a fact that is further compounded by the operation of section 71 of the Serious Organised Crime and Police Act 2005 (SOCPA). Under s.71, the SFO has a power to offer an individual immunity from prosecution by issuing a written immunity notice, a provision that the SFO would presumably seek to use to facilitate an informant scheme in the UK. Unhelpfully for the SFO, s.71 gives rise to a number of practical issues all of its own.
Most notably, it is unclear how a section 71-based informant scheme would work in parallel with Deferred Prosecution Agreements (DPAs), which are only available to corporates and have become the leniency mechanism favoured by the SFO. Unlike the CMA leniency programme, the Joint SFO-Crown Prosecution Service (CPS) Code of Practice for DPAs makes no provision for co-operating offenders.
This is significant, as informants are arguably most effective for speeding up large-scale, document-heavy cases – the very cases that are also likely to hold DPA potential. It is noteworthy that the latest and fifth SFO DPA, announced this month in respect of Serco Geografix Limited – a wholly-owned subsidiary of the outsourcing company Serco Group – involved documentary evidence relating to alleged fraud and false accounting offences committed as far back as 2011.
With these possible impediments in mind, the SFO may look to utilise section 73 of SOCPA instead. This more commonly utilised provision creates a presumption that, if an offender pleads guilty to offence(s) and also offers assistance to an investigator and/or prosecutor, then the sentencing court may impose a substantially smaller sentence.
However, the agency has seen an unfortunate number of cases collapsing with evidence provided on this basis. Moreover, the conditions imposed by such agreements can be onerous and drawn-out, and require an offender to make admissions under caution at an early stage, which is likely to act as a deterrent for some suspects contemplating becoming informants. There is also no guarantee as to likely sentence, which may act as a further deterrent.
An informant arrangement supported by SOCPA also risks conflicting with parallel overseas investigations. Theoretically, if a suspect pleads guilty to a criminal offence in the UK (pursuant to a section 73 agreement), they can seek to rely on the internationally recognised principle of ‘ne bis in idem’ (or double jeopardy), if prosecuted elsewhere in respect of the same conduct. However, outside of the EU, such protection is not consistently applied, and separate agreements may need to be negotiated from overseas authorities conducting parallel investigations.
For it to succeed, the SFO will need to clarify how such a scheme would work in practice and its expectations from co-operating offenders. This would include when and how offenders should offer assistance, what their options are if the SFO approaches them, whether waiver of privilege will be required and whether any continuing obligations apply. Indeed, detailed guidance, similar to the CPS’ regarding “assisting offenders” co-operating under SOCPA, will be a pre-requisite for any potential informant to weigh up their options.
According to reports published by the Investigatory Powers Commissioner’s Office, there have been approximately 3,000-5,000 active CHIS deployed every year since 2003. This figure is largely comprised of undercover officers working in the field, not the wire-wearing, white collar crime informants envisaged by Osofsky in her recent comments.
The negative institutional attitude taken towards informants – or “snitches” as they are more colloquially known – runs deep, particularly in the area of financial crime. This is largely because there is not an easily understandable system of guarantees in place to reassure informants as to the advantages of offering assistance. Notably, the sentences imposed in the UK for financial crime are a far cry from the lengthy prison sentences in the US. For any informant scheme to be successful, full transparency will be required to bridge this trust gap.
A further potential obstacle is the risk that evidence obtained through undercover means is tainted by entrapment. Distinguishing between unlawfully created “state crime” is a fact-specific exercise, with the courts historically drawing a distinction between an agent who has acted for the state to cause or instigate an offence (which is not permitted), and the act of providing an opportunity for the accused to commit an offence (which is permitted).
However, this distinction starts to break down in more complex cases, and entrapment arguments deployed in the financial crime context would inevitably be analysed using a more comprehensive factual matrix test adopted by courts in recent years, taking into account factors such as the necessity and proportionality of the means employed by the agency controlling the informant. This would create further uncertainty as to the efficacy of such evidence, whilst also potentially blurring the perceived “justice” of informant-generated convictions in the eyes of the public.
Clearly, informants hold the potential to speed up investigations, with Osofsky suggesting that co-operating witnesses could further assist in the interpretation of documentation and in the presentation of cases to juries. However, for this potential to be unlocked, greater clarity is needed on the mechanism, outcome and safeguards for informants. This would offer the crucial comfort needed for those contemplating coming forward and for the public to embrace such a scheme.
By Maria Cronin, Partner and Craig Hogg, Associate, at Peters & Peters Solicitors LLP