The effect of the lockdown on criminal and regulatory investigations, enforcement and prosecution

Introduction

The current crisis has disrupted investigations, enforcement and prosecutions around the world. We have summarised below the effect of the crisis on the UK SFO and financial regulators, and summarised the impact on investigations in the US and Asia. 

The UK

COVID-19 has significantly impacted the progress of ongoing UK criminal investigations and hearings, as well as charging decisions. 

Ongoing criminal proceedings

The UK Government moved to quickly expand the availability of audio and video technology in criminal proceedings. Schedule 23 of the Corona Virus Act 2020 (which came into force on March 25, 2020)  amended the Criminal Justice Act 2003 to allow Crown Court appeals, preliminary proceedings in relation to these appeals, and incidental proceedings to be conducted by video or audio link. The courts have the discretion to decide whether all or part of proceedings should be conducted via audio or video link, provided “it is in the interest of justice” to do so¹. However, jurors are excluded from participating in trials remotely, and hearings where bail is contested, a guilty plea is entered, or sentencing is being dealt with, cannot be conducted by audio link. 

To minimise disruptions to ongoing jury trials and other proceedings that require in-person appearances, around 160 “priority” court buildings have been kept open, with social distancing protocols implemented.  

We understand that a major bribery trial involving the Serious Fraud Office (SFO) is likely to resume in the coming weeks with distancing measures in place (although it remains to be seen how jurors will react to being asked to travel into central London). If successful, this case is likely to provide a blueprint for future trials. The Lord Chief Justice has recently approved the commencement of new jury trials in the week of May 18, with ‘special arrangements’ in place to protect the health and safety of all participants and the jury.

Likely delays in commencing complex fraud prosecutions

There was, even before the current crisis, a significant backlog of serious criminal cases awaiting charging decisions and trials.

The Crown Prosecution Service (CPS) and National Police Chiefs’ Council’s interim charging protocol directs prosecutors to de prioritise long-running, complex cases, including complex fraud cases. The CPS interim guidance also directs prosecutors, when evaluating the public interest of a case, to consider whether prosecution is a proportionate response to an alleged crime, in the context of the ongoing impact of COVID-19.

The SFO will likely be factoring these issues into decisions as to whether to investigate issues, as well as charging decisions. Over the last ten years, the SFO has taken an average of four and a half years to complete its investigations². If the current guidance remains in place in the medium-term, defendants are likely to experience further delays. In practical terms, the SFO is likely to continue to prefer to enter into DPAs with corporates and may be dissuaded from pursuing individuals in some circumstances.

Ongoing SFO investigations - Delays in reviewing documents and conducting interviews

According to press reports, the SFO has stopped processing all physical evidence such as paper documents or information on physical storage devices, because the staff who would usually process these confidential materials at its offices are now working remotely. The agency has also experienced delays in processing electronic evidence. The SFO has also reportedly suspended interviews of suspects and key witnesses in investigations because it has been unable to find a legally acceptable alternative to in-person meetings.  The CPS, Police, Law Society, Criminal Law Solicitors’ Association, and London Criminal Courts Solicitors’ Association, on the other hand, have published interim guidance which provides for a suspect to be interviewed remotely if, having had the benefit of legal advice, the suspect provides his/her informed consent to a video or audio interview. It is not clear whether the SFO will seek to adopt similar guidance and conduct some interviews remotely. It is likely that the SFO will wait and see how long the current situation lasts. Again, this is likely to have a bottleneck effect, and issues are likely to be exacerbated where interviewees are overseas.   

The approach of the FCA and PRA

The PRA and FCA are still moving forward with current priority investigations (although there are some indications that certain non-urgent matters may be delayed such as standard data requests, s166 reviews which often have an on-site element to consider).  The FCA’s Business Plan commented “it may be months before we are in a more stable position and can focus fully on the activities in this plan … We have delayed other activity we had planned, where we judge that it was not urgent and may have distracted firms from the immediate priority.”

It is not clear which ongoing investigations are being prioritised over others but there does appear to be a ‘go-slow’ on some matters in contrast to others where the PRA and FCA are still seeking actively to progress matters as much as possible in this current remote environment. 

Firms and individuals are still receiving new requests for specific information/data, some with very tight response deadlines both in relation to on-going investigations and also on the supervisory side. There is generally some flexibility in relation to requests for extending deadlines but there are exceptions where matters are particularly urgent.

Both the FCA and PRA are prepared to accept and share information including in response to information requirements by way of an FTP platform (although this may require involvement of their cyber teams). 

There are some indications that the initial tendency to seek to defer interviews is evolving and holding interviews remotely (by phone or video) is now being considered.

In terms of new investigations, the FCA stated in its Business Plan that, in the short term “our highest priority is to deal with the financial implications of [COVID-19] quickly and effectively.”. It acknowledged that COVID-19 may have a significant long- term impact on its priorities, commenting that in the coming months “the shape and scale of the issues we need to address may have changed significantly as a result of the virus. We may publish an update to this plan if we believe it is necessary.”

However, investigations are still being commenced and scoping meetings are taking place remotely.  The FCA also recognises that the current circumstances may give rise to misconduct which could be the subject of future regulatory scrutiny.  The FCA’s Business Plan comments:  “we will remain vigilant to potential misconduct [during COVID-19]. There may be some who see these times as an opportunity for poor behaviour – including market abuse, capitalising on investors’ concerns or reneging on commitments to consumers.” 

The US

In the US, investigations and prosecutions have slowed but there is an added complication: the 2020 Elections in November and with that, a possible change in administration in January 2021. When there is a change of administration, thousands of prosecutors and other government employees will leave with the old administration. Therefore, there will be a push to wrap up any investigations before the end of the year.  As such, there is an expectation that the pace of investigations will pick up before the year’s end.

Asia

In Asia, there has been a general slowdown, due to the inability to travel and the difficulties with using remote platforms. Some regulators are particularly wary of using platforms that have recording functions.

Conclusion

The current situation will have a significant impact on how investigations, enforcement and trials are conducted in the near term, a medium-term impact on charging or enforcement decisions and trial dates given the ever-increasing backlog of cases, and in the long term may result in changes to the way in which investigations and hearings operate.