Partner Ian Hargreaves comments on the SFO corporate guidance, in Compliance Week

Partner Ian Hargreaves considers the Serious Fraud Office’s updated guidance on evaluating corporate compliance programmes and what it signals for organisations seeking to mitigate enforcement risk.

Ian’s comments were published in Compliance Week, 31 January 2025.

On whether the SFO guidance provides more clarity and transparency about the circumstances in which it will evaluate corporate compliance:

The new SFO guidance is potentially designed to do 2 things. Firstly, to provide clarity and thereby assist corporates (through a standalone guidance) as to what the SFO regards as the requirements of an effective compliance programme, but also secondly to set down a public marker  which sets a threshold by which there will be an expectation and which the SFO will use when investigating and prosecuting potential corporate crime.

Arguably, where the guidance does not relate to new developments – such as the failure to prevent fraud offence – it is a rehash of the 2020 Guidance. However, this assessment would be unfair as the update guidance does provide greater clarity as to what the SFO regards as its key outward-facing messages such as moving away from a paper-exercise to a dynamic risk-based operational model.

What lessons there might be for companies from the guidance:

Although several of the points the SFO makes draw on procedures which many corporates have already applied following the guidance on ‘adequate procedures’ which followed the enactment of the 2010 UK Bribery Act and the more recent guidance on ‘reasonable procedures’ relevant to the failure to prevent fraud offence, the new SFO Guidance does provide further insight as to what it expects. Notwithstanding this, there will always be a grey area and the SFO guidance does caveat this by stating that “there is no set of preordained answers that entitle an organisation to conclude that its programme is effective.”

Therefore, companies must remember that the assessment will be “holistic and focused on the specific circumstances.” Consequently, there is no one perfect compliance programme and corporates will have to continually monitor and test the effectiveness of the procedures they have in place which will require flexibility, investment and a strong compliance team.

It is also important to stress, as the SFO does, that it will require a “… level of effectiveness and pro-activity of the compliance programme, both at the time the offence was committed as well as at the time of charge.”

What advice you would give to companies about any potential interaction with the SFO:

Unsurprisingly, the SFO has highlighted that good compliance can be established through an interaction with the SFO. The SFO Director has stressed on many occasions that whistleblowers are a key part of his mission to make the SFO a more effective law enforcement agency. This will include internal whistleblower reports in relation to which the SFO will expect early self-reporting by corporates.

When and if to self-report remains one of the most difficult decisions to make but the following points which are made in the guidance are particularly important:

• “The corporate management team takes a genuinely proactive approach involving “remedial actions” [SFO Guidance extract]
• There is “the existence of a genuinely proactive and effective corporate compliance programme” at the time of offending and at the time of reporting [SFO Guidance extract];  and
• The company provides sufficient information about the operation of a company in its entirety, including, making witnesses available and disclosure of the details of any internal investigation. [Reworded SFO guidance]

How does the guidance/SFO approach compares to those used in other jurisdictions?

Although the US Department of Justice (DOJ) has been rather less forthcoming and proactive in recent times concerning the guidance it was providing corporates (and their advisers) on what it regarded as effective compliance programmes, it is hard to deny that the DOJ was and potentially still remains the standard-bearer of global law enforcement agencies which will guide, and at times assist, corporates with issues they may have in interpreting compliance requirements. Consequently, it is encouraging to see that the new SFO Guidance does not shy away from referring if not promoting other guides.

The SFO guidance usefully ushers companies in the direction of international sources for comparison purposes. The guidance links to that of the DOJ and the French Anti-Corruption Agency for companies with a US or French link. However, these are useful guides for all companies to gain a multi-jurisdictional understanding as to what can constitute effective compliance.

The DOJ approach, is arguably rather similar as it prioritises “individualised determination in each case”; focuses its investigation on “the adequacy and effectiveness of the corporation’s compliance programme at the time of the offence, as well as at the time of a charging decision”; and considers “the corporation’s remedial efforts to implement an adequate and effective corporate compliance program or to improve an existing one.”

The DOJ also helpfully provides “three fundamental questions a prosecutor should ask” which can assist companies in their internal assessment of the effectiveness of their compliance programmes. These are:

1. Is the corporation’s compliance program well designed?
2. Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively?
3. Does the corporation’s compliance program work in practice?

The DOJ elaborates on these questions and provides critical factors involved in the answering of these questions. The French Anti-Corruption Agency’s (“AFA”) guidance operates in a similar format to that of the DOJ. However, rather than three questions, the AFA utilises “three inseparable pillars.” This contrasts to an extent with the SFO’s approach and at least where a business is global in nature it is definitely worthwhile considering the guidances provided by the DOJ and AFA.