Policy paper

Economic Crime and Corporate Transparency Act: the extension of the Serious Fraud Office’s pre-investigation powers

Updated 1 March 2024

What is the government doing and why?

The government is expanding the Serious Fraud Office’s (SFO) section 2A pre-investigative powers to all SFO cases. The SFO investigates and prosecutes cases of serious or complex fraud, bribery and corruption. Section 2A pre-investigative powers will no longer be limited to suspected cases of international bribery and corruption. This expansion will allow the SFO to compel individuals and companies to provide information at the pre-investigation stage in all SFO cases, helping it to deliver its mission to tackle serious financial crime, to deliver justice for victims, and to protect the UK’s reputation as a safe place to do business.

The SFO’s investigative powers are provided by section 2 of the Criminal Justice Act 1987 (CJA) and can be used to compel individuals or companies to provide information. These powers, known as section 2 powers, could originally only be used following the SFO Director’s decision to commence an investigation when there are ‘reasonable grounds to suspect’ that a crime (serious or complex fraud, bribery or corruption) has taken place.

In 2008, in recognition of the difficulties facing the SFO in gathering information in relation to suspected cases of international bribery and corruption, the SFO was granted access to section 2 powers at the pre-investigation stage. This amendment to the existing powers – known as section 2A – subsequently amended by the Bribery Act 2010 was limited to suspected cases of international bribery and corruption. It is invaluable in delivering justice in relation to suspected bribery and corruption.

The expansion of section 2A powers to all SFO cases forms part of the government’s strategy to combat economic crime, including fraud. The extension will ensure the interests of justice are better served as decisions on complex fraud cases, in particular, will be able to be made more quickly.

How is the government going to do it?

The expansion of section 2A powers will:

• allow the SFO to promptly determine whether a crime has taken place, by giving it early access to information and evidence held by individuals or companies
• ensure the early stages of an investigation are delivered more quickly. Currently complex fraud cases can take over a year to be developed, which can have a detrimental effect on victims and take up a large amount of tax payer funded resources
• ensure that proceeds of crime are identified more quickly, ensuring that assets can be preserved for confiscation or compensation
• ensure that fewer fraud investigations are shut down after a case has been formally accepted by the SFO as referrals that do not meet reasonable grounds to suspect criteria can be identified and sifted out more effectively at intelligence stage

Case study

The SFO Intelligence Division (ID) received a referral in 2019 relating to a potential investment fraud. Investors had been encouraged to deposit their money into a property investment scheme that promised high returns. However, the scheme collapsed with a number of the companies involved falling into administration and millions of pounds being owed to investors.

Administrators stepped in to manage property/assets and were in possession of key material (for example laptops and emails). The administrators were reluctant to hand over material to the ID without a formal agreement/compulsory notice. Without this material the SFO were unable to determine whether or not to open a formal investigation. It took a long time to finalise a written agreement with the administrators and over a year passed before the ID had sight of relevant material.

With section 2A powers available at the outset a decision on case acceptance could have been made more quickly as the SFO could have compelled the administrators to provide the information, cutting the pre-investigation stage of the SFO’s operation by many months.

Who will this apply to?

The SFO has jurisdiction in England; Wales and Northern Ireland. The extension of this provision will apply in these jurisdictions.

The SFO was created by Section 1 of the Criminal Justice Act 1987 which empowers the SFO Director to investigate any suspected offence which appears to him/her on reasonable grounds to involve serious or complex fraud. There are several factors that the Director will take into account but the most pertinent is that the Director must have reasonable grounds to suspect that a relevant crime has taken place.

When will this come into effect?

Implementation will proceed following Royal Assent of the Bill.