Business Crime Defence 2017: Trends & Conclusions

The past 12 months have seen a continued focus from regulatory authorities around the world on criminal activity within the corporate sphere as part of an attempt to combat corruption and encourage transparency. Businesses have reacted to the intensified approach from authorities by reassessing internal compliance systems and identifying and pre-empting problems arising from risk areas within their structures. As both the size and number of global and internal investigations have increased, the legal market too has expanded, with many practitioners and firms viewing business crime defence as a real growth area and thus a strategic priority. 

Global Investigations

Full-scale global investigations are still the main source of work for practitioners around the world, as the trend of general enforcement on an international scale continues. In particular, there is an uptick in the number of cross-border investigations as companies conduct more outbound work and the globalisation of businesses increases. Big-ticket cases involving the likes of Rolls-Royce, Petrobras, Odebrecht and Barclays remain at the forefront of the international corporate crime market, encompassing both corporate and individual defence and therefore keeping a vast number of lawyers across the world exceptionally busy. It is a trend that the majority of lawyers canvassed during our research see no sign of abating, as the fight for transparency and the activities of enforcement agencies intensify.

The number of internal corporate investigations is also on the rise, as a result of a more stringent approach from authorities with regards to compliance and related investigations. Indeed many lawyers have noted not only an uptick in compliance work but also requests from clients to conduct internal investigations and assess their internal processes. Furthermore, sources have also witnessed a growth in whistleblowing and corruption work, the main driving factor behind which they consider to be an increasing awareness and better understanding from the client of the related processes. It is evident from this trend that clients continue to grow in sophistication, not only in their awareness of the changing attitudes from authorities, but also in their approach to internal corporate processes and ensuring compliance. Clients are becoming more proactive, seeking out counsel to pre-empt serious risks, rather than waiting for a problem to arise and the subsequent need for a solution.

Changing tactics

Over the past year, Europe has been a hub of changing and newly introduced regulation. The European Union’s Fourth Money Laundering Directive was recently introduced in a bid to defend against money laundering and terrorist financing, with members required to be compliant by the end of June 2017. The European white-collar crime market has also witnessed a recent shift in the development of new techniques on the part of enforcement authorities – most notably deferred prosecution agreements (DPAs).

In the UK, the first DPA was issued by the Serious Fraud Office (SFO) in 2015 to Standard Bank on the back of allegations of failure to prevent bribery. Since then, the SFO has entered into two more – the latest in January 2017 with Rolls-Royce, following a four-year investigation into bribery and corruption claims. Although the use of DPAs began back in 2015, the development of how they are used as a tool is ongoing. Lawyers have noted that the impact that these agreements have on follow-on prosecutions of individuals and other related claims are matters that are currently assessed on a case-by-case basis.

This is not a trend solely pertaining to the UK. DPAs have been commonplace in the US for many years and have since been used in the French market as well as the UK. In 2016, France passed its new anti-corruption legislation which included the introduction of DPAs; however, many French practitioners have noted that to what extent these moves will lead to a reflection of the US system, in which self-reporting is commonplace, remains to be seen.

The introduction of DPAs has unsurprisingly resulted in an increased focus on individuals, with a greater emphasis on those at board level and in senior positions of accountability. In addition to HMRC, sources note that the SFO in particular “has become more and more stringent and aggressive in its approach as it faces its own extinction.” Practitioners remain unsure about the future of the Conservative Party’s plans to merge the SFO into the National Crime Agency (NCA); however, many note that the NCA’s differing priorities to those of the SFO may result in resources being diverted, and thus a slowdown in the latter’s investigative activity.

Question of Privilege

The question of privilege also seemed a particularly polemic issue when speaking to lawyers during our research this year. Many noted a growing intrusion of state authorities into what has traditionally been considered “a private sphere”. Firms conducting internal investigations have commented that they are increasingly seeing authorities deny the absolute privilege of certain information held by lawyers. Many argue that this has been pursued “in the name of transparency”; however, one source notes, “Transparency is one thing, but if the basis of the relation between the lawyer and the client is not preserved regarding confidentiality, then perhaps we are moving in the wrong direction.” Another practitioner asserts that “legal professional privilege cannot be put on the same level as bank secrecy”, and as privilege remains a bone of contention, only time can tell what the outcome of the debate will be.

The Legal Market

As was the case last year, the practice area remains incredibly competitive with many firms continuing to expand their offerings in this area. One practitioner notes, “Many firms are beefing up their white-collar crime capabilities and are increasingly focusing on it as a strategic priority.” This trend is also reflected on an individual level, as many lawyers look to shift their practice into the realm of business crime defence. Sources note that this movement has been most prevalent among commercial litigators, who have identified the field as a particular growth area.

In addition, cost-consciousness continues to play an important role in shaping the legal market, with many clients requesting alternative fee structures or capped fees. For clients, price pressure and the battle for resources never stops. As one practitioner puts it, “General counsels and their teams are treated as an expense and not a business enabler.” Looking to the future, one of the greatest challenges for lawyers will be balancing the increasing globalisation of investigations and corporate crime disputes and the subsequently elevated need for resources, with growing demand from clients of “more for less”.

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The next year looks set to be an extremely active one for the legal market, as ever-changing regulations and increasing demands from clients for legal services remain the order of the day. For the UK market, the future of the SFO will be a hot topic. For global markets, however, the development of international investigations as well as the continued use of DPAs and other alternative investigative techniques from enforcement authorities will stay at the forefront of business crime work. 

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