Tuesday 9th August 2022

In brief: evidence gathering during government investigations in United Kingdom (England

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Evidence gathering and investigative techniques

Covert phase

Is there a covert phase of the investigation, before the target business is approached by the government? Approximately how long does that phase last?

Prior to the target business being advised of an investigation, agencies seek to gather information from other parties either voluntarily or by using their compulsory powers. That could include specific covert techniques but will not inevitably do so.

The next stage of the investigation will usually involve the investigating agency contacting the target business to advise that an investigation has commenced. The agency will likely request the disclosure of documents and seek to interview relevant witnesses, either voluntarily or using powers designated to the particular agency by statute (eg, the Serious Fraud Office (SFO) using its powers of compulsion under section 2 of the Criminal Justice Act 1987).

There is no law requiring agencies to inform businesses that investigative steps are being taken. It is not uncommon for agencies with dual regulatory and enforcement functions to gather evidence for enforcement action against a target business under the auspices of its regulatory or supervisory function (notably the Financial Conduct Authority (FCA) or Her Majesty’s Revenue & Customs (HMRC)). For this reason, it is essential to consider the impact of all responses provided to an authority irrespective of the context in which it is provided.

If an agency considers that its investigations are to be best advanced by the use of covert techniques and not informing the business, then they will adopt that approach, including the execution of a search warrant (ie, a dawn raid) without notice.

Any covert investigations, such as surveillance and the interception and collection of communications data, must be undertaken in accordance with the Regulation of Investigatory Powers Act 2000 or the Police Act 1997 (for physical surveillance and the use of covert human intelligence sources (CHIS)), and under the Investigatory Powers Act 2016 (the IP Act – for electronic surveillance). The IP Act can be used by specified government agencies on the basis of national security, and for the purposes of detecting crime, preventing disorder, public safety, protecting public health or in the interests of the economic wellbeing of the United Kingdom. There is no time limit on how long a phase of covert investigations may last.

What investigative techniques are used during the covert phase?

Before advising a target business of an investigation, agencies may obtain information by interviewing witnesses or requesting the disclosure of documents from other parties.

Specific covert techniques include:

  • intercepting communications (intercepted communications are not admissible in criminal or regulatory proceedings in the United Kingdom);
  • the use of human sources (ie, CHIS);
  • conducting intrusive surveillance;
  • obtaining communications data; and
  • computer penetration.

 

Investigation notification

After a target business becomes aware of the government’s investigation, what steps should it take to develop its own understanding of the facts?

Aside from the retrieval and review of relevant documents and electronic data, the obvious step is to conduct interviews with relevant employees as part of an internal investigation. However, doing so carries a risk. The SFO suggests businesses should carefully consider whether it is best to interview employees or to limit the ambit of an internal investigation to document review only. Any final decision will need to take into account the facts and circumstances of the case, and the business concerned, bearing in mind any obligation or duty owed to its employees and shareholders.

If an internal investigation is decided upon, its parameters should be carefully considered and documented by the business. Although the position is open to dispute, particularly in light of the decision in the case of The Director of the Serious Fraud Office v Eurasian Natural Resources Company (ENRC) [2018] EWCA Civ 2006, the employment of external lawyers may enable the business to assert that legal professional privilege can be claimed. Otherwise, the internal investigation may be (and in practice, often is) disclosable to the authorities. Indeed, it will often be in the interests of the company for it to be disclosed. The Courts’ continuing need to deal with privilege arising in the context of government and corporate investigations was apparent in two 2020 cases, Civil Aviation Authority v R (on behalf of the application of JET2.com Ltd) [2020] EWCA Civ 35 and Sports Direct International plc v The Financial Reporting Council [2020] EWCA Civ 177. In summary, the cumulative effects of the rulings are:

  • confirmation that the ‘dominant purpose’ test applies to any legal advice privilege claim;
  • regarding communications sent to multiple recipients (ie, lawyers and non-lawyers or legal advice contained within a chain of communications), legal advice from a lawyer maintains its privileged status;
  • email attachments need to be separately assessed for privilege in document review; and
  • privilege cannot be asserted for non-privileged documents merely because they are attached to privileged communications.

 

Evidence and materials

Must the target business preserve documents, recorded communications and any other materials in connection with a government investigation? At what stage of the investigation does that duty arise?

Even when a target business has been informed that an investigation has commenced, there is no legal duty to preserve material; however, the destruction of evidence is itself a criminal offence. Section 2(16) of the Criminal Justice Act 1987 provides that a person who knows that the police or the SFO are conducting or may conduct an investigation into allegations of serious or complex fraud and destroys, conceals, falsifies or otherwise disposes of relevant documents (or causes the same) is guilty of an offence. There is also the general common law offence of conspiracy (agreement) or attempting to pervert the course of justice that might apply if any material is destroyed.  Extreme caution is required in the destruction of any material during an ongoing investigation, even where company policies operating normally provide for that. 

Persons or entities regulated by the FCA or CMA also have a duty to cooperate with investigations, which includes the preservation of material.

Providing evidence

During the course of an investigation, what materials – for example, documents, records, recorded communications – can the government entity require the target business to provide? What limitations do data protection and privacy laws impose and how are those limitations addressed?

Some agencies have the power to issue notices compelling a person to answer questions about matters relevant to an investigation, or to otherwise furnish information or to produce documents (including information recorded in any form). Failure to comply would constitute contempt of court. Generally, the criteria for issuing a compulsion notice are that there are reasonable grounds for suspecting that wrongdoing has occurred and that there is a reasonable belief that the recipient of the notice is in possession of relevant information or documents.

The agencies may also apply to a court for a search and seizure warrant. To issue the warrant, the court must be satisfied that the company has failed to comply with an obligation to produce documents or would do so such that to give notice may seriously prejudice the investigation.

The statutory framework for data processing for the purpose of law enforcement is contained in Part 3 of the Data Protection Act 2018. When processing data for law enforcement purposes a competent law enforcement authority must adhere to several guiding principles to process the data lawfully and fairly:

  • the purpose of the processing must be specified, explicit and legitimate;
  • the personal data processed must be adequate and not excessive to the purpose for which it was processed;
  • the data must be accurate;
  • the data must not be kept longer than is necessary; and
  • the data must be processed in a manner that ensures its appropriate security.

 

As a result, careful scrutiny is required by law enforcement agencies to establish the basis and purpose of their decision to process data.

A company has data protection obligations of its own under the UK General Data Protection Regulation to…

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