Fine by me: could a small sanction for a breach of the SFO’s Section 2 Notice fail to deter non-compliance?

10 February 2020

At the end of January 2020, the UK courts convicted an individual of failing to comply with the terms of a “Section 2 Notice” issued under the Criminal Justice Act 1987 (CJA). The “Section 2 Notice” regime is contained in section 2 CJA and is the principal mechanism by which many of the Serious Fraud Office’s (SFO) most significant investigations are carried out.

However, the punishment imposed on the individual was only £981, comprised of an £800 fine and a £181 victim surcharge. This small fine (especially small considering the significant wealth of the defendant) has raised serious questions about whether the criminal sanctions backing up the Section 2 regime are a strong enough deterrent to ensure compliance.

Under section 2 CJA, the SFO can require a person being investigated or any other person that has information relevant to an investigation to answer questions or to provide information or documents relevant to that investigation. Section 2 also contains powers for the SFO to obtain warrants in certain circumstances in order to obtain documents.

The requirements imposed by section 2 carry a criminal sanction for non-compliance. Under section 2(13) of the Criminal Justice Act 1987, a person convicted of failing to comply with a requirement imposed on them under section 2 without a reasonable excuse is liable on summary conviction to imprisonment for up to six months or a fine. The sentences are stricter still under subsections (14) and (15) for making false or misleading statements in response to a Section 2 Notice or under subsections (16) and (17) for falsifying, concealing, destroying or disposing of relevant documents.

Provisions such as these are particularly effective in jurisdictions such as the USA, where the authorities often convict suspects for lying to investigators, rather than the offences of which they are accused. This approach is very much in its infancy in the UK and this is the first time a person has been convicted of failing to comply with a Section 2 Notice. There was the potential for a more serious punishment to have been imposed by the Court to send a message to respondents to Section 2 Notices, which may have been something the SFO wished for in this case.

There has been comment about this being an apparently lenient punishment and that it may send the wrong message to those considering breaching the terms of a Section 2 Notice. However, notwithstanding the size of the fine, the defendant has now got a criminal record and will face consequences as a result. It remains to be seen how this decision may affect the approach to Section 2 Notices in the future, both by the authorities and respondents.

Section 2 powers are a fundamental part of how the SFO investigates and prosecutes serious fraud, bribery and corruption, and we are committed to challenging what we see as unreasonable non-compliance

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