Financial Services and Markets Dispute Resolution Quarterly Update: Spring 2019

Welcome to our Quarterly Update, in which we review some of the key developments affecting Financial Services and Markets in the areas of disputes, investigations and financial crime, from the start of 2019.

Judicial highlights include a bank failing to exclude the Quincecare duty; further scrutiny of representations in the context of benchmark manipulation; and international judicial assistance in cases of fraud.

The FCA issued its 2019/2020 Business Plan, and in keeping with its cross-sector priority of Financial Crime and AML, the FCA has issued its second largest AML penalty. The remediation measures introduced in response to the firm’s AML breaches indicate the increasing role to be played by technological innovation, which is in turn provided for in the EU’s Fifth AML Directive, which we also discuss below.

Finally, our Corporate Crime & Investigations team comment on the effectiveness of the UK at prosecuting financial crime, including the impact of the new Director of the SFO in recent months; and the NCA’s 2019/2020 Business Plan.

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Financial litigation

Regulatory developments

Financial crime

Financial litigation

Bank Fails in sttempt to exclude 'Quincecare' duty

In The Federal Republic of Nigeria (the FRN) v JP Morgan Chase Bank, N.A. [2019] EWHC 347 (Comm), the Commercial Court rejected a bank's application to strike out its customer's US$1bn claim based on a "Quincecare" duty of care owed to the customer. The Quincecare duty is a duty on a bank to refrain from executing a customer's order if, and for so long as, the bank is "put on inquiry", i.e. that it has reasonable grounds for believing that the order is an attempt to defraud the customer.

The Bank had agreed to act as depository in respect of settlement monies put up by the FRN in relation to a long-running dispute about an off-shore Nigerian oilfield. The deposit account was opened pursuant to a Depository Agreement between the Bank and the FRN in May 2011. Between August 2011 and August 2013, on instructions by authorised signatories of the FRN, the Bank made three transfers totalling US$875m from the deposit account to accounts in various names at Malabu Bank and Keystone Bank. It was alleged that the money was then used to pay off corrupt former and contemporary Nigerian government officials and/or their proxies, rather than being paid to parties properly entitled to the settlement monies. Proceedings were commenced by the FRN in November 2017 and the bank's application to strike out the claim and for summary judgment was issued in July 2018.

By the time of the hearing, the FRN had substantially amended its Particulars of Claim, relying upon a claim in both contract and tort based upon breach of the "Quincecare" duty of care, so-called after the case of Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363. Put simply, the duty, according to Steyn J, is that:

"[A] banker must refrain from executing an order if and for so long as the banker is 'put on inquiry' in the sense that he has reasonable grounds (although not necessarily proof) for believing that the order is an attempt to misappropriate the funds of the [customer]."

Based upon certain express provisions in the Depository Agreement, the Bank argued that the Quincecare duty had been excluded so that it did not owe a duty of care to the FRN. However, the Commercial Court considered that the Depository Agreement was not inconsistent with and did not exclude, either generally or by particular terms, the Quincecare duty of care. The duty is a specific manifestation of the duty of care owed by a banker to its customer in relation to instructions, and was imposed on the Bank as an implied term in the Depository Agreement under common law, or by statute under Section 13 of the Sale of Goods and Services Act 1982, or by the tort of negligence.

For the purposes of the Bank's strike-out application, the Court had to assume that the FRN had a realistic prospect of successfully establishing at trial that the bank had reasonable grounds for believing that the payments out were part of an attempt to defraud the FRN: i.e. that the Bank was 'put on inquiry'. If so, the Quincecare duty imposed on the Bank would mean that it could not simply follow the mandate of abiding by the instructions given by the FRN; the duty at its core required the Bank to protect the FRN against being defrauded, by not paying out unless and until the bank was 'off inquiry.'

The Commercial Court also "strongly inclined" to the view that, once the Bank had reasonable grounds for belief (i.e. it was 'put on inquiry'), the Quincecare duty imposes an additional positive duty to make reasonable enquiries.

In conclusion, the Bank had failed to establish that the FRN's claim had no realistic prospect of success such that the application for summary judgment failed. It followed that the Particulars of Claim (as amended) did disclose reasonable grounds for bringing the claim such that the application to strike out also failed, and the matter would proceed towards trial.

Landmark ruling – Implied misrepresentations about Euribor rejected

In a landmark ruling on 25 February 2019, the high court dismissed implied misrepresentation claims against NatWest Markets and a syndicate of banks in relation to the alleged manipulation of the Euro Interbank Offered Rate (EURIBOR) benchmark.

The judgment in the case of Marme Inversiones v NatWest Markets plc & Others [2019] EWHC 366 (Comm), comes hard on the heels of last year's Court of Appeal rejection of similar, LIBOR-related, implied misrepresentation claims made against RBS by Property Alliance Group, and the conviction in absentia of French national Philippe Moryoussef, who was sentenced to eight years for his part in manipulating/attempting to manipulate EURIBOR whilst at Barclays.

The Spanish SPV, Marme, bought the Spanish headquarters of the Santander Group in September 2008 using, in part, a €1.575bn loan from a syndicate of eight banks. The interest payable was fixed by reference to EURIBOR and was hedged by interest rate swaps.

In a lengthy written judgment, Mr Justice Picken decided that EURIBOR-related representations alleged by Marme, such as that NatWest Markets had not sought to manipulate EURIBOR at the time of the loan, could not be implied into the contractual arrangements between Marme and the banks. Even though, therefore, the knowledge of Mr Moryoussef, who had briefly joined NatWest Markets, would have falsified such a representation, Marme could not rely on it. The judge further decided that Marme could not have rescinded the deal because, by its conduct, it had affirmed the loan, and it could not rescind the related swaps without first rescinding the loan. Finally, even if Marme had known the truth about the alleged EURIBOR manipulation, it was unable to show that the terms of the deal would have changed.

International judicial assistance in Ablyazov bank fraud 

One of the largest frauds in history - the misappropriation of more than US$10bn by the former Chairman of JSC BTA Bank of Kazakhstan, Mukhtar Ablyazov - has taken a new turn in the UK. 

The audacious fraud, which has previously been the subject of more than 100 decisions by judges in the English Court, currently forms the back-drop to acrimonious proceedings in New York involving claims made against the Bank by Panamanian entities said to be linked to Mr Ablyazov and his co-conspirators. In January, the presiding judge in New York acceded to a Motion by the Panamanian entities that he should issue Letters of Request, seeking the English Court's assistance to compel oral depositions of witnesses based in the UK. The witnesses were senior individuals, including a former managing director of the Bank, said to have been involved in the asset recovery process instigated by the Bank in 2009 once Mr Ablyazov's fraud had come to light.

Between 2010 and 2012, the Panamanian entities had acquired subordinated debt in the Bank as part of two restructurings, and claimed that the Bank had knowingly caused the value of the subordinated debt to plummet substantially by engaging in deals that were ultimately to the benefit of its majority shareholder, a sovereign wealth fund, and to the immense detriment of bondholders and creditors.

The individual witnesses and the Bank challenged the Order which the English Court had made allowing the depositions to take place in London, on the basis that they were oppressive, and irrelevant to the US litigation. At the same time they argued that because Mr Ablyazov and his co-conspirators were effectively behind the depositions, they were merely seeking to gather information relevant to their personal interests in impugning judgments obtained against them by the Bank as part of the Bank's recovery of US$5bn. In short, the depositions were nothing more than a "fishing expedition".

On 21 February 2019, Mr Justice Knowles, who, in mid-January, had dismissed the Bank's and the witnesses' application to stop the depositions, released detailed reasons in a written judgement.

It has long been recognised by the English Court that the need for international cooperation through judicial comity is especially acute in cases of international fraud.

Knowles J ruled that the depositions were not oppressive because there was plenty of time for the witnesses and their lawyers to prepare, particularly since the number of documents on which questions were to be asked had reduced from around 1,800 to less than 200. In addition, the topics which the Panamanian entities wished to question the witnesses about were clearly relevant to the US litigation, since the presiding judge in New York had said as much in the Letters of Request. In these circumstances, it was not for the English Court to determine whether the topics and questions were relevant to the issues in the US litigation. As far as the alleged ulterior motive of "fishing" was concerned, the judge considered that it was "far-fetched" to suggest this when the US judge had satisfied himself that the depositions were relevant and necessary for the forthcoming trial in New York.

Foreign law shall not automatically restrict the conduct of English litigation

In Bank Mellat v Her Majesty’s Treasury [2019] EWCA Civ 449, the Court of Appeal ruled that the English Court’s ability to conduct its proceedings in accordance with English law and procedure shall not be overridden by foreign law.

It was simply a matter for the Court’s discretion as to whether a party’s perceived risk of prosecution in its “home” jurisdiction for disclosing unredacted documents in the English litigation, could warrant an order that the documents should be disclosed in redacted form.

In this case, the Bank sought to recover losses of more than US$800m from HM Treasury (HMT), alleged to have been suffered as a result of the Financial Restrictions (Iran) Order 2009 which, in 2013, the Supreme Court subsequently ruled to be unlawful.

In relation to its disclosure, the Bank produced expert evidence of Iranian law to support its contention that to disclose certain documents in unredacted form would expose it to a risk of criminal prosecution in Iran.

At first instance, Mrs Justice Cockerill ordered the Bank to produce unredacted documents to members of a confidentiality club, including the lawyers representing HMT. On a fair reading of the Bank’s expert evidence of Iranian law, the judge concluded that the risk of prosecution of the Bank in Iran was more than purely hypothetical, but less serious than the expert had suggested.

On the Bank’s appeal, the Court of Appeal agreed with Cockerill J that the expert evidence did not deal with the actual risk of prosecution in Iran, and considered the evidence to be less than compelling. Furthermore, in the context of the English Court’s jurisdiction and discretion to order production of documents, the actual risk of a party being prosecuted in a foreign state, and the confidentiality of information contained in its documents, are but aspects of the discretionary balancing exercise which the Court has to perform between the parties’ competing interests.

Regulatory developments

FCA Business Plan 2019/2020 – focus on Brexit, consumer protection and financial crime

On 17 April 2019, the FCA published its 2019/2020 Business Plan (the Plan). The FCA Chairman’s Foreword emphasises the theme of change and the three areas where he considered this to be most prevalent: (i) technology; (ii) the global context i.e. Brexit; and (iii) public expectations. He also noted the potential risk of gaps in global regulation post-Brexit.

In a number of places the Plan emphasises the importance of protecting consumers, particularly those considered to be vulnerable and Andrew Bailey noted that this is "at the core of [their] work".

The Plan sets out a number of key cross sector priorities (as well as some detailed sector specific priorities) including:

  1. EU Withdrawal - the FCA emphasised the importance of maintaining effective international standards that underpin the UK regime post-Brexit and acknowledged the need to ensure market access is ‘enabled’ at the same time as reducing the risk of regulatory arbitrage. The FCA intends to do this, in part, by strengthening strategic international engagement and relationships with key regulators.
  2. Financial Crime & AML - the FCA’s overall aim is to stop the UK financial sector being used to facilitate financial crime. This will be achieved, it says, by using technology to be more intrusive in assessing the effectiveness of firms' own systems and controls. Data and intelligence collection will also be a focus to help enable the FCA to monitor trends in financial crime and target criminals as a result. The FCA also acknowledged that combatting money laundering required a multi-agency and multi-national response.
  3. Fair Treatment of Existing Customers – the FCA notes that firms often have strong incentives to offer better deals and services to new or prospective customers increasing the possibility that existing customers will be treated poorly. The FCA will identify situations where existing customers are treated differently to new customers and address any resulting harms. The FCA also highlighted its continuing work with the CMA including considering how best to act on the recommendations made by the CMA in relation to pricing practices in home insurance and the use of pricing interventions in the cash savings market.

The Plan also contained a number of other points of interest including that:

  • the FCA has restated its commitment to an independent investigation into the issues raised by the failure of London Capital & Finance; and
  • LIBOR will cease to be supported by the end of 2021 and the FCA will continue to work with the UK authorities, firms and the market-led Working Group on Sterling Risk Free Reference Rates to continue the transition to the new risk free rates.

FCA’s continued scrutiny of AML risks for regulated firms

The FCA recently fined Standard Chartered Bank for £102.2m for shortcomings in the adequacy of the Bank’s AML controls at its branches, subsidiaries and correspondent banks between 2009 and 2014. The Bank has also agreed to pay $947m to American agencies, including the US Department of Justice, in respect of allegations that it violated sanctions against various countries.

As indicated by the FCA’s Business Plan, the FCA’s action forms part of a wider pattern of increased scrutiny of regulated firms' AML policies and procedures. In a speech in early April, the FCA's Director of Enforcement and Market Oversight, Mark Steward, announced that the FCA is currently pursuing a "large number" of AML investigations, with the potential for criminal proceedings in some cases. 

The increased scrutiny of AML controls by regulators poses a significant risk to firms and places a considerable burden upon their compliance personnel. In its Decision Notice, the FCA criticised the Bank's past approach as "narrow, slow and reactive", demonstrating the importance to firms of adopting an agile approach that goes beyond a ‘box-ticking’ exercise, and of sufficiently deploying resources to achieve this. Meanwhile, the introduction of the EU's Fifth Anti-Money Laundering Directive (5MLD), which Member States are required to implement by 10 January 2020, is likely to increase the scope and complexity of the regulatory landscape in which firms operate.

Notably, the Bank's remedial measures included the introduction of "new technology including artificial intelligence and machine learning to support [its] screening and investigations processes". The Bank also stated that some of its breaches arose from "the actions of two former junior employees", highlighting the risk posed by individual human actions where there is inadequate oversight. The increasing challenge posed to compliance teams by regulators' scrutiny of AML controls may encourage growth in the use of such technology, in an effort to support client due diligence and transaction monitoring, automate audit trails and reduce the risk of individual human error or misconduct. The global anti-money laundering software market was estimated at $868m in 2017 and is expected to reach $1.77bn by 2023.

Indeed, the increasingly central role played by technological innovation in managing AML is recognised by 5MLD; while nothing previously precluded the use of technology in AML procedures, the new directive now clarifies that customer identification may be carried out by "electronic means" (provided the electronic identification process is accepted by the national regulator).

Upper Tribunal upholds FCA's penalty under a Focused Resolution Agreement

On 9 April 2019, in Linear Investments Limited v Financial Conduct Authority (Case number FS/2018/054), the Upper Tribunal upheld the amount of a penalty imposed by the FCA on an authorised broking firm, Linear Investments Limited (Linear), for breach of Principle 3.

In June 2018, the FCA imposed a penalty of £409,300 on Linear in relation to historic failings in its systems and controls relevant to its electronic Direct Market Access business. Specifically, Linear was found to have failed to take reasonable care to organise and control its affairs responsibly and effectively and to implement adequate risk management systems in relation to the detection and reporting of potential instances of market abuse. Linear had failed to undertake its own independent surveillance and had instead relied on post-trade surveillance by the brokers involved in executing transactions. The breaches identified occurred between January 2013 and August 2015.

This was the first reference to the Upper Tribunal of a partly contested case where the Applicant (Linear) and the FCA had entered into a Focused Resolution Agreement (FRA), under which the parties agreed certain elements of the case. Linear agreed the facts and liability set out in the FCA's Decision Notice, including any reference to the Tribunal. However, it contested the level of the FCA's fine and made an appeal to the Upper Tribunal.

The Upper Tribunal (i) interpreted Linear's position in a way that did not conflict with the agreed facts under the FRA; and (ii) did not re-open any matters of fact and liability in its decision making. It upheld the FCA's reasoning and decision to impose a penalty and agreed that the size of the fine was appropriate, despite the negative impact it would have on Linear's business.

On 10 April 2019, the FCA published its response to the Tribunal's decision. Mark Steward commented: "Firms are expected to play their part in tackling market abuse by ensuring that they are able to identify and manage the market abuse risks to which they are exposed. The Upper Tribunal recognised that, despite the pain caused by the size of the penalty, given Linear’s financial resources and level of profits, Linear’s lack of effective monitoring measures was a serious matter and the FCA’s penalty was therefore appropriate."

Linear's FRA was the first example of a firm using the process. It remains to be seen what impact the Tribunal's decision and the outcome for Linear are likely to have on those under investigation and whether the appetite for the use of FRAs will grow.

FCA imposes a fine on fund manager for failures of Principles 2 and 3

In February, a former fund manager was fined £32,200 for his conduct in relation to an Initial Public Offering (IPO) and a placing.

On more than one occasion, the fund manager and CF 30 (Customer Controlled Function) submitted orders as part of a book build for shares that were to be quoted on public exchanges. The FCA found that the fund manager had failed to observe proper standards of market conduct in breach of Principle 3; and acted without due skill, care and diligence by failing to give proper consideration to the risks of engaging in these communications.

For example, in advance of an IPO in September 2015, the fund manager blind-copy emailed 14 external fund managers at 11 competitor firms (the Email Recipients) informing them of the volume and price cap of his order, in an effort to persuade the recipients to cap their orders at the same price limit as his own orders (the Email). In one chat message, he wrote that he was “in the midst of potentially getting an IPO canned single handedly…by pushing the price down”.

Although none of the Email Recipients changed their orders following receipt of the Email, the FCA concluded that by attempting to encourage investors to use their collective power in this way, the fund manager’s conduct risked undermining the integrity of the market and the proper price formation process for the IPO, for the benefit of the funds that he managed, and to his own indirect benefit since his remuneration was linked to the performance of those funds.

Interestingly, the Final Notice details the responses from the Email Recipients. Whilst the FCA does not provide an assessment of them, the description provided indicates that those who recognised the Email to be inappropriate and escalated their concerns were in the minority.

The Final Notice observes that Newton did have relevant policies and procedures in place at the time, together with a clear route for escalation of queries or issues; and that the fund manager received on-going guidance in relation to compliance matters in the relevant time period.

Some of the facts in this case form the subject of the FCA’s first decision under its competition enforcement powers, in which it found that three competing asset management firms had breached competition law by sharing strategic information between them. The Firm was given immunity under the competition leniency programme, and therefore it did not receive any fine.

Financial crime

Commentary: How effective is the UK at prosecuting financial crime?

The effectiveness of the UK’s anti-corruption regime has come under greater scrutiny this year. The UK’s prevention framework and its compliance standards, on anti-money laundering for instance, continue to be held up as a global standard. The importance of the financial services sector to the UK economy has impelled lawmakers to protect it from external threats and from itself. They have done so by introducing strict regulatory requirements and prohibitions on institutions and individual employees. However, despite the strength of regulation, research suggests that this jurisdiction remains comparatively ineffective at following through and actively prosecuting financial crime.

The global anti-corruption NGO "Corruption Watch" has published a critical report comparing the UK's fight against economic crime unfavourably to that of the USA. The report highlights some interesting statistics when considering New York and London in the period 2008 - 2018, including:

  • in the UK there were no successful criminal prosecutions of a bank, compared to 20 in the USA; and
  • the UK imposed c. £2.5bn in non-criminal fines, compared to c. £25bn in the USA.

The report came to some frank conclusions which may give UK lawmakers pause for thought. In particular, it was noted that UK law on corporate criminal liability makes it more difficult to prosecute companies in the UK than in the USA. Various MPs have begun to turn to this issue and actively consider whether the tools given to UK prosecutors are enough to enable enforcement agencies to carry out effective prosecutions.

Further submissions were made to a Parliamentary Select Committee report on the Bribery Act 2010, which concluded its work in March this year. The post-legislative scrutiny report concluded that the Act is exemplary and "an international gold standard for anti-bribery and corruption legislation". The Committee also noted that Deferred Prosecution Agreements (DPAs), UK enforcement’s leading innovation of recent years, are largely effective (despite their relative scarcity since the implementation of the Act), and when used, are not an "easy way out" for companies as critics had suggested.

The report did acknowledge however that the Government ought to provide better advice to SMEs on how best to export their products and services, and clearer examples of what constitutes legitimate corporate hospitality whilst remaining compliant with the Bribery Act. They also noted that the relevant authorities ought to prioritise the speed at which bribery prosecutions progress.

Whilst Brexit has consumed Parliament’s current bandwidth for any new legislation, a post-Brexit Government may find that it has more time to engage with growing calls for reforms and expanded powers. Any development on corporate criminal liability in particular would represent a seismic change in UK law.

Critics argue that the need for reform has been reinforced by the SFO's recent decision to halt investigations into individuals at Rolls Royce and GlaxoSmithKline - two of their most high profile probes: "After an extensive and careful examination…there is either insufficient evidence to provide a realistic prospect of conviction or it is not in the public interest to bring a prosecution in these cases.”

Discontinuing the investigations represented a significant move by Lisa Osofsky, the former Department of Justice prosecutor who took the helm of the agency just eight months ago. Ms Osofsky has sought to put her mark on the SFO and avoid some of the criticisms faced by her predecessors. She told the Bribery Act Select Committee in late 2018 that she was personally reviewing more than 70 cases and had been challenging staff at the agency as to why it was not moving faster in its decision-making. Ms Osofsky has sought to bring her American-style practices to aid the expedition of cases, not just driving a more decisive culture but attempting to use greater prosecutorial discretion, such as persuading insiders to “flip” and cooperate with investigators.

As well as overhauling the SFO, Ms Osofsky (along with Sir Brian Leveson, President of the QBD) urged the Parliamentary Committee on the Bribery Act to expand corporate criminal liability. In doing so, Ms Osofsky stressed the importance of "failure to prevent" style offences that shift the burden of proof onto the corporation in question. Such an intervention will only add to growing momentum in favour of giving prosecutors expanded powers to tackle corporates.

The extent of Ms Osofsky's impact has yet to become fully apparent, and any proper analysis of the UK’s ability to combat financial crime must go beyond a simple scorecard of the SFO’s recent trials. Nevertheless, a more aggressive and decisive SFO is vital to improving the UK's record of successful white collar prosecutions. Combined with new powers introduced by statute such as the Criminal Finances Act 2017 (the CFA), the UK could begin to see a marked improvement in the ability of its enforcement bodies to rival their US counterparts and become a global force in combatting cross-border financial crime.

In recent weeks, the SFO announced that it had used its first account freezing order (AFO) to forfeit over £1.5m from a convicted fraudster. Along with the SFO, the National Crime Agency has also used AFOs to seize nearly half a million pounds from various bank accounts. In a similar vein, HMRC has launched its first criminal investigations using new powers brought in by the CFA. The CFA introduced a new corporate criminal offence of failing to prevent the facilitation of UK tax evasion. The offence places a positive obligation on companies to implement procedures to prevent the facilitation of tax evasion. Not only has HMRC begun to exercise its new powers, it has stated that it has a target to bring 100 prosecutions of serious and complex tax crime per year by the end of current Parliament, which is scheduled for 2022.

Amidst a difficult start to the year, UK enforcement agencies continue to see opportunity. As authorities make better use of new powers that they were, in some cases, slow to adopt, we should see an uptick in investigations, fines and even effective prosecutions. We can anticipate a lobbying blitz, as prosecutors and regulators seek the power and discretion afforded to their counterparts in the US and elsewhere. Brexit is an opportunity to reshape the legislative landscape. Whether it will be used to enhance or weaken the UK’s ability to effectively tackle corporate crime is less clear, but this will be the battle of the coming months and years.

The Crime (Overseas Production Orders) Act 2019

The Crime (Overseas Production Orders) Act 2019 (COPOA) received Royal Assent on 12 February 2019. COPOA is not yet fully in force, but it nonetheless represents a significant change in the way that UK law enforcement agencies will be able to pursue documents or information overseas as part of their investigations, especially once the international agreements that will underpin it are in place. 

At its most simple, COPOA enables UK law enforcement agencies to apply for a court order to obtain electronic data stored outside the UK. This helps plug a gap that has widened significantly over the past few years as more and more data held by individuals and companies is stored overseas or on servers with no easily discernible jurisdiction, often preventing investigating authorities from accessing it. 

This issue was examined at the end of 2018 in the case of R (on the application of KBR Inc) v Director of the Serious Fraud Office [2018] EWHC 2368 (Admin). Controversially, the judgment in this case gave extra-territorial effect to orders under Section 2 of the Criminal Justice Act 1987 (CJA) where there is a “sufficient connection” between the subject of a Section 2 Notice and a foreign body. This has been highly criticised as “judicial law making” – investing Section 2 CJA with powers that the legislation did not intend. It remains to be seen whether this decision will be overturned, as many predict it might be on appeal.

The SFO needed to rely on an expanded interpretation of Section 2 CJA, and was fortunate to get a supportive judgment in that regard, because the existing powers for seizing documents abroad are in some ways no longer fit for purpose. The principal tool for obtaining documents or information overseas is a request for Mutual Legal Assistance (MLA). However, MLA requests are widely acknowledged to be slow and bureaucratic.

COPOA seeks to change this and to create a system that is significantly faster and more direct. 

Specifically, COPOA allows for Overseas Production Orders (OPOs) to be made by a UK court on the application of an appropriate officer. An OPO requires a person to produce or give access to the electronic data specified in it. There is a period of seven days in which the data must be produced or access granted. Furthermore, this is a bilateral order between the UK courts and the subject of an OPO, which is not overseen by the authorities in the jurisdiction of the subject. The potential for OPOs to reduce overseas production processes from months or years down to just days could have a huge impact on the way a case develops, potentially changing its outcome. 

Significantly, an OPO can only be made in respect of persons located in a jurisdiction with a “designated international co-operation agreement” in place with the UK. It is understood that the UK is currently negotiating the first of these designated international co-operation agreements with the USA. If successful, this would effectively give the UK direct access to the world’s largest communications services providers, such as Google and Facebook and potentially a vast pool of data. 

Although it received little fanfare when it was given Royal Assent, this legislation may prove to be extremely significant in major investigations and prosecutions before too long.

NCA publishes its 2019/20 Annual Plan

The National Crime Agency (NCA) has published its Annual Plan for 2019-20 (the Plan), setting out its priorities for the coming year. The Plan builds upon the new strategy published by the NCA in November 2018.

Alongside its other sectoral focuses and general operational priorities (such as efforts to enhance intelligence collection and dissemination capabilities, through measures including a new "NCA Intelligence Operating Model", and a "NCA Gateway" as a single entry point for all information and intelligence), the Plan highlights a number of recent developments in the FCA's focus on driving down economic crime.

The Plan emphasises the NCA's collaborative "whole-system" approach and encourages partnerships with other law enforcement, regulatory and professional bodies, including the Financial Conduct Authority. In this regard, the Plan makes the work of the National Economic Crime Centre (NECC) a priority. The NECC was established in October 2018 as a partnership of law enforcement agencies, government and regulatory bodies and the private sector, with the aim of driving down serious organised economic crime.

The priorities set out for the NECC in the Plan indicate the increased depth and breadth of tackling economic crime. They include:

  • using the most appropriate of criminal, civil and regulatory measures to ensure maximum impact;
  • maximising the use of new powers, such as Unexplained Wealth Orders (UWOs) and Account Freezing Orders (AFOs), to tackle illicit finance; 
  • ensuring "professional enablers" who enable criminals to exploit the UK financial system and related sectors are identified and pursued;
  • work on new and innovative measures (including preventative measures) to tackle economic crime.

The Plan therefore suggests that the use of such so-called ‘super-powers’ from the FCA may become a more regular feature of the NCA's efforts to tackle economic crime, having first become available to it on 31 January 2018 and first used against Zamira Hajiyeva later that year

The focus on pursuing "professional enablers", along with references throughout the Plan to the NCA's aims to lead cross-sectoral efforts in this area, reflect the increased use of criminal sanctions to drive regulatory compliance culture in the financial sector.