Out-Law / Your Daily Need-To-Know

SFO increasingly using power to demand information without court approval

Out-Law News | 26 Sep 2018 | 9:57 am | 2 min. read

The Serious Fraud Office (SFO) is increasingly using its powers to demand information from large businesses without the need to ask for court approval, new data has shown.

The number of ‘Section 2’ notices issued by the SFO more than doubled in the last five years, from 463 in the year ending 31 March 2014 to 1,032 in 2017/18.

Section 2 notices allow the SFO to compel the production of documents, electronic data and information from any individual or business without the need for court approval.

Corporate crime expert Tom Stocker of Pinsent Masons, the law firm behind Out-Law.com, said the laws behind the powers were designed before the digital age and should now be reviewed in the light of the SFO’s use of Section 2 to obtain electronic data.

Stocker said Section 2 powers were a “powerful investigative tool in the SFO's armoury”.

“As the SFO itself recognises, Section 2 notices can have a significant impact on businesses and their senior management time. When the SFO were given these powers in the late 1980s, prior to the digital age, companies would have been able to produce the limited number of paper records they were required to deliver much more easily than large amounts of digital data now required. Even a straight forward sift through of emails, texts, instant messages, phone call logs can be phenomenally expensive,” Stocker said.

"It is recognised that judicial involvement in the issuing of search warrants is extremely important. The information that the SFO put before a judge to justify obtaining a search warrant is carefully considered and the SFO must explain why the proposed search parameters are appropriate. There is no such check on the exercise of Section 2 powers,” Stocker said.

Stocker pointed to the June 2018 announcement of a review by the Law Commission into the law relating to search warrants as an example of ways the government was looking at this issue.

“One of the reasons for that review was that much of the law predated the electronic age,” Stocker said. “Given the significant increase in the use of the SFO's Section 2 powers to obtain electronic data a review of the law relating to such compulsory and intrusive powers should also be considered.”

Under a Section 2 notice the SFO is not required to explain to the courts what or who is subject to the investigation, or the reasons that requiring the production of a potentially significant amount of data is necessary, reasonable and proportionate. In contrast, to obtain a search warrant the SFO or other law enforcement bodies must persuade a judge that there are reasonable grounds for believing that an offence has been committed and that the warrant is justified and proportionate in the circumstances.

Section 2 powers have also been used increasingly to compel documents from overseas companies instead of going through the traditional route of mutual legal assistance, which involves judicial oversight.

Companies usually have seven days to produce the requested data, although the SFO can deliver a “here and now” notice asking for it immediately. Extensions may be granted.

Stocker said the deployment of Section 2 powers against a business can create severe disruption and expense for that business.

Although the SFO’s operational handbook notes that Section 2 notices are inherently intrusive and that the powers should only be exercised when it is necessary and reasonable to do so and in a proportionate manner, the assessment of what is proportionate rests with the SFO.

A recipient of a Section 2 notice is able to apply to the courts for a judicial review if they feel the notice is disproportionate, but this route incurs additional cost and time.