On-Demand Webinar: Navigating Cross-Border Investigations - UK & US Perspectives


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Summary: Cross-border investigations and enforcement cases - the key trends and developments. Watch this on-demand webinar - 'Navigating Cross-Border Investigations - UK & US Perspectives' - for an exclusive insight into 3 key trends that are changing global investigations. Our presenters explore the trends, reveal the common ground and differences between US and UK approaches, and share practical tips on how you can respond.


Aaron Stephens;

Good afternoon.  This is Aaron Stephens of Berwin Leighton Paisner and this is Roger Burlingame of Kobre & Kim.  And welcome to the first in a new series of webinars that BLP is running on topics of interest to the financial services and the wider corporate community.  I am a partner in the London office of BLP and the head of our corporate crime and investigations practice.  Today I’m very fortunate to be joined by Roger Burlingame who is a US white collar crime lawyer and a partner in the London office of Kobre & Kim.

In the next 45 minutes Roger and I will discuss various trends and  developments relating to cross-border investigations and enforcement cases and in doing so will try to draw out similarities and differences between the US and the UK, and flagging up some pitfalls to be on the lookout for.

So as I said we’re going to try to stick to 45 minutes with your questions at the end but I’d just like to walk you through a couple of house-keeping points.  Roger and I will answer your questions at the end of the session so to send us a question just click on the Q&A tab on the left hand side of your screen, type your question and then send away.  All the questions are anonymous so remember there is no such thing as a stupid question.

So Roger, I was wondering if you could get the ball rolling for us by talking about the first overarching trend which is the outsourcing of regulatory and white collar investigations to firms and to their lawyers, as well as the amount of control the regulators seek to exert over these internal investigations - particularly from a US point of view.

Roger Burlingame;

Thanks Aaron.  So unlike in the UK which I’ll speak about in a few moments, the dynamics of internal investigations are fairly well settled in the US.  The way that it’s developed is a little bit, it’s helpful to understand, the history of how the process came to be which is that in the US corporations are easy to charge because the liability stems from one person in the company doing something wrong on behalf of the corporation. There is no judge at the end of the process and so once an investigation begins, the prosecutors can essentially threaten the entity into whatever sort of settlement they want, because the threat is either you reach an agreement with us or we will indict you which is something that most entities can’t withstand.

So what brings the companies in the door is the hope that by co-operating in these investigation they’re going to be able to eventually either avoid a penalty or get a penalty that is mitigated by the fact of their co-operation.  So the point of the internal investigation is obviously to get that co-operation and credit, and the difference, to address your question, the difference between where are things are in the US and where they appear to be in the UK right now is that while the US authorities very much expect an internal investigation to be conducted and they have expectations as to how it will be conducted, they typically don’t get into the weeds of dictating precisely what the entity and it’s lawyer should do, what steps should be taken, exactly what conduct should be investigated, the pace at which the investigation should run, the form in which the findings of that investigation are going to be communicated.

The problem in the US and this is the problem that we’re going to talk about in the next slide ‘how to mitigate’, is that while there is not a message coming from the government as to here’s exactly how we want you to run this, if you run it in a way in which the government is unhappy with then you’re going to be facing a tremendous penalty down the road.  So I think that’s a little bit different than how things are evolving here in the UK but maybe Aaron can address that a little more.

Aaron Stephens;

Thanks Roger.  So I think in the UK you need to make a different distinction between FCA regulatory investigations and SFO criminal investigations.

In the regulatory context firms who are subject to FCA regulations are obviously subject to positive obligations to carry out internal investigations and proactively notify the FCA (or the PRA if that’s the case), of any significant issues.  An initial notification obligation may even are before a firm has even had the chance to carry out an investigation, or at least a full investigation.  Now I’m aware of some instances of the FCA being somewhat prescriptive in how a firm goes about investigating itself but in most cases and certainly in our experience early and serious engagement with the FCA to notify of any potential issue, to proactively take steps to define and agree the scope of the investigation, to satisfy the FCA that you’re going to do a credible and independent investigation, will enable a firm to retain a sufficient amount of control over their investigation rather than finding itself in a situation where the FCA is telling them what to do or you know, at the extreme, appointing a section 166 FSMA skilled person to carry out an investigation or even kicking the thing immediately into enforcement.

In the corporate crime context and you know looking at the SFO and particularly if you look outside the regulated sector, there is no strict obligation on a corporate to carry out internal investigations or indeed to notify the SFO of any problems uncovered by investigations.  So an unregulated corporate is in a position where they have much more choice as to how to approach this type of situation and different corporates take different approaches and the position is to some extent evolving.  But where a corporate decides that it’s going to go down that road of proactively notifying the SFO of a potential problem or a potential criminal offence its carried out within its organisation, its reasonable to expect the SFO to take - possibly a little bit more of a hands on and prescriptive approach - as to how the corporate conducts any internal investigation, and that’s particularly the case if the SFO has opened up their own parallel investigation at the same time.  We’ll come onto more detail on this in the next slide.

Roger Burlingame;

So the slide here talks about the quid pro quo for regulators outsourcing their investigative work and by way of background I worked at the Department of Justice as an assistant US attorney for 10 years in New York and I remember I followed a very typical career pattern which was in the beginning doing more sort of drugs and blood and guts sort of crimes for the first few years and then graduating and doing the latter part of my career on white collar work.When I made that transition I was amazed to discover that instead of my cases being staffed by me and perhaps one FBI agent they were staffed by me, the FBI agent and the entire resources of the giant law firm which was now at my disposal, to help me find out what was happening in the case that I was investigating.  So it’s a remarkable resource for the government to have the assistance of law firms and their army of associates and often investigators hired at their disposal and the question is how can you as the entity being investigated make sure that you’re getting something out of this arrangement and as Aaron was referring to, the key to securing that quo is to take an engaged and proactive approach throughout the course of the investigation and the ultimate goals here are you want to limit the scope of the investigation so that you’re not boiling the oceans and looking any further than you need to for the wrong-doing that’s been discovered, you want to limit the scope creep throughout the investigation so that you don’t start with one problem and if it can be avoided end up with a whole different set of problems and ultimately over the course of the investigation you want to become the expert of the fact and the trusted partner of the government who eventually you buy credibility that’s going to allow you to make the sorts of factual and possibly legal arguments at the end of the process that may be very helpful to your client.

So the question is how to do that and the key as Aaron was saying is to get buy in from the start and the key to being to be able to do that is to jump on the problem extremely early, you want to find out as much as you possibly can about the facts,  first of all to make the determination as to whether this is something that would merit self-reporting and if you do make the decision to self-report, which is not always a given but in many cases that decision will be made and if it is made when you start, you have much more knowledge than the government does and so you will be able to present to them as to ‘here is the problem’ and ‘here is our specific plan as to how to investigate this problem and come back to you with the results of our investigation’ and if you can initially get that buy-in and get the government to agree with the steps that you’re going to be taking then you’re going to be able to ensure that you’re not going to face that situation where after having spent a significant amount of time and money conducting an internal investigation, it turns out that the government doesn’t think that you’ve been a bona fide partner in the investigation and it has all been for nothing. 

So this approach if done correctly can yield really big benefits and I just want to tell one story to dramatize that from my own career as a prosecutor which is one of the final corporate prosecutions I was doing against a large pharmaceutical company.  The lawyers were taking a very combative approach from the start and as the prosecutor was incentivising me to view the company negatively and to want to expand the scope of my investigation to see why I was facing this resistance and  what there was to be hidden.  Eventually the company figured out that this lawyer was not handling the representation the way they would have liked, they replaced him, and two years later the company did have a problem and they found themselves having to accept some responsibility for that and reach an agreement with the government which involved a payment. But, I found myself in writing the documents that ended the case and the press release, thinking ummm… I don’t want to say that, I’m not sure we should push that far because I had gained so much respect for the new lawyer that they brought in that I did not want to, you know, on a personal level, humiliate him and stretch beyond you know, in close call situations, push things as far as I might and also because I could rely on what he had told me during the course of the investigation. And so, I think that establishing that kind of relationship can be enormously valuable to the company and the way that you do that is by getting that early buy in from the government where you can establish your position over the course of the investigation to be that trusted partner.

Aaron Stephens;

Great.  Just picking up from the UK side of things there, I think this whole idea of aquid pro quo and outsourcing of investigations is less formally developed here in the UK than in the US and certainly for a number of years, at least in the FCA context, taking a proactive approach, getting in and notifying the FCA early on and really being co-operative in those early stages has always been a strategy for hoping to solve a problem and to rectify a systems and controls issue without going into an enforcement process with the FCA.

 In more recent times we’re getting I think more kind of certain indications of the potential quo in the quid pro quo for acting in this way.  Again in the FCA context Jamie Simmington gave a speech towards the end of last year where he laid out the FCA’s expectations of firms carrying  out internal investigations and there was a lot in that speech, but I thought I would just flag up a few key points and the first is that Jamie Simmington said that the FCA is very much willing to give credit or leniency to firms that, you know, assist it to unravel potential misconduct quickly and efficiently and in doing that, he really stressed the importance of self-reporting and of early engagements with the regulator to discuss and agree the scope of any internal investigation that is carried out.  He also stressed the real importance of putting together an investigation plan and team which is both independent and credible and is seen to be independent and credible; and demonstrating a willingness- a real willingness -to share the output of the investigation, openly, fully and promptly and that  obviously brings up the perennial issue of legal professional privilege and what Mr Simmington said in summary is in effect, you know, we don’t want to see firms trying to gaming the process by hiding facts, and especially unhelpful facts, within privileged documents. You know if you’re carrying out an investigation, if you want us to take it seriously and rely upon it and think of it as credible then you need to find some way of communicating to us the facts that you’ve uncovered and that doesn’t necessarily mean waiving privilege over interview notes, you can do it another way but we need the factual narrative and we don’t want to see people, as I said, gaming the process to try to hide unhelpful facts. 

He also mentioned that this strategy that I think some firms have possibly adopted in the past of trying to say to the FCA, well we’re coming to give you an oral briefing on the findings of our investigation, is not a suitable substitute, they need, you know, proper documentation of facts and findings if you’re going to expect them to take your investigation credibly.  But in appropriate cases where firms approach things in this way then this can easily lead to the FCA declining to open any enforcement case or at the very least help to mitigate the severity of any financial penalty or other sanction that they impose at the end of the process and certainly we at BLP we have had various matters where we have been able to keep the client out of enforcement by taking this kind of a proactive approach.

I think by contrast the SFO has sent out some confusing and contradictory signals in recent times.  You might recall the SFO at one stage complaining that internal investigations simply “churn up the crime scene” and thus are not considered to be helpful.  This was interpreted by many as a warning from the SFO not to carry out internal investigations.  But it also begged the question, if corporates themselves are not carrying out internal investigations, how can the SFO reasonably expect to receive self-reports of corporate wrong doing.  The SFO obviously does not have unlimited resources so like it or not it really does need corporates to behave responsibly, to carry out internal investigations and to self-report in appropriate cases.  More recently, I think the SFO has been a bit more helpful in providing some detail on its position, and in a speech in May of this year the SFO made it clear that any company that’s looking to maximise the possibility of a non-criminal disposal will be in a much better position if it actively engages with the SFO and self-reports potential issues to the agency, rather than simply waiting to see if the SFO finds out about the wrong doing through other means.  In this regard I think it’s important just to bear in mind how many different ways wrong doing can now come to the surface.  You obviously have whistleblowers, in the states we all know that whistleblowers are financially incentivised by the authorities to blow the whistle and they can receive multi-million pound rewards for doing so when successful enforcement cases are brought on the back of the information they provide.  In the UK there has been more interest and more regulation around whistle blowers in recent times, so that’s one way that things come to the surface, even where a corporate doesn’t self-report.

You obviously have competitors who might feel aggrieved in a situation and will seek to provide information to the authorities to bring something out.  You have investigative journalists, we’ve seen the Panama Papers and other situations, you know, very sophisticated operations by investigative journalists and huge data dumps being made of quite confidential and in some cases, privileged information.

And then you’ve got suspicious activity reports being made to the NCA by various companies and firms in the regulated sector which are more and more shared between the different regulators, you know, the NCA will share that with the SFO, they will share that with the FCA where appropriate. 

So that’s something, you know I’m not necessarily advocating self-reporting in every situation or in any situation, but it’s something that has to go into the equation when you’re considering whether to self-report is, you know, are the authorities going to find out about this in any event and if so isn’t it better that they find out about it from us in a proactive way?

Now the speech in May made it clear that companies aren’t expected to immediately pick up the phone to the SFO the moment they become aware of potential wrong doing.  But the expectation is that companies will engage at an early stage and what that means in practice is that once you’ve started investigating something internally, once you have enough evidence and have come to the view that the concerns that you are investigating are not fanciful, they’re real, they’re substantive, then that’s the moment in time to start engaging with the SFO if you decide to follow that approach.

In terms of the amount of control the SFO will exert, according to the speech the SFO has said that it’s not their job to tell corporates how to carry out investigations.  So in terms of what lines of enquiry to follow, who to interview, what documents to review etc., that’s not the SFO’s job, that’s your own prerogative.  However on the flip side they do expect genuine, unequivocal co-operation from companies.  This does not, according to this recent speech, mean necessarily requiring companies to waive valid claims to legal privilege over materials that are generated by that internal investigation.  Rather the key thing the SFO wants from a firm conducting the internal investigation is the factual narrative and for the firm to work with the SFO to identify the full extent of any wrong doing.  I think if that’s the situation in a purely internal investigation where the SFO are sort of waiting back and you know holding its own counsel as to whether it will open up its own investigation. If at the same time that you as a firm are investigating something the SFO has opened up its own parallel investigation, then I think you can expect them to be a bit more prescriptive about how you go about investigating and we’ve all heard, you know, situations for example of the SFO telling firms that they can’t interview certain people and they can’t do certain things because they don’t want the SFO’s investigation to be somehow prejudiced.

Very quickly I thought I’d just mention that a couple of days ago the SFO published some new guidance on section 2 interviews, so that you’ll recall that section 2 is the power under the Criminal Justice Act where the director of the SFO can compel anyone really to attend the SFO to give evidence and they must answer questions and provide documents to the SFO unless they have a reasonable excuse not to.  This is a very strong power that the SFO has and typically people who are interrogated by the SFO in this way have brought legal advisers along with them.  The SFO is taking a little bit more of a robust approach now through this guidance in making it very clear that at the end of the day there is no right to bring along a lawyer as when you’re just a witness in the section 2 context, and that they have a discretion to exclude legal advisers from section 2 interviews.  So they proposed a, or mandated a procedure that must be followed where you’re required to attend the SFO under section 2 to request that a lawyer be allowed to attend with you and there is a number of things that need to be satisfied in that regard.  We’ve actually published a blog on this on our website so if you want more information just check the BLP website and you can see the blog right there.  But it will have I think a big effect on the ability of corporates to send their lawyers along with their employees to a section 2 interview because the view of the SFO is that a company’s lawyers coming along with an employee, that there’s too much of a risk of conflict of interest, there’s too much of a risk that the company will try to prejudice the investigation or stop the employee from talking openly and freely.  So that’s something just to be aware of in terms of the SFO exerting more control over investigations.

So moving on then to our next trend which is internationalisation.  It’s obviously no secret that the financial markets are more global than ever and that as a result financial regulators and enforcement authorities have been modifying their approach in an attempt to properly monitor and enforce market cleanliness.  Obviously unfortunately for banks and other financial firms this means that an incidence of misconduct in one jurisdiction, or one part of the world, can easily lead to scrutiny by multiple authorities across the world and these authorities may have very different approaches, they may have varying degrees of sophistication and so that can cause all kinds of complications.

At the same time the more sophisticated authorities like the US and the UK have been developing and using information gateways between them to more closely coordinate their supervisory and investigatory functions.We certainly have seen situations even recently where US authorities at a very early stage seem to have access to documents, to information which they must have got through some kind of mutual legal assistance with other authorities around the world and so it’s clear that there is a huge amount of co-ordination going on even at very early stages of a matter.  Roger can you give us some insight into the frequency and depth of the co-operation that you see between US and UK authorities.

Roger Burlingame;

Sure.  So it’s interesting, I think this is one of the areas where the US government’s approach has changed most dramatically in just the last five years.  When I was at the Department of Justice (and this was also true for the other regulatory authorities in the United States) the approach was that there was competition for cases, fierce competition for cases, among the various different regulators and prosecuting agencies and that international prosecutors and regulatory agencies were viewed similarly to domestic competitors which is race to finish the case and try and finish your investigation and get a result before anyone else does, because they’re going to cut you out of it.

The situation now couldn’t be more different.  I have a friend from my days as a prosecutor who has recently returned to the fraud section of the Department of Justice and he is the head of the section and he was telling me that this to, he spent a stint in private practice and that this was a shocking change for him that when he left, you know, the same situation that I described as far as international contacts and that now it’s rare that a day goes by and certainly not a week goes by where he is not on the phone with international regulators co-ordinating cases which are being jointly investigated in the US and abroad and sharing information on cases which maybe are  not being investigated by the US or are not being investigated by the foreign authorities and I think the lesson that DoJ has learned is that they can make more cases by sharing rather than fighting and that’s lead to the situation that we now see and I think that the broader effects of this is actually that this is a reflection of the trend which has led to the situation that we’re in now with respect to the US government’s role as a global regulator which is that the financial crisis spawned an army of white collar prosecutors and regulators in the United States.  When I was with the Department of Justice, prior to the financial crisis I would say that there were less than 50 real prosecutors focusing solely on white collar work, maybe a bit more, maybe a bit less, but that number has multiplied significantly since then and is now standing in the hundreds and there’s a myriad of different agencies which weren’t touching white collar, serious white collar work, let alone doing international white collar investigations that are now hugely active and the most active area of course is in the financial sector and the most active spot in the financial sector is London, where London is effectively being treated as the new New York, that you know, you have this greatly expanded  ranks of white collar prosecutors and regulators and there is only so much financial crime for them to go after in the United States and so London has become the next natural stepping stone.This doesn’t mean of course that you are always going to be facing a US prosecutor wherever you are in the world, but there is certainly going to be that co-ordination that we talked about on significant cases and I think the US has shown that where they feel that there is inadequate consequences from the local authorities they’re going to step in and where the behaviour is significant enough they’re going to step in even if the local authorities have and so in the LIBOR and Forex cases for example you have fines being paid by entities both towards United States and toward the UK and other authorities and unfortunately, what this has spawned is a culture in which the investigators globally are starting to compete as to who is the toughest and who’s going to be doling out the harshest penalties, and competing most aggressively for these cases and I think that on a personal level the example of this is Tom Hayes who was prosecuted in the UK, as I’m sure as you all know, for LIBOR and was prosecuted in the UK because he was afraid of the terrible sentence that he might face in the US, that seemed to be the explanation for his decision and then in fact he was hit with a tremendously harsh sentence, probably much harsher than he would have faced in the US and I think the explanation for that obviously reading a lot of tealeaves, is that the UK authorities thought to themselves, I don’t want to be seen as the patsy in comparison to the US and Tom Hayes was the recipient; and I think we’re seeing the same thing as to entities happening at a higher level.

Aaron Stephens;

So just keeping to this trend for a second and you need to keep moving along to stick to our 45 minutes, but it is obviously the case that in an environment of more global supervision and enforcement like this it is critical for firms to have expert advice and guidance from lawyers and others who can help guide them through the local regulatory enforcement processes that might apply in different jurisdictions and crucially, to help them understand certain key issues. The ones I want to flag up at this stage are ‘what other regulatory notifications obligations that might exist in different parts of the world and in different systems?’ and ‘When do those obligations to notify crystalise?’ It is all good and well to know when you are supposed to be reporting to the FCA but what about all the other regulatory authorities around the world who might also be interested in a particular situation? and making sure  you are on top of that.  Two,  the availability and utility of legal professional privilege in any particular jurisdiction, how it might be waived either on purpose or accidentally the consequence of waiver, these are all important things to get to grips with at the very beginning of an investigation. Aand then thirdly, I would say that the impact of data protection and privacy rules on how do you carry out an investigation and how you, for example, transmit data into an email, chats across borders as part of your investigation.  So each of these topics on their own can be quite technical, quite complicated, so I am just flagging them up now at a high level and will address them in some more detail a bit later but the key message is that in any cross border investigation situation you should be getting to grips with these three key points as soon as possible, at the start of the investigation. 

On our slides the next bullet relates to joint defence agreements and common interest privilege.  Roger perhaps you can give a quick explanation as to what a joint defence agreement is in a US context.

Roger Burlingame;

Sure, so very simply, a joint defence agreement is that two people who are in the same position with respect to an investigating authority can have privileged communications as long as they share that common interest against the authority.  So how this is typically used in investigations both into individuals and entities is to exchange information and learn information about what is happening in the investigation so in the case of a company that is being investigated, the company will be hiring lawyers for the individuals, and the lawyers for the individuals are going to be benefitted greatly in doing their job if they can receive information from the company, the company knows from the internalinvestigation it has been doing, in its communications with the investigating authority, about what they will be facing in their interview. And then similarly, when an individual goes and is interviewed by the investigating authority to be able to have a conversation afterwards that is completely privileged with the company’s lawyers, relaying back the substance of what happened, thereby giving the company a greater insight into the investigation and allowing the next person in the chain to be all the better represented. So it is helpful for the individuals, it is also helpful for the entity and the conversations are privileged.  One added benefit is that often times there will be formal joint defence agreements and one of the provisions of the joint defence agreement will be notification to others in the agreement, in a joint defence group, when someone is dropping out of the joint defence group and what that signifies is this person is no longer similarly positioned i.e they are starting to talk to the government and on the road to becoming a co-operating witness and so that can be extremely helpful in figuring out/engaging the strength of the government’s case either against an individual or an entity by having a sense as to you know who is on which side,

Aaron Stephens;

So these types of formal written joint defence agreements are a less common feature here in the UK but we obviously do have similar principles around common interest privilege, and it is also important for lawyers to take steps to preserve common interest privilege, and to be alive to situations where the interest of a firm and those of an individual or an interest amongst different individuals begins to diverge.  There is another really interesting difference I think between the US and the UK and one that many people in the UK  do not understand and that is the use in the US of what are known as proffers.  Roger can you give us a bit of an education on proffers.

Roger Burlingame;

Sure, yes so very simply proffers are a way in which people who are under investigation tend to communicate with the investigators and so an interview of say that same employee at a company that is being investigated with investigating authorities will take place under a proffer agreement, which means that the information that is discussed during the proffer session cannot be used as substantive evidence against the person, but that the authorities could use that to follow up on investigative leads or possibly the person had lied and there could be consequences for that or they could be cross-examined with any conflicting testimony in a later proceeding.  So that is the basics of what a proffer is and what a proffer agreement or ‘queen for a day’ agreement is and what protection it provides.  There is also the attorney proffer, which would be representing to the government a certain set of facts that your client would be able to provide to the government if the government was to speak with them, in hopes of (typically for an individual) securing co-operation or securing, perhaps, immunity from prosecution  if the person was to come in and make their statements in a way to communicate with the government about what your client might say without subjecting your clients to potential penalty for lying during the interview, you know, obviously your client is going to be well advised not to lie but the government can always take a different view as to what the truth is limiting your options of trial down the road.  Finally there is a reverse proffer which had been taking place, according to newspapers in London, the subject of the Forexinterviews and what that is is the US government reaching out to people who are under investigation and saying we would like to meet with you, you do not have to say anything, here is all of our evidence against you, this is why you are going to lose when we bring a charge against you and the point of making this presentation is the hope that the person will conclude that their best avenue is not to fight the case but is to co-operate and therefore allow the government to make the case stronger against others they are hoping to prosecute.

Aaron Stephens;

And I think that is all very interesting and it is very different from the UK.  Obviously  the US does not have something similar to what I talked about earlier, the section 2 power to basically compel someone to come in to override their right of silence and, you know, in a US context that just simply doesn’t really happen because of the fifth amendments rights etc.  So the only analogue, the most close analogue for this ‘queen for a day’ process here in the UK, is that section 2 process where your right of silence is overridden by the authorities but they cannot use any of the material that you disclosed to them in that process against you, except in very limited circumstances which are similar to the exceptions in the States.  Another quite interesting difference that we come across in our practice is the difference between US lawyers and English or UK lawyers in their approach to witness preparation and I think the basic point here to say is that, in general terms, US lawyers will often take a much more hands on and detailed approach to witness preparation, which in many cases will culminate in those lawyers subjecting a witness to a mock interview that will very closely resemble what the witness will actually encounter at a formal interview with the authorities.  This I think reflects the approach taken in US litigation and in arbitration where it would be considered negligent for a lawyer to fail to prepare a witness in this manner.  On the flipside though a lot of English lawyers will look at this type of preparation and think that it amounts to effectively coaching a witness what to say.  In English civil litigation the professional conduct and ethical rules very much limit a lawyers ability to coach a witness and I think rightly or wrongly, this practice and restriction is carried over into the world of investigation, so you will sometimes see situations where a client will have US and UK counsel and they will be preparing for an interview and the approach that is taken by the two sets of legal teams in preparing them for an interview will be quite different.  Roger, do you have anything quick to add on this?

Roger Burlingame;

No I think that is exactly right and I think that that can be one of the benefits of wherever you are in a situation, where you have US and UK counsel is that US Counsel is not only more comfortable in that role but is more experienced in that role because it is a standard part of witness prep and that it would be frankly negligent, to not provide that sort of preparation for clients prior to interview or testimony in court. 

Aaron Stephens;

So moving on to the next slide which is out penultimate slide and we are a little bit tight on time so we are going to move through this one quickly. This is continuing the theme of internationalisation and tactical considerations and really of primary concern early on is to try and figure out where your problem is coming from and throughout all the different steps of the investigation how you are taking notes, where you are operating, what sort of data privacy concerns you are going to take into account.  You are going to have your eyes focussed on where you are most likely to ultimately be presenting, and then of course, the most complicated questions come up frequently unfortunately, where you are being investigated by multiple different authorities simultaneously and often gives you a Hobson’s choice of which of these investigators are you going to decide that you ultimately want to please if it is impossible to please both at the same time.  And a perfect example of that is with data privacy where the US approach is they have had many many years of training that they ask for materials, they ask for an investigation and a law firm is going to go get those materials and do the investigation very thoroughly and the prosecutors in the United States are unimpressed with the excuse of the data privacy laws prevent us from obtaining certain materials and expect the lawyers for entities under investigation to figure out a creative way to solve these problems and frankly, if the problems cannot be solved, they are happy to present the choice to the entity of either violating the data privacy provisions or risking their co-operation credit and I am not sure they are going to put it to you that starkly, but that is what is ultimately being judged.  So I know of many situations in which the client has had to take the risk of violating a data privacy protection overseas or data privacy law overseas because there is no way that you are going to have a good result with the US authority saying ‘I am sorry but we are not going to be able to get you these key materials’. 

Another considerationthat plays into how you might make these kind of tactical priority judgments is the different theories of corporate liability that exists between the US and the UK at least at present.Roger already touched on the fact that in the US, pursuant to the doctrine of responded superior a corporation can become liable for a criminal offence if any employee at any level of the organisation commits criminal offence in the scope of their employment.  In the UK we still. have at least as a matter of common law. this idea that this doctrine directing will and mind liabilities so a corporate as a matter of common law cannot be charged with a criminal offence unless there is evidencing demonstrating that someone in the brain of the company, so at the level of the Board or quite senior management were actively involved in the criminality themselves.  Now there can be specific acts of Parliament that create corporate criminal liability and probably the best known one in recent times is the bribery act, which created the section 7 failure to prevent offence.  But outside of that as a general point, the differences between corporate and criminal liability between the US and the UK are still quite stark.  I think the thing to be aware of is that this is rapidly changing.  We have recently had announced that there is going to be a consultation this summer on expanding that section 7 formulation to other types of corporate misconduct, so a strict liability offence or failure to prevent fraud, a strict liability offence or failure to prevent money laundering.  And I think we also have the,  which I think is even more certain to come into force the failure to prevent the facilitation of tax evasion.  And so we may well be in a situation soon where that kind of regulatory arbitrage between the US and the UK in terms of where are you more at risk of corporate liability will not really be as stark as it is at the moment.

The other thing we are going to pick up quckly and we are just going to fly through it because we don’t have time is just differences of privilege and anyone who has studied privilege will know that there are quite particular differences between the US and the UK in a corporate context in terms of how easy or hard it might be for a privileged communication to happen between a lawyer and its corporate client and I will not go through the whole three rivers formulation there, but I will just flag it up.  Obviously there is differences in terms of which lawyers can communicate with third parties.  In the UK it is safe to cloak those kind of communications in privilege.  You would want to be able to rely on litigation privilege, that does not always exist in the context of an internal investigation, the way that you go about creating interview notes is an area which needs a lot of care -if you want to try and create those in a privileged way or separately if you want to do something else and then put down the factual merit in a non-privileged format.  England recognises this concept of a limited waiver, so being able to say I am going to waive privilege over documents, only vis a vis the FCA for example, but that does not amount to a waiver against all other parties who might want to get those same documents and might want to sue you in a civil court.  That is not the case in the states, ifyou waive privilege as a general matter, with one partythen you effectively waive it with others and there is all kinds of complicated things to think through where you have got a cross border or multi jurisdictional investigation regarding whose privilege rules are actually going to apply, when all this information is flowing back and forth over borders.  But we will move on from there to our final slide which is just quickly focussed on individual accountability.  I expect that most or all of you on the call have heard of the Yates memo.  It was published towards the end of last year.  But hopefully Roger can just give us a quick summary of what it is and how it impacts the way that firms carry out internal investigations.

Roger Burlingame;

Right, when the Yates memo was issued everybody who had been a federal prosecutor and was asked the question, ‘does this change anything?’ immediately answered no, because there has always been a real focus within the Department of Justice on holding  individuals accountable where possible.  I think that within the time that has passed since the Yates memo was issued  that answer would have changed, which is that the muddled messages coming out of the Department of Justice about the possibility for corporations to receive co-operation credit without individual prosecutions have led to a situation in which even though I think the Department of Justices’ approach remains the same, there is now a much greater focus on trying to provide individuals and frankly a worry, on the part on the part of entities is that if they don’t provide individuals, they may not be able to get co-operation credit.  The DoJ has tried to explain that that is not and there have, certainly historically, and recently been plenty of resolutions where the company has accepted criminal responsibility without individuals being prosecuted but it is not a good position currently to be an individual in a company that is under investigation if you are in any way tied to what is being investigated.  I think this is a good place to end that.

Aaron Stephens;

Thank you, just in terms of the UK I think it is fair to say that there is a similar focus on individual accountability.  We do not have anything like the Yates memo per se, but we have the Senior Manager’s Regime which clearly one of its purposes is to create a blue print as to who within large banks and other regulated firms is actually responsible for certain areas of the business and then that leads to a situation where if there is a problem, it is much easier to identify and take action against them.  Certainly in a regulatory sense and in a financial crime sense we are expecting more and more scrutiny of individuals and more and more cases to be brought against individuals in the future.  On the pure corporate crime side where the deferred prosecution agreements come into effect, the FCA cannot do the deferred prosecution agreements but the SFO can and there is an impact on individuals there as well.  As part of the co-operation that ICBC standard bank provided to the SFO in order to get its DPA , no doubt part of that was a willingness to co-operate in helping the authorities not only here, but in other parts of the world, investigate the conduct of individuals and to assist those investigations and I think that will be a feature of DPAs going forward - part of that package of co-operation that a firm will try to offer to the authorities is that we are going to offer up to you compelling evidence of who the actual human beings are that were responsible for this.

So that brings us to the end of our time.  There is a final little slide that we have just put on here, we are not going to talk through it but it just sets out for you some of the key challenges of investigations.  We hope this has been a useful session and we are very happy to answer any questions although I don’t know if there are any at this stage.

Before anyone goes, can I just encourage you to sign up for the next seminar in this series which is on the subject of how to prepare for the market abuse regulations.  If you just go to the resources tab on the left hand side of your screen you will be able to click directly onto a link to register for that session.

So if there are no questions from myself and Roger, thank you very much and we hope this has been helpful.

Roger Burlingame;

Yes thank you and if anybody has any individual questions they would like to follow up with,  on this screen are mine and Aaron’s contact information and we are certainly happy to deal with any enquiries anyone may have.  Thank you so much for your time and attention.  Thank you.


  • Aaron Stephens, Partner, Head of Corporate Crime, BLP
  • Roger Burlingame, Partner, Kobre & Kim

What you will learn:

  • Trend 1: How to respond to the increasing control that regulators are exerting over internal investigations.
  • Trend 2: Internationalisation: How to deal with multiple regulators across multiple jurisdictions.
  • Trend 3: Focus on individual accountability - unpacking the impact of the new senior managers' regime and the Yates Memo.

Don't miss the other on-demand webinars in our financial crime series 

New corporate offence for failure to prevent tax evasion - what does it really mean for you >

How to Prepare for Market Abuse Regulation (MAR)  >

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