COVID-19 Coronavirus Business Impact: Financial Crime and the CPS Interim Charging Protocol

The criminal justice system in England and Wales, as in other nations, is severely impacted by Covid-19, and is under immense pressure.  This extends beyond the investigation and prosecution of criminal activity surrounding the lockdown measures, to the very heart of how the justice system functions, including in respect of charging decisions.

In its Interim Charging Protocol¹, issued on 8 April 2020, the Crown Prosecution Service (CPS) describes the pandemic as an “unprecedented crisis” for the management of the justice system. ² Antiquated infrastructure and a lack of digitisation impose limitations on the current operability of courts, prosecutors and the police. Techniques employed by investigating authorities, such as search and seizure operations, or conducting interviews, may not currently be deployed in the usual manner. 

The Interim Charging Protocol is a practical measure by the CPS to streamline and prioritise charging decisions during the crisis. This article considers the implications on Covid-19 related financial crime and the types of offences which the CPS will prioritise; the role and approach taken by other major UK law enforcement agencies; and how corporates may respond to the increased risk of fraudulent or other criminal conduct in the current circumstances. 

Three levels of priority

The Interim Charging Protocol divides active cases into three categories, depending on the level of priority: 

1. Immediate

• Cases where the police are seeking a CPS charging decision and intend to apply to court to remand the suspect in custody; and
• Covid-19 related offences.

2. High Priority

• Serious cases requiring bail conditions but no remand in custody after charge
  

3.  Other

• Serious offences (such as fraud) which require large complex investigations; and
• Less serious offences.
  
  

Implications for financial crime enforcement

Of particular interest are the elements of the Interim Charging Protocol that set out the CPS’ response to a perceived increase in financial crime caused by the Covid-19 pandemic.  For example, the City of London Police’s National Fraud Intelligence Bureau has reported recent attempts by fraudsters to seek donations for the National Health Service,³ and there have also been reports of increases in cybercrime and bogus government fines for breaches of emergency regulations.⁴  

The focus of the major UK law enforcement agencies is on the protection of individuals, especially those vulnerable to fraud.  However, the offences targeted by the measures adopted to date are serious and have implications for corporate entities:

• The CPS and the National Crime Agency (NCA) have issued a statement warning of the increased risk of financial crime:⁵  “Criminals are targeting people looking to buy medical supplies online, sending emails offering fake medical support and scamming people who may be vulnerable or increasingly isolated at home. These frauds try to lure you in with offers that look too good to be true, such as high return investments and ‘healthcare opportunities’, or make appeals for you to support bogus charities or those who are ill.”
• The Financial Conduct Authority (FCA), alongside the Pensions Regulator, has issued a statement warning individuals not to make rushed decisions regarding their pensions, due to increased fraud risks.⁶  
  
• The Serious Fraud Office (SFO) has not made public announcements regarding the Covid-19 pandemic, but is working with the CPS, NCA, police and other government and private-sector organisations to prevent fraud. 
  

How financial crime may arise in the context of Covid-19

There are three types of Covid-19 related offences which may be regarded as immediate cases under the Interim Charging Protocol: 

• Serious offences where the suspect will need to be remanded in custody.
  
• Lesser offences (summary offences and minor either-way offences) without a remand in custody; and
  
• Offences committed by bodies corporate.
  

The Interim Charging Protocol does not define Covid-19 related offences.  It seems the term is to be understood broadly, and covers offences including assaults (e.g. on health workers, sneezing/coughing on individuals)⁷ and criminal damage (e.g. to emergency vehicles).⁸  Importantly, financial crime is also covered.  The Interim Charging Protocol lists the following examples:⁹   

• Covid-19 dishonesty offences against vulnerable victims; and
  
• Other Covid-19 related offending, e.g. fraud.
  

The offences could cover a variety of conduct.  At its most serious, this may include: 

• Fake offers of investment;
• Systematic targeting of vulnerable individuals;
  
• Fraudulent claims for private-sector credit;
• Fraudulent claims for government support; or
• Bribery to secure preferential access to treatment, facilities and equipment.

There is a tension in the Interim Charging Protocol.  On the one hand, Covid-19 related offences are to be prioritized.  On the other hand, serious fraud is allocated to the “other”, lower priority category.  This is because serious fraud cases may require prolonged investigation and involve complex pre-charge disclosure obligations. The Interim Charging Protocol states that such cases are “likely to clog up the court system if charged and actioned at this stage.”¹⁰  It is unclear whether this applies to Covid-19 related serious fraud, but this would seem to be the case. 

Much will therefore depend on the complexity of each investigation:  straightforward cases may be regarded as “immediate”, and processed by the police and CPS under the Interim Charging Protocol.  More serious offences clearly fall within the SFO’s remit.¹¹ The Interim Charging Protocol is not technically applicable to the SFO, which will make its own decisions on work prioritisation and charging.  There have been calls for the SFO to make vigorous use of its statutory powers to combat financial crime in the current circumstances.¹² It remains to be seen whether the SFO is able and willing to do so. 

Risks for corporates

The focus on Covid-19 related financial crime offences may lead to an uptick in investigations and charges being brought against corporates offenders.  The impact may be felt immediately where the case is categorised as “immediate”, or may be delayed due to the complexity of the investigation. While enforcement agencies are presently encountering inherent difficulties in carrying out traditional investigative steps – from using statutory powers to search and seize evidence, to conducting interviews – once lockdown restrictions are eased, they can be expected to redouble their efforts to investigate and prosecute relevant offending. 

Covid-19 related offences are a particular concern, but past experience indicates that the financial impact of the pandemic could also lead to a wider increase in criminal misconduct, as individuals and their companies seek to take advantage of or minimize upheaval.

Corporates will need to update their financial crime risk assessments¹³ in light of the present circumstances and should take preventative steps to mitigate the risks of Covid-19 and broader related misconduct, including by:

• Issuing ‘tone from the top’ messaging to staff, particularly in high-risk areas of the business, reinforcing that misconduct will not be tolerated in the current crisis.
  
• Undertaking a specific COVID-19 Risk Assessment to identify any enhanced risks caused by working restrictions to the company’s risks of fraud, corruption, money laundering and market disclosure obligations.  Identifying mitigating actions and implementing improvements, such as: 
  
  • Reviewing and updating policies and procedures to ensure they cover specific Covid-19 financial crime risks to the business (e.g. updating insider list and market disclosure regimes and adapting investigative protocols to take account of remote working).
    
  • Monitoring, testing and, if necessary, updating systems and controls to ensure that financial crime risks are effectively managed. 
    
  • Providing additional training across the organisation and in accordance with higher risk sectors of the business.
    

How Dechert can help

Dechert can assist companies navigate these unchartered times.  Dechert’s multi-jurisdictional compliance and investigations team can provide support to corporates looking to proactively monitor and adapt their policies to accommodate, identify and manage the new risks.  Where appropriate, Dechert can also advise corporates on the investigation of suspected misconduct and the options and procedures for engaging with relevant law enforcement agencies.

Footnotes

1) Interim CPS Charging Protocol – Covid-19 crisis response

2) Interim CPS Charging Protocol (2020), para. 1. 

3) The Guardian, Fraudsters exploiting Covid-19 fears have scammed £1.6m. 

4) Ibid. 

5) National Crime Agency,  Beware fraud and scams during Covid-19 pandemic fraud and CPS Beware fraud and scams during Covid-19 pandemic. 

6) FCA , Covid-19: savers stay calm and don't rush financial decisions. 

7) See Interim CPS Charging Protocol, p. 3. 

8) Kent Online, Coronavirus Kent: Six ambulances have holes drilled in tyres in overnight attack in Ramsgate. 

9) See Interim CPS Charging Protocol, p. 3.

10) See Interim CPS Charging Protocol, p. 5.

11) Criminal Justice Act 1987, s. 1(3): the SFO may investigate and prosecute “serious or complex fraud”. 

12) B. Waite, SFO needs urgent fix to fight Covid-19 fraud (24 Mar 2020)

13) For the ‘failure to prevent’ bribery or facilitation of tax evasion offences under the Bribery Act 2010 and the Criminal Finances Act 2017, a defence is available if the organisation had in place “adequate” or “reasonable” procedures to prevent the offending.  HMRC and Ministry of Justice guidance is clear that a targeted risk assessment is a critical part of evidencing the adequacy or reasonableness of the procedures put in place by the organisation.