Transatlantic litigation: investigation and enforcement

Posted: 25/03/2025

As financial crime continues to cross global borders (via cryptocurrencies, for example), the importance of cooperation between national law enforcement agencies increases. This is especially true for UK and US agencies. 

This article outlines the roles and key powers of law enforcement in both countries and explores the impact of the recent decision to ‘pause’ the enforcement of some US legislation.

Key tips for United States companies being investigated in the United Kingdom

Be proactive
Some of the main UK corporate criminal offences have a statutory defence which can be engaged if proactive prevention measures are put in place. If conduct giving rise to a potential offence nevertheless takes place, it is important it is detected (and if appropriate, remediated) quickly. This creates an opportunity to co-operate with, and self-report to, the relevant authorities, which can be crucial steps in resolving investigations successfully. 

A more restrictive application of privilege
Compared to the position in the United States, the interpretation and application of privilege in the UK is more limited. For this reason, it is important to instruct external counsel as soon as a potential issue comes to light. Privilege may then apply to as much of the subsequent investigation as possible.

Managing dual investigations 
Whilst the relevant agencies on both sides of the Atlantic work together, how this happens in practice differs from investigation to investigation. In some cases, the agencies will make different demands, and it is important to identify which will have the greater impact. The business must then analyse how to align the investigation, and any potential co-operation, to satisfy all agencies. The impact of the current ‘pause’ in enforcement on the US side is a factor to be weighed into that analysis.

Staying up to date  
The position in respect of the United States’ federal legislation is currently dynamic. However, even when a more permanent position is reached, that will not necessarily represent certainty going forward for those subject to not only that federal legislation, but also overlapping state legislation. It also remains entirely possible that a new administration might adopt a different stance. Businesses need specialists who understand the consequences of these shifts to minimise future risk. 

United Kingdom

The Serious Fraud Office
Established by virtue of the Criminal Justice Act 1987 (CJA), the Serious Fraud Office (SFO) is a specialist prosecuting authority tackling the most serious or complex fraud, bribery and corruption in England, Wales and Northern Ireland. In considering whether to authorise an investigation, the head of the SFO, the director, will take into account the actual or intended harm that may be caused to the public, or the reputation and integrity of the UK as an international financial centre, or the economy and prosperity of the UK, and whether the complexity and nature of the suspected offence warrants the application of the SFO’s specialist capabilities to investigate and prosecute.

The director also has discretion to take over matters from other law enforcement agencies.

The SFO’s role is similar to the US Department of Justice (DOJ), as it both investigates and prosecutes criminal wrongdoing, which is relatively unusual in UK law enforcement. As part of its special powers the SFO may issue ‘section 2 notices’ pursuant to sections 2(2) and 2(3) of the CJA, and the director of the SFO can require the provision of documents, written responses and/or attendance at an interview during an investigation.

Section 2 notices will apply to documents in the jurisdiction, are likely to apply to documents held extraterritorially by a UK company, and may (although the situation is not clear) apply to documents held extraterritorially by a foreign company if it has a business presence in the UK.

The recipient of a section 2 notice cannot refuse to answer matters raised within the interview or provide documents required. The only lawful excuse for declining to respond to a section 2 notice or questions at an interview (outside of the sort of jurisdictional issues referred to immediately above – in which case the section 2 notice would be considered invalid) is that to do so would constitute a waiver of privilege. 

While this may seem draconian, a degree of protection is afforded given that those provided with a section 2 notice are normally (at the stage at which such notices are issued) witnesses rather than suspects, and any answer given by the subject during ‘section 2 interviews’ cannot generally be used against them in criminal proceedings. Providing false or misleading answers in response to a section 2 notice is a criminal offence in its own right.

Non-compliance with a section 2 notice is a criminal offence under section 2(13) of the CJA and may lead the SFO to seek a warrant authorising the police to enter premises and seize the relevant materials.

Similar to the Securities and Exchange Commission (SEC), the SFO does not have the power of arrest. However, pursuant to section 1(4) of the CJA, the director of the SFO can request the police to make an arrest or obtain a warrant to conduct a search.

National Crime Agency
Created by the Crime and Courts Act 2013 (CCA), the National Crime Agency (NCA) is a non-ministerial government department focusing on serious, organised, and financial crime. There is a degree of overlap between the work conducted by the NCA and SFO, and previous governments planned to merge the two agencies (while some wished to abolish the SFO completely). Such proposals have subsequently been abandoned.

Like the DOJ and SEC, the NCA is split into different ‘commands’, including the Economic Crime Command which deals with fraud and corruption, the Proceeds of Crime Centre, and the Organised Crime Command.

Under section 10 of the CCA, the director general of the NCA may designate that any officer has the powers of a police constable, an officer of Her Majesty’s Revenue and Customs (HMRC), and an immigration officer. It gains these powers via delegation, rather than possessing them in its own right. These powers include the right to gain entry to property, search property and premises, seizing materials, detaining and arresting suspects, executing warrants and conducting interviews. 

Financial Conduct Authority
The main role of the Financial Conduct Authority (FCA) is to regulate the UK’s financial services industry.

Pursuant to part XI and section 284 of the Financial Services and Markets Act 2000 (FSMA), the FCA has broad powers allowing it to require those under its supervision (or whose conduct falls within its regulatory scope) to provide it with information and to conduct investigations into those individuals and entities.

The FCA may impose a wide range of sanctions including public censure; financial penalties; and/or the removal or variation of a firm or individual’s authorisation to conduct regulated activity. For less serious breaches, the FCA may issue warnings in private. 

Certain breaches of the FCA’s regulations may constitute criminal conduct, which the FCA has the power to investigate and prosecute, pursuant to the FSMA. These offences include carrying on regulated activity without authorisation (or unless an exemption applies), inviting or inducing participation in investment activity in breach of financial promotions rules, misleading the FCA, and market abuse. The FCA is increasingly using its criminal law powers.

International cooperation

In addition to the means stated above, authorities in the UK and the US can also make what are generally described as mutual legal assistance (MLA) requests in obtaining evidence and assistance from law enforcement agencies in other jurisdictions. In the UK, the MLA regime is enshrined in sections 7 and 8 of the Crime (International Cooperation) Act 2003 (CICA). 

Most requests can be made by a designated prosecuting authority (in the UK this includes the director of the SFO and the FCA) using a formal ‘letter of request’. Before assistance can be sought from another jurisdiction, it must appear to the designated prosecuting authority making the application that:

• an offence has been committed or there are reasonable grounds for suspecting that an offence has been committed; and
• proceedings in respect of the offence have been instituted by the designated prosecuting authority or that the offence is being investigated. 

As a matter of domestic law, it is not necessary for an MLA treaty to exist between the UK and the requested country in order to make a request under section 7 of the CICA, although requests are more likely to be successful where a treaty basis exists. 

As demonstrated above, leveraging both UK and US intelligence and investigative resources seems like a natural solution for both parties. These efforts are being further strengthened: on 3 October 2019, both countries signed the US/UK Bilateral Data Access Agreement, the first agreement reached under the CLOUD (Clarifying Lawful Overseas Use of Data) Act which enables more efficient access to electronic data for use in criminal investigations between UK/US criminal law enforcement agencies.

United States

The Department of Justice 
The US legal system is divided into federal and state law. The US Constitution forms the basis of federal law, which is created at a national level and is applicable to all 50 states. State laws on the other hand are only in effect within that particular state. When a state law is in direct conflict with federal law, the federal law prevails.

The Department of Justice (DOJ) is the main agency responsible for enforcing the federal law in criminal and civil litigation in US federal districts.

The DOJ is currently headed by the US attorney general, who is appointed by the president and confirmed by the Senate.

The DOJ oversees a number of investigative and law enforcement agencies. Two of these agencies, the Federal Bureau of Investigation (FBI) and US Marshals Service, are authorised to execute arrest and search warrants. In order to obtain a warrant, officers must sign an affidavit stating they have a ‘probable cause’ to believe the suspect has committed or is about to commit a crime. This ‘probable cause’ must come from specific facts and circumstances, rather than from the officer's suspicion. A judge will then issue a warrant if they agree with the officer’s assessment. The evidential threshold for establishing ‘probable cause’ is quite low.

As part of their function, the DOJ’s agencies also have the power to bring a criminal charge by indictment. The Fifth Amendment to the US Constitution requires the federal government to seek an indictment from a grand jury in order to prosecute someone for a crime. An indictment comes typically before an arrest and the standard of proof is much lower for criminal trials since the grand jury’s role is to determine whether there is ‘probable cause’ (rather than to prove guilt) in order to bring the criminal charges. 

Since states are not required to use a grand jury to obtain indictments, many state grand juries function in a similar manner to federal grand juries, but tend to vary by the number of jurors and the type of majorities required.

The DOJ’s powers also include the power to compel disclosure by issuing administrative subpoenas ordering persons or entities to provide documents or information in relation to a case. Failure to respond to a subpoena is punishable as contempt by either the court or the agency issuing the subpoena – this usually includes a monetary sanction and, in very rare cases, imprisonment. The DOJ can also seek injunctions, and impose monetary penalties and asset forfeitures.

One of the pieces of legislation which the DOJ has enforced from a criminal perspective since its inception (although see below for the current ‘pause’ in enforcement) is the Foreign Corrupt Practices Act of 1977 (FCPA), a federal statute prohibiting the bribery of foreign public officials. The FCPA applies to foreign companies and individuals (as well as American companies) that issue securities in the United States. The DOJ’s enforcement of the FCPA has resulted in the issuance of some substantial fines for relevant conduct. 

Securities and Exchange Commission
Created under the Securities Exchange Act 1934 during the Great Depression, the Securities and Exchange Commission (SEC) is a federal agency protecting the American public against fraudulent and manipulative practices in the securities markets. The SEC consists of five presidentially appointed commissioners, heading each of its five divisions.

Unlike the DOJ, the SEC’s powers are limited to bringing civil enforcement actions in a US federal district court or administrative proceedings heard by an independent administrative law judge. The SEC normally determines whether to bring civil charges by a vote of the commissioners, on the basis of recommendations from staff attorneys.

The SEC’s main role is its investigative powers, and the group’s Division of Enforcement investigates violations of securities laws and regulations such as the manipulation of market prices and insider trading. The SEC can issue a formal order of investigation, compelling the production of documents and compelling witnesses to testify by subpoena. The SEC also has the power to bring actions against alleged violators, including injunctions against future fraud violations; disgorgement of ill-gotten gains; placing restrictions on an individual’s ability to work in the securities industry; and monetary penalties. In cases of insider dealing, for example, the SEC can seek penalties of up to three times the profit gained or loss avoided per violation.

While the SEC does not have criminal authority like the DOJ, it may refer matters to state and federal prosecutors, and, in fact, the SEC shares responsibility with the DOJ for enforcement of the FCPA, albeit the SEC’s remit is civil only. One example of this is the enforcement authority bestowed on both the SEC and DOJ under the Foreign Corrupt Practices Act (FCPA) in relation to corporate entities maintaining accurate books and records. While the SEC has authority to investigate and bring civil enforcement actions against violators of accounting provisions, the DOJ is responsible for criminally prosecuting ‘wilful’ violations of the accounting provisions and the SEC rules adopted.

In civil cases under the FCPA, the SEC has authority to subpoena records and testimony, conduct investigations, and initiate civil enforcement actions seeking to enjoin prohibited activities, and/or seeking disgorgement or civil monetary penalties for business entities. In criminal cases, a ‘wilful’ violation of the FCPA accounting provisions constitutes a felony under section 32(d) of the Exchange Act, punishable by a fine of up to US$25 million against entities, and a maximum fine of US$5 million and up to 20 years’ imprisonment against natural persons.

‘Pause’ to FCPA enforcement 

Recently, however, by way of executive order, President Donald Trump has directed that FCPA enforcement be paused to review ongoing investigations and to ‘restore proper bounds’ on FCPA enforcement by reviewing existing guidance and policies. Currently, no new investigations may be commenced without express exceptional authorisation by the attorney general. The rationale for this, it is said in the executive order, is that FCPA enforcement has stretched beyond its original intended bounds in such a way that it hinders American companies from being competitive, by criminalising conduct which is normal business practice in other jurisdictions. The executive order appears primarily directed at DOJ criminal enforcement activity rather than SEC enforcement, however, other executive orders made recently have imposed greater control over the SEC, suggesting that it will (and/or will have to) adopt the DOJ’s stance. 

Whilst the FCPA has been seen as the premier anti-bribery regime for some time, that lustre was as much a result of the approach to, capability for, and attitude about enforcement as about the actual legislation itself. The pause therefore does represent something of a dent in the global fight against bribery and anti-corruption. Arguably, the UK’s Bribery Act 2010 has been seen as its closest rival, and some view it as a more stringent law in itself, with the enforcement of it representing its weakness. As deferred prosecution agreements have been concluded however, attempts to shake that impression on enforcement have been made. 

Whether the UK seeks to step into the shoes of the FCPA is a harder question to call. From a legal and economic position, the SFO is more established and part of a stronger tradition than some other potential rivals to take the DOJ’s crown as the premier anti-bribery enforcement body, if the pause becomes more permanent. However, whether it takes that step will be a political question of push and pull between a de-regulatory US, and an increasingly regulated Europe.

That is not to say that the position in the US is, or will become, clear. Whilst the outcome of the pause is unknown, the SEC position remains even more uncertain. Further, and perhaps most importantly, in the US, it must be emphasised that it is FCPA enforcement that has been paused, the law remains on the statute books and the conduct it prohibits is therefore still criminal in nature. Even under the executive order, new investigations can be commenced if the attorney general grants exceptional authorisation. 

Further, the limitation provisions within the FCPA mean that some conduct under the current administration, if the pause continues, could still fall to be investigated and prosecuted under the next administration. Even whilst FCPA enforcement may be paused, that is not to say that other anti-bribery legislation, particularly at state, rather than federal level (which admittedly may have a different focus to the FCPA) ceases to apply. 

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