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MULTI-AGENCY INVESTIGATIONS: HOW AGENCIES APPROACH THEM AND HOW THOSE INVESTIGATED SHOULD RESPOND

November 2019 - Crime. Legal Developments by Rahman Ravelli Solicitors.

More articles by this firm.

Syedur Rahman of Rahman Ravelli details the issues involved when more than one agency investigates wrongdoing and explains how these should be assessed by thesubject of the investigation.

After a global investigation by United States, British,Swiss and European Union (EU) regulators into allegations of foreign exchangemarket manipulation, five major global banks had a total fine of €1.07 billion imposedby EU anti-trust regulators.

The central allegation was that prices in the foreignexchange market – which is worth $5.1 trillion a day – were being manipulatedby Barclays, Citigroup, JPMorgan, Mitsubishi UFJ Financial Group and Royal Bankof Scotland RBS. Citigroup was given the largest fine (€311 million) followedby RBS (€249M), JPMorgan (€229M), Barclays (€210M) and Mitsubishi (€70M). TheSwiss bank UBS Group escaped penalties, which were imposed in May this year, asit had told the authorities about the cartels.

Individual traders at the accused banks were involved informing two cartels to manipulate 11 currencies, including the US dollar, theeuro and the pound. Between 2007 and 2013 they exchanged information on theirrisk positions, shared confidential data and on occasions synchronised theirtrading strategies.

As a case, it made the headlines because of the high-profilenature of the banks and the sums involved. But it was also an indicator of howregulatory authorities can and will conduct investigations that cross bordersand involve a number of legal jurisdictions.

Another example followed a month later, when TechnipFMC agreedto resolutions with both the United States’ Department of Justice (DOJ) and theSecurities and Exchange Commission (SEC) as well as with a number of Brazilianauthorities. The resolutions, which included a three-year deferred prosecutionagreement with the DOJ, followed charges of conspiracy brought against thecompany to violate the US’ anti-bribery Foreign Corrupt Practices Act (FCPA).

According to admissions and court documents, Technipconspired with others from 2003 to 2013 to violate the FCPA by making tens ofmillions of dollars’ worth of corrupt payments to Brazilian and Iraqi officialsto obtain and retain oil-related business. It agreed to pay a total of $296M toconclude the investigations which, in announcing the payments, US Attorney RichardP Donoghue said were “the result of a continuing multinational effort to holdaccountable corporations and individuals who seek to win business throughcorrupt payments to foreign officials’’.

As financial crime becomes more sophisticated andmultinational, it increasingly requires investigation by agencies in more thanone country. A 2011 report by the United Nations Office on Drugs and Crime,estimated that the total proceeds from crime that crossed borders between 2000and 2009 was the equivalent of 1.5% of global gross domestic product. Thechallenge facing agencies, therefore, is to work with their counterparts inother countries to investigate and prosecute crime (and the resulting movementof money) that crosses a number of jurisdictions.

 

 

Issues in Multi-Agency Investigations

But such multinational efforts do not always run smoothly.Issues such as the sharing of documents between jurisdictions, cooperationagreements and mutual legal assistance can be of great value in aninvestigation that crosses borders – but they also offer the potential forproblems among those seeking to investigate and prosecute. Disputes about anythingfrom extradition and who should be leading the investigation can undermine theinvestigation itself. While regulators or law enforcement agencies from variouscountries may take an interest in the same allegations – and the samecorporates or individuals alleged to be involved in the alleged wrongdoing –they may not always find it easy to work together. Despite the benefit to themof working together and presenting a united front, this can be eroded bycompetition and disagreements.

There is little doubt that international regulators havedisagreed on a number of multi-jurisdictional investigations in recent years,covering everything from manipulation of the inter-bank offering rate, forexand SSA bond trading through to suspected wrongdoing in the aviation insurance sector,not to mention numerous multinational bribery investigations.

Each and every investigating body will have its ownpriorities and a desire to control most or all aspects of an investigation. Butthese will often fail to dovetail with the aims and approaches of others thatare involved in a multi-agency, multi-jurisdictional investigation. The mostcrucial factors in an investigation can lead to major disagreements: access todocuments, scheduling witness interviews (and who should conduct them), whowill be the lead investigator, who will prosecute and the dividing of any finesimposed can all prompt problems.

 

Inter-Agency Competition

It is true that formal cooperation agreements exist betweenauthorities from different jurisdictions, as do mutual legal assistancearrangements. But the effectiveness of these can be diminished if agencies seekto act in defiance of them to hasten their access to witnesses or other aspectsof an investigation that are in another jurisdiction.

That can happen if the agency that is first to investigate believesthat alerting a local agency in that other jurisdiction may prompt it to startits own investigation, which may (according to the first agency) hamper theoriginal investigation. Such an outlook can lead to agencies making directcontact with witnesses outside of their jurisdiction. Competition betweenagencies can, therefore, hamper a cross-border investigation.

But even if this does not happen and the agencies fromvarious jurisdictions do work together, there is still the potential forproblems. While the questioning of a witness is usually led by an agency thatis based where the witness is based, this is not always welcomed by otheragencies who would prefer to control or direct the questioning.

 

The Decision to Prosecute

The decision on which agency will prosecute individuals isalso a major issue where the wrongdoing is believed to have been committed in anumber of jurisdictions. Attempts by one agency to extradite someone to face questioningin its country can lead to disputes with investigators where that individual isbased, who will want to keep that individual within their borders. The waterscan be further muddied when one agency wants to use an individual as aprosecution witness in its investigation – after possibly offering a pleabargain or immunity in exchange for testimony – whereas another agency wants toprosecute the same individual.

Usually, the state authorities where the individual liveswill be given first chance to bring a prosecution. But disputes can arise ifthe individual is in another jurisdiction at the time one or more agencies arelooking to prosecute.

There may also be the possibility that national courtsrefuse to extradite an individual. This has happened in Europe even though the EuropeanArrest Warrant system is in place; one example being Germany and France’srefusal to extradite suspects to the UK in relation to investigations into Euribor.In that case, the Serious Fraud Office (SFO) secured European Arrest Warrantsagainst five individuals at a hearing at Westminster Magistrates’ Court inFebruary 2016. Extradition was refused by the French and German courts;although one of the five was later arrested in Italy, extradited to the UK tostand trial and acquitted by a jury in July 2019.

Such situations are a clear indicator that differentagencies in different countries will often have differing priorities and evendifferent interests. An even clearer one can be arguments about sharing thefinancial penalties imposed between the agencies involved in the investigation.Such a division can serve as an indicator of the relative success of eachagency and the importance of their role in such an investigation.

 

The Defence Approach

From a defence point of view, such inter-agency rivalriescan provide opportunities. A legal team representing an individual underinvestigation by agencies in more than one country should be taking time toassess the potential conflicts between the investigators in order to determinethe best course of action.

Reaching a settlement – or even “doing a deal’’ and becominga prosecution witness – in one country can lead to leniency in that country. Takingsuch a step could boost an individual’s chances of escaping what could havebeen the far more severe consequences of a prosecution in another state. Evengoing to trial in one country as opposed to another can be a way of minimisingthe penalties imposed.

Such an approach needs to be carefully planned and based onanalysis of the various agencies involved, the powers that they can wield andthe legal means by which the least damaging outcome can be worked towards. Thisapproach is worthwhile even if there are no apparent conflicts between agenciesfrom varying jurisdictions.

There needs to be a detailed assessment of what each agencyexpects or demands from those under investigation. If these requirements differsignificantly, careful thought should be given to precisely how they should bemet.

Factors that may vary from country to country can also be akey determinant in exactly how and when you deal with the various agencies. Forexample, the issue of legal privilege may differ in various jurisdictions. Thiscan mean the level of protection afforded legal advice and other relevantmaterials is often inconsistent, with such items being more vulnerable todisclosure to regulators and third parties in some jurisdictions than others.Such variations need to be considered in detail when weighing up precisely howand when to respond to enquiries from a number of investigating agencies.

The signs from the United States in the past year or so arethat the DOJ expects US prosecutors to work closely and in a coordinated waywith agencies within and beyond its borders. In the UK, the SFO Director LisaOsofsky has made clear her intent to make her agency work more closely withinternational counterparts in order to achieve mutually beneficial globalsettlements to cases.

We may, as a result, see more cohesion from agencies infuture multi-jurisdictional investigations. But for now the potential for alack of togetherness among agencies can offer opportunities to those beinginvestigated.