Tackling Illicit Finance: SFO uses Listed Asset Order for first time
Faerman had been implicated in Brazil’s ‘Operação Lava Jato’ (Operation Car Wash) which is a huge corruption investigation into allegations that executives at Brazilian state-owned oil company Petrobras had accepted bribes from construction firms in return for awarding them contracts at inflated prices. Whilst under investigation by Brazilian prosecutors, Faerman admitted paying bribes to win contracts for the Dutch company SBM Offshore NV (SBM), for whom he acted as an agent, and paid a financial settlement of US$54m. He also remains subject to a co-operation agreement.
Prior to Faerman’s admission, the Brazilian authorities sought the assistance of the SFO in the identification and recovery of Faerman's assets in the UK. Although this request was withdrawn following the settlement, it is illustrative of the open lines of communication between law enforcement agencies globally. And in June 2015 the SFO opened its own civil recovery investigation, under Part 5 of POCA 2002 (POCA), into the UK assets it suspected were purchased with the proceeds of Faerman’s criminal conduct. In January 2019, the SFO secured a Property Freezing Order (PFO) on Faerman’s London flat, to prevent it being sold while the investigation proceeded, as well as a Disclosure Order (DO) to enable the SFO to trace the passage of the alleged proceeds of crime, from the commissions paid to Faerman by SBM to facilitate bribes, to his purchase of the flat.
Faerman applied to the High Court in June 2020 to discharge the DO. His application was made on the basis that - by reason of the Supreme Court’s judgment in Perry v Serious Organised Crime Agency  UKSC 35 - the court had no jurisdiction to make the DO as drafted (with a penal notice for non-compliance with an information order issued pursuant to the DO). It was submitted that the order was defective because it named only Faerman as a respondent, yet he resides abroad and s.357 of the Proceeds of Crime Act 2002 (POCA) confers no authority to issue information notices under a DO on people outside the jurisdiction. As the only conceivable purpose of the DO could have been to obtain information from Mr Faerman, where such a purpose was frustrated by statute the DO could not be valid. It was further submitted that the SFO’s failure to bring the Perry judgment to the attention of the court constituted material non-disclosure.
Faerman’s application to discharge this order was dismissed by Mrs. Justice Cutts CDE, who judged there was a clear and compelling public interest in maintaining the order. She reminded the SFO of the effect of s.357 POCA, but found that in this case there was no evidential basis to Faerman’s assertion that he would have been the only recipient of an information notice under the DO. The SFO persuaded her that it had in mind a number of UK based recipients for the information notices. The judge also found that there had been material non-disclosure to Supperstone J at the time the application was made, but that it did not warrant discharging the DO.
Having successfully contested Faerman’s application, the SFO intended to bring a civil recovery claim against Faerman in respect of his property. However before the claim was concluded, the SFO and Faerman instead agreed a settlement, whereby the PFO and DO will remain in place until Faerman pays the settlement amount of £1,198,424.78 and the SFO’s £57,000 in costs. With another nod to cross-border collaboration, the SFO’s press release on this case acknowledged the assistance of the Swiss and Dutch authorities with their investigation.
The SFO’s civil settlement with Faerman, like the NCA’s recent settlement with Mansoor Hussain, demonstrates the willingness of prosecuting authorities to use the civil recovery tools at their disposal to effect settlements.
Ed Smyth is a Partner in the Criminal Litigation team and represents individuals and corporates involved across the full spectrum of criminal and quasi-criminal matters. He has considerable experience of confiscation and asset forfeiture proceedings and of challenging the exercise of search and seizure powers. He has acted in cases involving the SFO, the NCA, HMRC, the Information Commissioner, the Electoral Commission and various professional disciplinary bodies.
Tom Surr is the Head Paralegal in the Criminal Litigation team. He is a former police officer, having served in the Met Police for just over two years as the Dedicated Ward Officer for the ward of Kilburn in North-West London. He left the police to pursue a career in law, working briefly in the Crown Prosecution Service’s Extradition Unit as a paralegal before joining Kingsley Napley.
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