Cross Border
Internal
Investigations
Roger Best
06 July 2011
Outline
 Why companies commission internal
investigations
 The basics of conducting internal
investigations
 Legal constraints on the conduct of internal
investigations
 Cross-border implications
Cross Border Internal Investigations
06 July 2011
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Why companies commission internal
investigations

Firms authorised by the Financial Services Authority (“FSA)
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Principle 11
“A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA
appropriately anything
relating to the firm of which the FSA would reasonably expect notice”
SUP 15 Notification required if
– Significant reputational impact
– Significant fraud and accounting irregularities or employee misconduct
“The FSA recognises that there are good reason for firms wishing to carry out their own investigations. This
might be for, for example, disciplinary purposes, general good management, or operational and risk control.
The firm needs to know the extent of any problem, and it may want advice as to what immediate or shortterm measures it needs to take to mitigate or correct any problems identified. The FSA encourages this
proactive approach and does not wish to interfere with a firm’s legitimate procedures and controls.” [FSA
Enforcement Guide paragraph 3.17]
The Serious Fraud Office (“SFO”): Guidance of self-reporting on Overseas Corruption encourages
companies to self-report and commission an investigation:
“We will discuss the scope of any further investigation needed. Wherever possible, this investigation will be
carried out by the corporate’s professional advisers.”
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Good corporate governance
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Reputational risk management
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FSA approach to firms conducting their own
investigations in anticipation of FSA
enforcement action
 The FSA recognises that sharing the outcome of an investigation
can potentially save time and resources
 A firm's willingness to volunteer a report is something the FSA may
take into account when deciding whether to take enforcement action
 The FSA encourages prior consultation before an investigation is
commenced because it is concerned about the potential prejudice to
any investigation it may wish to conduct (particularly where there is
possible criminal conduct or market abuse)
 In addition to seeing the report the FSA may want access to the
underlying documents and interview notes supporting the report
 The FSA will accept material on the basis of a limited waiver of
privilege but expects to be able to use any report for enforcement
action
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The preparation and gathering of material
 Document preservation notices
 What is the scope of the investigation?
 Where is the relevant data stored?
 How do the IT systems work?
 Who is required to assist in the collection task?
 What confidentiality obligations need to be imposed
on third party vendors?
 Clean up – don’t forget the obligations on third
parties to destruct documents and clean their
systems
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Co-operation with the investigation
 Employees are under a contractual duty to
co-operate with an investigation to establish
relevant facts
 Limited obligations of former employees
unless imposed by termination arrangements
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Constraints on internal investigations
 Data protection restrictions on personal
information
 Is there justification for processing?
 Does notice need to be given?
 Is there a pre-existing policy on telephone tapes
and email monitoring?
 Can personal data be exported?
 Regulation of Investigatory Powers Act
restricts interception and live monitoring of
communications
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Constraints on internal investigations (2)
 Maintenance of privilege
 Employment law considerations
 Do not predetermine internal disciplinary findings
 Watch out for the need to switch from investigation
to formal disciplinary process
 Independent representation of employee
 Privilege against self-incrimination
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Reducing civil litigation risk
 Record purpose at the outset of the investigation
and consider whether it is for a privileged purpose
 Use in-house legal function and external lawyers
where there could be a claim for privilege and
advantages therefrom
 Form of report (oral or written/factual or evaluative)
 Maintenance of privilege
 Limited disclosure of the report
 Restrict interviewees access to interview notes
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Warning
 Throughout the process remain alert to
 The requirement to file suspicious transaction
reports (STRs and SARs)
 FSA’s general notification requirements relating to
firms and approved persons
 The advantages of self-reporting to the SFO
 The possibility that there will be a leak requiring a
reactive statement
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Cross-border complications
 Some countries have blocking laws that make it illegal to
investigate on their territory where there are foreign or
national implications (e.g. Switzerland and France)
 In some European countries breach of data privacy and/or
bank secrecy laws carries criminal law penalties
 Some other European countries’ employment laws provide
greater levels of protection for employees in relation to
internal investigations and subsequent disciplinary action
 Local bar rules may prohibit local lawyers conducting
factual investigations
 Differing concepts of confidentiality and legal privilege in
civil law countries reduce the advantages of using lawyers
for internal investigations
Cross Border Internal Investigations
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Cross Border
Internal
Investigations
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