Many a CF11 money-laundering reporting officer has watched the police carry his bank's computers away in the knowledge that this will bring its business - or part of it - to a grinding halt. What can a firm do to minimise disruption of this kind and challenge a search warrant? This article takes the compliance officer through the vagaries of English law, with a checklist for action at the end.
The Law Commission of England and Wales recently began to consult interested parties about the laws and practices that govern search warrants, with the aim of proposing a simpler, more streamlined set of rules. Things are well-known to be confusing and complicated at the moment. Although it is still relatively rare for warrants to be executed at banks and other financial firms, many of the legal challenges to unlawfully executed warrants come from firms whose premises have been raided by the police, HM Revenue and Customs, or the Serious Fraud Office – the Kaupthing investigation is one such example. With change in the pipeline, let us consider the present situation and the things of which every compliance officer should be aware should a search warrant ever be executed at his offices.
A search warrant is a catch-all term for a document which gives an investigating agency permission to enter premises to identify and seize material, usually with the aim of furthering a criminal investigation. In such an investigation, the police have some additional powers to search premises where a person has been arrested, but we are going to ignore this and concentrate on searches that they conduct in accordance with warrants.
How do investigators obtain a search warrant?
Most search warrants are granted under s8 Police and Criminal Evidence Act 1984, commonly referred to as PACE, and the police, HMRC, the SFO and other investigating agencies use the mechanism set out there. However, there are other pieces of legislation that can permit entry for more specific purposes, such as the Proceeds of Crime Act 2002 which can be used to obtain evidence of money laundering.
In general terms, a police officer (or an otherwise authorised investigating officer) will make an application for a search warrant to magistrate or district judge. The application is in writing and is made without notice to the parties under investigation.
However, there are specific categories of material that are exempt from seizure under PACE and under most other laws. Material which is subject to legal professional privilege is completely exempt. Broadly speaking, this is material containing or evidencing advice from lawyers, or third parties (such as witnesses or experts) if it concerns litigation.
Two further categories of material – excluded material and 'special procedure' material – require specific conditions to be met before something can be seized. Excluded material includes medical and counselling records and confidential journalistic material, and 'special procedure' material is defined as confidential business records and non-confidential journalistic material.
It is important to be aware of these specific categories of material as, for example, the files of a human resources department may contain 'excluded material' documents and in many circumstances warrants executed on commercial premises will have to satisfy the criteria for obtaining confidential business records which fall into the category of 'special procedure' material.
What happens when someone exercises a search warrant?
There are certain features of a search warrant that the compliance or financial crime officer can check in order to satisfy himself that it is in order. He can refer to these later if he requires legal advice about whether or not the search warrant was valid.
When a warrant is granted it should clearly state the name of the person who applied for it, the date on which it was issued, the provision(s) under which it was issued, each set of premises to be searched (or the person to whom the premises relate if it is an ‘all-premises’ warrant) and the details of the material that the investigators are seeking. A warrant authorises entry on one occasion only, unless it specifically states that it authorises multiple entries, in which case it must also say whether the number of entries being authorised is unlimited or limited to a specified maximum. Entry and search under a warrant must be within three months of the date of its issue.
An officer who conducts a search is obliged to identify himself to the occupier and to provide him with a copy of the warrant. If the compliance officer has concerns relating to the validity of the warrant, he should bring them to the officer’s attention and write them down at the time. In some circumstances he may be able to persuade the investigating authority to delay the search while he seeks advice about the validity of the search warrant, but the investigators are not obliged to accede to his request. He must be cautious at all times; if he refuses entry he might be prosecuted for obstruction.
As mentioned above, in order to seize 'special procedure' or excluded material, investigating authorities follow use a procedure set out in PACE. In our experience, investigating authorities are often ignorant of these provisions. Even in cases where they are aware of them, they do not know how to apply them properly. There is therefore a high possibility that a judge might grant a search warrant mistakenly in respect of material that should have been subject to more stringent conditions. If a compliance or financial crime officer is faced with the prospect of an investigating authority that wants to seize files that may contain medical and/or counselling records, confidential business records or any kind of journalistic material, he should consider the warrant carefully and seek advice as soon as practicable if he lacks the requisite expertise on the premises.
In some extreme circumstances when a bank hands over material in accordance with a defective warrant, it (or its employees) may be open to prosecution under the Data Protection Act, so it is essential to take advice, or ensure that it has people on its payroll who know this area of the law.
Material subject to legal professional privilege
Material subject to legal professional privilege is completely exempt from seizure. The job of deciding whether this-or-that document qualifies is often far from clear-cut. Investigating authorities often instruct a barrister, known as Independent Counsel, to make decisions about whether documents attract legal professional privilege. Independent Counsel sometimes accompanies officers on the search, or reviews material that might be subject to legal professional privilege that officers have seized after the search, or both.
The term Independent Counsel is slightly misleading because the barrister is instructed by the investigating authority but his job is limited to making decisions about legal professional privilege. He is not going to be the barrister who presents the case in court and he does not advise the investigators about anything else.
It is important to note that lawyers consider legal professional privilege on a document-by-document basis; not all documents in a file labelled “Correspondence with Solicitors” are subject to it. It is standard practice for the investigating authorities to seize a file of this sort and then ask Independent Counsel to decide whether it is covered by legal professional privilege, so even if the compliance officer tells the investigators that a document is subject to it, they will still seize it. If it is covered, they will return it. In any case, whenever investigators are searching a building the compliance officer must make them aware of the presence of any privileged material, with the aim of ensuring that they follow the right procedure. If the compliance officer learns later that some investigators have searched the premises without being made aware of privileged material, he must make that point in writing to the most senior officer in charge of the investigation as soon as possible afterwards. If he does not, a court might decide subsequently that the bank has waived its privilege.
What if material that is subject to legal professional privilege is mixed up with, or inextricably linked to, material that is not? This is certainly noot unusual. It is quite likely to be the case on servers, hard drives and USB sticks and in mailboxes. The law allows investigators to seize the entirety of a mixed file or server or any other electronic device with the intention of handing it over to Independent Counsel at a later date. The exact nature of the review process varies from investigation to investigation but in almost all cases it is necessary for both the people concerned (if they are subjects of the investigation) and the firm (regardless of whether it is under investigation or not) to be involved and to seek legal advice, the better to ensure that material subject to legal professional privilege is identified and that privilege is preserved. This is particularly the case from the company’s perspective if the allegations relate to the conduct of an individual, but the material seized contains documents belonging to the company and potentially subject to the company’s legal professional privilege.
How to challenge a search warrant
Judicial Review is the mechanism by which one queries the worth of a search warrant. The High Court can quash a warrant and order the return of the seized material, although it is also allowed to consider issues relating to the seizure of the material without considering the validity of the warrant itself. Any person with a ‘relevant interest’ in the seized property may apply to the court for the return of the property if certain conditions are met. This would be the case, for example, if the investigators had no right to make the seizure, or if the property contains 'legal professional privilege' material, or excluded or 'special procedure' material. However, strict time-limits and heavy costs can make this path a hard one.
Many a CF11 money-laundering reporting officer has watched the police carry his firm's computers away in the knowledge that this will bring the firm's business to a grinding halt. What can a firm do to minimise disruption of this kind and ensure that its business goes on?
Common sense must prevail. It must ensure that electronic and hard copy files are in good order and are clearly and appropriately labelled. Only people who require access should have access. If an investigation centres on anyone in particular, the warrant may allow the seizure of all documents to which he had access, so the firm must think carefully about how wide-ranging such access ought to be for its staff. It must know what material exists, or ought to exist, and know where it is located. This is so it can help investigators when they want to see a specific file or document, and so that it can know what they are taking away with absolute certainty and not spend the next few weeks wondering whether this-or-that document has been lost. It should label confidential or privileged material clearly in the subject heading of emails and letters and on the watermarks of documents. Even if the investigators claim later that the material is not privileged, such precautions are a sign of the firm's businesslike state of mind and easily identify material at which the investigators ought to look twice before seizing.
Few situations at work are more intimidating than the appearence of investigators bearing a search warrant, and the prospect of challenging their right to enter premises and seize items may seem out of the question. Hopefully, these notes ought to give firms and compliance departments some confidence about their rights.
1. Does the warrant contain the required information? It should state the name of the person who applied for it, the date on which it was issued, the specific provision under which it was issued, each set of premises to be ransacked and the details of the material that the investigators are seeking.
2. Excluded or 'special procedure' material is important. If the search warrant asks for files containing medical and/or counselling records, confidential business records or any kind of journalistic material, are the investigators following the correct procedure?
3. Material subject to legal professional privilege cannot be seized. The firm ought to make any claim to legal professional privilege at the earliest opportunity and ensure that notice is also given in writing.
4. Mixed material is a problem. Is there a possibility that items to be seized in accordance with the warrant may mixed with privileged, excluded or 'special procedure' material? The firm must mention this at the earliest opportunity and give notice in writing.
5. Has the firm been provided with the requisite information about the items that are being seized? It is entitled to the Notice of Powers and Rights and a copy of the warrant. It might also be entitled to copies of the Premises Search Book(s) and the Record of Items Seized. If the investigators do not hand this over on the day, the firm can make a request in writing as soon as practicable after the search.
6. Does the firm wish to challenge the search warrant or ask for the return of any items that were seized? The mechanism for a challenge is generally by way of judicial review. In view of the strict time-limits that apply, the firm should seek advice about its situation at the earliest opportunity. There are other mechanisms by which it may be able to obtain access to copies of (or the return of) items that the investigators have seized. Occasionally this is done by agreement.
* Vivien Cochrane can be reached on +44 (0)20 7814 1257 or at firstname.lastname@example.org