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UK's SFO issues arrest warrant for failing to attend for questioning

BIScom Subsection: 
Editorial Staff

On Friday 13th July 2018, the UK's Serious Fraud Office obtained, from a Magistrates' Court, a warrant for the arrest of Benedikt Sobotka has been issued over his failure to appear for questioning in an ongoing corruption investigation into ENRC and related companies. Failure to appear when required to do so is itself a criminal offence, independent of the allegations under investigation.

Sobotka, 37, is the CEO of Luxembourg-based Eurasian Resources Group S.à.r.l. He failed to appear for questioning in London on 26 June this year. Sobotka is wanted by the SFO for prosecution of an offence of failing to comply with a direction, contrary to Section 2(2) and (13) of the Criminal Justice Act 1987.

In a statement, the SFO said "An arrest warrant is a rare but necessary step to ensure that Sobotka is brought before the court. A Section 2 Notice is an investigative process, frequently used in our criminal investigations."

A Section 2 Notice, requiring Benedikt Sobotka to appear for interview on Tuesday 26 June was issued on Wednesday 20 June. A warrant for Mr Sobotka’s arrest was granted by Westminster Magistrates’ Court on Friday 29 June and his solicitors immediately notified.

Sobotka is required to attend quawitness, not as a suspect in the corruption investigations that his evidence would relate to.

Eurasian Resources Group S.à.r.l is the parent company of ENRC Ltd. ENRC plc was listed on the London Stock Exchange until December 2013, and is headquartered in St James Street, London. On de-listing, ENRC plc’s operations were transferred to ERG. ENRC Ltd is a UK registered company. In relation to that case, the SFO says "The investigation is focused on allegations of fraud, bribery and corruption around the acquisition of substantial mineral assets." The investigation was announced in April 2013.

Interesting questions arise: even though he is not under direct, personal, investigation into the corruption allegations, does the warrant elevate him to a suspicious person for financial crime purposes, and in particular money laundering? The answer will lie in the definition of criminal conduct and whether failing to appear is a predicate crime. Failing to comply with a Notice served by the SFO and appear for interview to answer questions without reasonable excuse is an offence under the Section 2 of the Criminal Justice Act 1987 and carries a prison sentence of up to 6 months and an unlimited fine. It is, therefore, not an absolute offence. Accordingly, Sobotka cannot be said to be guilty of an offence. Also, while the financial penalties are potentially enormous, the maximum jail sentence is six months. Under current UK law, the concept of "serious crime" which provided that only crimes with a minimum jail sentence of one year were to be regarded as predicate crime was replaced in 2002. Now "all crimes" are potentially predicate crimes - if there is an element of financial gain i.e. criminal property (that's a simplistic overview but it is sufficient for the purposes of this article).

On the available facts, there is no evidence that Sobotka has made a financial gain from his failure to appear and, therefore, it seems unlikely that he is currently subject to suspicious transaction reports by financial institutions, etc. in relation to his financial affairs. That, however, may change if evidence becomes available to support suspicion that he has made any gain, no matter how small. Then, the question arises as to jurisdiction in relation to the alleged offence of failing to appear.

In a cross-border investigation, it is necessary for the predicate offence to have an equivalent measure in the country where, it is alleged, money is laundered. If there is no equivalent offence in the jurisdiction where he and his assets are present, then even if it is alleged that there has been a gain, that gain does not result from a predicate offence and is therefore unlikely to be subject to reporting, unless there is, in those jurisdictions, a catch-all provision which is not common.

++ CAVEAT. Sobotka has not been charged with any offence other than failing to appear as ordered. In particular, there has been no allegation of money laundering. The references to money laundering in this article are for the purpose of examining the extent of predicate crime and conflict of laws, and are not intended to suggest that Sobotka has, in fact, received or will receive any financial benefit from his failure to attend.