Balfour Beatty, the UK construction group, has been forced to surrender £2.25 million in unlawful proceeds after a Serious Fraud Office (SFO) investigation found inaccurate accounting practices at an Egyptian joint venture.

The payment, which will be swelled by Balfour Beatty’s contribution towards the SFO’s costs, relates to accounting irregularities at a joint venture between Balfour and an Egyptian company established to build the Bibliotheca Alexandrina in Alexandra, Egypt in 1996.

Balfour Beatty reported the irregularities to the SFO and accepts that unlawful conduct took place in its subsidiary, which has since been disbanded.

Following its own investigation, the SFO pursued the £2.25 million through a Civil Recovery Order, a new tool that allows the regulator to seize property obtained by unlawful conduct without going through a criminal prosecution.

A Civil Recovery Order does not require any specific offence to have been committed by any company or individual. The SFO only needs to show that the money that it wants to recover is the proceeds of unlawful conduct.

The SFO said it is the first time it has used the tool against a UK company in what Neil Blundell, head of financial crime at law firm Eversheds, called a “complete change of direction for the regulator.”

“The SFO is following the route taken by the Financial Services Authority and other regulators in acknowledging that although a criminal prosecution may be the preferred method of policing corporate crime, the length, cost and uncertainty of criminal cases means they are often not the best option.”

“Civil Recovery Orders allow the SFO to secure a quicker victory against business and we can expect them to use this tactic much more in the future,” Mr Blundell said.

The change of strategy, which became possible because of new laws introduced in April, comes at a sensitive time for the SFO, which has been heavily criticised for its poor record in securing criminal convictions.

It is appealing after a judge dismissed its biggest case — the prosecution of several companies and individuals accused of fixing the price of drugs supplied to the NHS.

Last week the SFO suffered another blow when one defendant was acquitted and a jury failed to reach verdicts for another two in an investment fraud prosecution against Imperial Consolidated Group, an investment company.

The Balfour Beatty case also highlights the increased willingness of businesses to approach regulators to disclose details of wrongdoing.

The SFO said it “welcomed Balfour Beatty’s transparent and responsible approach in self reporting the issue”.

Richard Alderman, the SFO director, added that how “responsibly” companies behaved would in future be an important factor in deciding whether the SFO would pursue a criminal or civil investigation.

Jo Rickards, a partner at law firm Peters & Peters, called the decision to use civil, rather than criminal, powers to pursue Balfour Beatty “a significant and inventive development for the SFO.”

“It may lead to a greater willingness on the part of companies to self report in the future, particularly if by so doing they can avoid all the reputational and financial costs of a criminal prosecution," she said.

The SFO has previously said that it will not issue criminal proceedings against Balfour Beatty or any individuals in connection with the accounting matter. Neither the company nor any employees are thought to have gained financially from the unlawful conduct.

Balfour Beatty said it had introduced internal controls to prevent any similar accounting irregularities in future.

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