Follow Us

  • Twitter Social Icon
  • LinkedIn Social Icon

Subscribe

April 10, 2017

March 27, 2017

Please reload

Recent Posts

The 4MLD Approach

March 27, 2017

1/6
Please reload

Featured Posts

Deferred Prosecution Agreements – The latest weapon in the SFO’s armoury

June 19, 2017

The Deferred Prosecution Agreement (“DPA”) is an agreement reached between prosecuting body (Serious Fraud Office) and a corporate entity. The agreement provides for the suspension of prosecution for a defined period, provided the entity complies to, and meets a specific standard or a set of conditions issued by the prosecutor.

DPAs were introduced in February 2014, by virtue of Schedule 17 of the Crime and Courts Act 2013. The same act gives the Serious Fraud Office (“SFO”), the power to issue DPAs. Since its inception, the SFO has used its DPA powers four times.

The first time was in 2015, in a bribery case against Standard Bank, the SFO used the new weapon in its armoury. Earlier this year, a DPA was reached between the SFO and Rolls Royce for a number of bribery and corruption claims against them. Rolls Royce had rented a warehouse in Dubai for 8 months to store defence materials for its Indian market. The rent for 8 months cost £3.32 million and yet no stock seemed to have passed through the warehouse. It was a cover up to disguise and conceal facilitation payments destined for middlemen; who Rolls Royce used to win contracts globally.

In March 2017, a DPA was also reached between the SFO and Tesco for a series of profit misstatements over a period. Usually, offences as the above would end up with prosecution, however the issues around corporate criminal liability in the UK and the complexity in trying to establish the “controlling mind” behind each offence, make the DPA a desirable/welcome alternative.

It must be borne in mind that, the DPA remains a discretionary tool in the armoury of the SFO as such each case is assessed on its own merits. The pace of its use is rapidly increasing but the SFO insists that prosecution are its preferred option. This means that corporate entities can expect to be prosecuted in cases of fraud and corruption, unless they meet a set standard for the DPA.

Prior to commencing DPA negotiations, the prosecutor must apply and satisfy a two stage test as outlined in the DPA Code of Practice.

  1. The evidential test - The prosecutor must be satisfied that at least there is a ‘reasonable suspicion’ that an offence has been committed and further investigation would give rise to a realistic prospect of conviction.

  2.  The prosecutor must be satisfied that the public interest will be served by not prosecuting the entity and by entering into a DPA.

Secondly, the prosecutor would consider using its DPA powers over prosecution in some of the following circumstances. Where;

  1. the corporation points out and self-reports its wrongdoing

  2. the accused corporation fully cooperates with the prosecutor;

  3. there has been no previous similar offences by the corporation in question;

  4. the corporation has in place a proactive compliance programme;

  5. Conviction of the corporate is likely to have a disproportionate effect.

 

So then what are the advantages of having the DPA as opposed to conventional criminal prosecution?

Firstly, the DPA offers a shorter and less costly proceedings. This is particularly an advantage because corporations are spared from negative publicity that could have gone on for lengthy periods of time.

Additionally, conditions imposed by the prosecutor as part of a DPA which seeks to deter future wrongdoing by the corporation concerned. The firms ongoing compliance is also checked by a monitor periodically. It gives corporations the opportunity to demonstrate good conduct. As such, this measure can only be considered an advantage to both the firm in question and for the SFO.

The last 30 years has seen a shift in the attitudes towards bribery and corruption, at both national and international levels. They are high on the agenda yet prosecution of these offences had been incredibly difficult and long-winded. To place the onus on corporations to “do the right thing” has proven to be a great place to start, when handling issues of bribery and corporation. It distorts competition, consumers suffer as a result and offenders are unjustly enriched. As such there is no “fair game” play in these situations. What we have seen so far from the four DPA entered by the SFO and various companies is, its aims include retribution through financial penalties and seeks to deter corporations from future wrong doing by encouraging good corporate conduct and culture. As such the DPA is a welcome development for the financial industry, it gives companies involved in criminality the opportunity to protect their reputation, change leadership structures and to improve a corporation’s compliance to laws, regulatory rules and standards while being monitored. The key action a company in this position must take, is to cooperate with the SFO throughout the inquiry.

 

 

 

 

 

 

 

Please reload

Follow Us