Landmark ICBC Standard Bank bribery case sets precedent for future Deferred Prosecution Agreements

October 02, 2019 by Mark Dunn

On Monday 30th November the Serious Fraud Office (SFO) announced the first successful application of a Deferred Prosecution Agreement (DPA), which was reviewed and approved by Lord Justice Leveson at Southwark Crown Court, sitting at the Royal Courts of Justice.

Why was the DPA issued?

The DPA was issued in relation to a case brought against ICBC Standard Bank for failure to stop bribery during a Tanzanian bond issuance project.  The landmark case represents a turning point in the way financial services companies will be prosecuted for fraud, as well as failures in anti-bribery and corruption compliance, and in the words of David Green CB QC, Director of the SFO, "will serve as a template for future agreements".

A DPA can be offered by the SFO to a company charged with committing an offence if the company is willing to comply with the terms of the DPA and co-operate fully on an ongoing basis.  If the company accepts the offer, the offence is suspended for an agreed period of time and when the prosecutor is satisfied with the ongoing co-operation, may be withdrawn.  This allows the company to reach a settlement with prosecutors over allegations of criminal behaviour without having to appear in court.

The offence and penalties

The offence in question was carried out in March 2013, when the former sister company of the bank, Stanbic Bank Tanzania, paid a bribe of $6 million to Enterprise Growth Market Advisors (EGMA), a private Tanzanian firm, to encourage Tanzanian government officials to select Stanbic and Standard Bank to raise $600m in a private placement.  The banks won the business and subsequently split $8.4 million in fees.

As a result of the successful DPA, ICBC Standard Bank will pay $25.2 million in damages, and a further $7 million in compensation to the Tanzanian government.  ICBC Standard Bank has also agreed to pay investigation and resolution costs of £330,000, as well as to ongoing co-operation with the SFO.  An independent review of the bank's existing anti-bribery and corruption controls, policies and procedures will also be taking place as part of the agreement.

The SFO requires companies to be proactive when seeking a DPA to avoid court action.  Companies must contact the SFO as soon as they become aware of illegal activity within their organisation.  ICB Standard Bank uncovered evidence of wrongdoing in April 2013 and alerted the SFO immediately.  The DPA allows ICBC Standard Bank to avoid a costly legal process through the courts, as a judge is only required for the final stages of the negotiations.

Global cooperation

The SFO worked closely with the US Department of Justice (DoJ) and the US Securities and Exchange Commission (SEC) throughout the process, as part of a co-ordinated global settlement.  The SEC also charged the ICBC Standard bank for its failure to disclose the payments and issued a $4.2 million fine, as well as a requirement that the bank admit to the facts of the case.

Gerald W. Hodgkins, Associate Director of the SEC's Division of Enforcement, said that "This action…demonstrates that when suspicious payments made anywhere in the world result in tainted securities offerings in the United States, the SEC is fully committed to taking action against the responsible parties."

A framework for the future

As well as the effectiveness of co-operation between global agencies, involvement of the SEC and issuance of penalties and admission requirements demonstrates the 'domino effect' charges from enforcement agencies have in relation to globally operational financial services organisations.  While this is the first successful application of a DPA since its inception into the UK Bribery Act in 2014, the SFO has stated its expectation of securing a further DPA before the end of 2015.  The recipient is currently unknown, however the SFO is currently investigating number of publicly listed companies, including Tesco, Barclays and Rolls-Royce.

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