One year since UK’s first Deferred Prosecution Agreement
30 Sep 2019 9:16 am by Mark Dunn
In the UK's first DPA, in November 2015, Standard Bank paid $33 million. In the second DPA, agreed in July 2016, an anonymous company paid more than £6.5 million. These cases highlight the UK's distinctive approach to DPAs which seems to have provided a more attractive model for countries to consider.
DPAs aim to reward compliance
DPAs aim to encourage companies to self-report instances of perceived financial crime, cooperate fully with investigations, and improve their compliance processes. In a British DPA, the regulator will begin criminal proceedings against a company but suspend them for a fixed term. If the company complies with the terms of the agreement over this period, and a judge is satisfied that justice has been served, the criminal proceedings will be withdrawn and a conviction will be avoided.
In the UK's first DPA, in November 2015, Standard Bank paid around $33 million for allegedly failing to prevent bribery linked to its subsidiary in Tanzania. The DPA was granted as once the suspected bribery was reported to the bank's head office in South Africa, it was quickly brought to the attention of the Serious Fraud Office (SFO). The bank cooperated with the SFO's investigation and commissioned its own independent review of its anti-bribery controls and policies.
In the second DPA, agreed in July 2016, an anonymous company paid more than £6.5 million after its subsidiary allegedly paid bribes to win business overseas. This penalty was considered a significant reduction on the typical level of fine determined for bribery offences. The bribery allegations came to light after the US-registered parent company sought to implement its global compliance procedures within its UK subsidiary. The company quickly reported the evidence to the SFO, assisted the investigation and reviewed its compliance programme.
The UK's distinctive approach to DPAs
In the US, DPAs are frequently used to settle allegations of financial crime. There have been more than 290 agreements with settlements totalling more than $42.5 billion. Supervisory authorities (the Department of Justice and the Securities and Exchange Commission) are given sufficient scope to set the terms of an agreement. However, in the UK courts, each decision needs to be agreed by independent judges, who must decide if it is in the public interest and meets the requirements of justice. As Alun Milford, the General Counsel at the SFO, puts it: "Judicial approval of a deferred prosecution agreement is hard-won".
DPAs seem to be spreading to other countries. On November 8, France adopted new anti-corruption legislation which allows companies to enter into negotiated settlements. As in the UK, a judge must review the settlement in a public hearing. The law aims to improve France's record on prosecuting bribery cases. The OECD Working Group on Bribery said in 2014 that although 24 new corruption cases were opened since 2012, no French company had been convicted of a foreign bribery offence even though some French companies had been convicted in the US under the Foreign and Corrupt Practices Act.
Earlier in 2016, the Australian government launched a public consultation paper on whether to introduce DPAs, and 14 of 16 responses from stakeholders came back in favour. The consultation paper said DPAs may improve the ability of agencies to detect and pursue corporate crime, improve compliance and corporate culture, avoid lengthy and costly investigations and prosecutions, minimise the impact of criminal convictions on third parties, and provide greater certainty for organisations seeking to resolve misconduct.The UK's version of DPAs seems to have provided a more attractive model for countries to consider. A report by Clifford Chance says the UK's use of DPAs may help alleviate an "intrinsic
hesitation" towards DPAs in Australia, and predicts that Australia's DPAs would resemble the UK's.
Should DPAs continue to be adopted more widely in global markets, it will provide further incentives for companies operating internationally to improve their compliance procedures.
- Around the world in 8 sanctions regimes
- New international certification emphasises need for risk-based due diligence
- FATF reports on countries' beneficial ownership records
How you can apply this information right now
To protect your business and reputation you need to better understand your customers, employees and vendors.Lexis Diligence brings together all the intelligence you need in one place to conduct consistent due diligence and comply with anti-money laundering and anti-bribery regulatory requirements.