Our website uses cookies. See our cookies page for information about them and how you can remove or block them. Click here to opt in to our cookies
post_thumbnail

Deferred prosecution gains ground globally

July 20th, 2016 - Posted by Sam Hemmant in Anti-Money Laundering

Following a two-year investigation the SFO has secured its second successful Deferred Prosecution Agreement (DPA).  Introduced in the UK in 2014, DPAs allow the Serious Fraud Office (SFO) to settle bribery and corruption charges out of court.  Now other legislatures are looking to non-prosecution agreements as a more effective way to combat corporate financial crime.  

The Serious Fraud Office (SFO) has secured its second successful Deferred Prosecution Agreement (DPA) for anti-bribery and corruption compliance failures.

The company – a UK SME with a US-registered parent company – which has not yet been named due to "ongoing, related legal proceedings" was charged with conspiracy to corrupt and conspiracy to bribe under the Criminal Law Act 1977, as well as failure to prevent bribery under section seven of the Bribery Act 2010. The offences relate to supply contracts with customers based outside of the UK.

Self-reporting bribery and corruption

DPAs were introduced by the UK in early 2014 and allow the SFO to settle charges of fraud, money laundering, bribery and other forms of corruption without undertaking court proceedings and crucially, without requiring the company to formally admit guilt.

The most recent DPA will require the company to pay a total of £6,553,085 in financial penalties while continuing to cooperate fully with the SFO.  The company must provide a report detailing all third party intermediary transactions and will need to prove the effectiveness of its existing anti-bribery and corruption procedures.

This DPA was approved by Lord Justice Leveson, who highlighted the benefit of self-reporting in anti-bribery and corruption proceedings.  In his judgement the Lord Justice commented that this DPA: "provides an example of the value of self-report and co-operation along with the introduction of appropriate compliance mechanisms, all of which can only improve corporate attitudes to bribery and corruption."

Individual co-operation in investigations

One mechanism that is becoming increasingly popular globally is seeking individual accountability for compliance failures rather than pursuing corporate actions. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have already confirmed this approach in the financial services sector in the United States. The Department of Justice Yates Memorandum explained that seeking accountability was one of the most effective means to combat financial crime.

The US Securities and Exchange Committee (SEC) has successfully issued its first DPA for an individual for Foreign and Corrupt Practices Act (FCPA) violations. The SEC commented: "DPAs facilitate and reward cooperation in SEC investigations by foregoing an enforcement action against an individual who agrees to cooperate fully and truthfully throughout the period of deferred prosecution."

The SEC adopted DPAs as part of its Cooperation Initiative in 2010 and first secured an application against an individual in 2013 – a former hedge fund administrator who worked with the SEC to end a fraud involving a hedge fund manager stealing investor assets.

Non-prosecution: a global trend

The US is the global leader in resolving corporate criminal investigations and a number of countries are now looking at implementing the principles of non-prosecution agreements into domestic legislation.

In March 2016 the Australian Minister for Justice issued a public consultation paper for a possible DPA scheme for serious corporate crime.  The paper proposes a DPA approach as a way of facilitating a more effective response by encouraging greater self-reporting by companies.

The French government has also been discussing the use of DPAs as part of its new anti-corruption legislation, despite the principle not conforming to a number of established norms of criminal case handling in the country.  A bill was presented at a ministerial council at the end of March 2016 without the provisions relating to DPAs due to opposition from the Council of State.  It is possible that DPA provisions may be reintroduced during the coming parliamentary debates over the proposed legislation.

At a recent anti-bribery ministerial meeting the Organisation for Economic Co-operation and Development (OECD) also stated its aim to "encourage further dialogue on possibilities for the adoption of voluntary disclosure and settlement procedures" in OECD jurisdictions.

While DPAs are common in the US they are still relatively new in the UK.  As the practice begins to gain momentum and other countries undertake formal discussions to implement the principles into their own domestic law, it seems likely that the non-prosecution agreements will become increasingly common.

Related Blogs

ps 3 ways you can apply this information right now to…

  1. 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.
  2. Keep up to speed on developing news and expert opinion with our regular posts on Anti-Bribery & Corruption and Anti Money Laundering.
  3. Subscribe to our blog to have updates delivered directly to your inbox.

What do you think?