SFO lowers prosecution risk for self-reporting bribery and fraud

In that scenario, the SFO said it will invite businesses to negotiate a deferred prosecution agreement (DPA), rather than a bring a prosecution against them – other than in “exceptional circumstances”.

The SFO’s change of policy, which is designed to further incentivise the self-reporting of corporate offences, was set out in new guidance issued by the agency on Thursday.

“We consider self-reporting suspected corporate criminal conduct to be a mark of a responsible organisation,” the SFO said. “A knowing failure to promptly self-report such conduct impacts our assessment of cooperation and any mitigation. Failure to notify the suspected offending within a reasonable time of it coming to light is a specific public interest factor in favour of prosecution. What amounts to a reasonable time will depend on the circumstances.”

DPAs were introduced in England and Wales in February 2014. They allow businesses to self-report instances of economic crime in the hope of more lenient treatment, including the opportunity to avoid prosecution, if strict conditions set by a judge are met. Where a business does not self-report wrongdoing, it is still possible to secure a DPA provided the business demonstrates a sufficiently high level of cooperation with the SFO.

In its new guidance, the SFO made clear that it expects businesses to self-report suspected offences before they conduct their own internal investigations. However, it said it recognises that responsible businesses may consider it necessary to “investigate suspicions of suspected offending before a self-report in order to understand the nature and extent of any offending”.

“If there is direct evidence of corporate offending, we would expect a corporate to self-report soon after learning of that evidence,” the SFO said. “If the position is less clear-cut we recognise that some further investigation may be necessary.”

“Where a corporate has not self-reported, we will have regard to whether it was aware of the offending before our investigation began,” it added.

The SFO said that it will only open DPA negotiations with “genuinely cooperative” businesses. It warned, though, that self-reporting and being cooperative “are not one and the same”. It cited examples of what cooperative conduct looks like in practice. These include: proactive preservation of material likely to be relevant to the SFO’s investigation; flagging specific documents likely to be relevant to the SFO; sharing details of internal investigations undertaken – such as the investigation’s parameters and the facts gathered – with the SFO; and making employees available for interview.

The SFO also said that waiving claims of legal professional privilege (LPP) over documents will also be considered “a significant cooperative act” that “can help expedite matters”, but said businesses wishing to retain claims of LPP over relevant material “will not be penalised for doing so”.

Examples of uncooperative conduct were also shared in the SFO’s guidance. They include “unreasonably reporting offending to another jurisdiction for strategic reasons” and burdening the SFO with “unnecessarily large amounts of material that may hinder the effectiveness of the investigation”.

Tom Stocker of Pinsent Masons, who specialises in corporate criminal defence, the conduct of investigations, and compliance risk management, said the SFO’s new guidance is important, because it clearly articulates the public interest considerations for and against a company being offered a resolution by way of a DPA.

Stocker said: “The guidance introduces a presumption in favour of a DPA being offered when a company self-reports suspected wrongdoing to the SFO and then cooperates fully. Importantly, the guidance also acknowledges that businesses need to investigate suspected wrongdoing before self-reporting. Should a business decide to self-report, the guidance provides a clear and short timetable for a self-report being responded to and addressed, which serves to give greater certainty.”

“These changes represent a significant change of emphasis which demonstrate more pragmatism and a better awareness of the legal and commercial factors that a company and their lawyers need to consider in deciding whether and when to self-report,” he said.

Stocker said that, for clients and their lawyers, there are two other important points: “Firstly, there is an express recognition that valid claims of legal professional privilege do not amount to a lack of cooperation. Second, preservation of ‘all’ digital and hard copy material is a requirement of full cooperation.”

“While businesses will often preserve centrally-held email records, in our experience, there is a common reluctance to recover and preserve digitally-held evidence stored on mobile devices such as phones, laptops and tablets – this approach may need to change if companies are to demonstrate that they have met the cooperation requirements,” he added.

Director of the SFO, Nick Ephgrave, said: “We are determined to lead the fight against serious and complex fraud, bribery and corruption at home and side by side with international partners. Our new guidance sets out how corporates can report suspected criminality to us and what we expect from cooperating corporates. If you have knowledge of wrongdoing, the gamble of keeping this to yourself has never been riskier.”

Recently, the SFO confirmed plans to further encourage the reporting of corporate wrongdoing, by setting out its intention to progress with reforms to incentivise whistleblowing over the next year. The introduction of a corporate whistleblower rewards pilot programme in the US last year has prompted renewed calls for reform in the UK.