Almost two years after they first became available, the UK saw its first deferred prosecution agreement (DPA) on 30 November 2015 when ICBC Standard Bank entered into a DPA with the Serious Fraud Office (SFO), thereby avoiding prosecution for failing to stop its former Tanzanian subsidiary, Stanbic Bank, from paying bribes to help it win business.
FAILING TO PREVENT BRIBERY
Acts of bribery are now significantly easier to prosecute in the UK than they ever have been. The new corporate offence of “failing to prevent bribery” under the Bribery Act 2010 removes the need to prove that a “directing mind” (e.g. a director) of the company was involved in the offence. Companies can be found guilty even if they did not know that bribes were being paid. This can be of particular significance to manufacturers operating both in the UK and overseas, where there is perhaps less visibility and control over the actions of individuals providing services for or on behalf of the company.
The relative ease with which a charge of failing to prevent bribery can be brought means manufacturers may wish to give serious thought to self-reporting any wrongdoing discovered in their ranks to the authorities. An early self-report can lead to a significant reduction in penalties imposed – the bank’s fine was reduced by a third to $16.8 million – and the SFO has made it clear that a DPA will not be offered in circumstances where a company has not self-reported.
THE BENEFITS OF CO-OPERATION
ICBC Standard Bank self-reported within days of discovering the issues, even before initiating an internal investigation, and provided a significant level of co-operation to the SFO in its investigation. It provided full disclosure of the results of its internal investigation; oral summaries of first hand witness accounts; and access to all of the potentially relevant electronic documents it had gathered.
Companies could be forgiven for being reticent about providing such unfettered access to the SFO to its documents, but the bank decided that this was the most appropriate course of action in this case. By doing so, it managed to avoid prosecution and the collateral consequences of that, which can include significant reputational damage and debarment from public procurement contracts. With public procurement contracts being the lifeblood of many manufacturers, this latter potential consequence of prosecution could be the deciding factor between self-reporting and not.
In contrast to ICBC, quantity surveyor Sweett Group, which announced it would plead guilty to an offence of failing to prevent bribery in relation to construction contracts in Dubai just two days after the ICBC judgment, only self-reported to the SFO after the Wall Street Journal had tipped it off that it was about to publish an article concerning the allegations. This late self-report, coupled with the SFO’s view that the company’s internal investigation had “trampled over the crime scene” and disagreements over legal professional privilege, meant that Sweett Group was largely seen as unco-operative by the SFO.
In total, ICBC was ordered to pay a $16.8 million fine, $8.4 million in disgorgement of profits, compensation plus interest of $7 million to the Government of Tanzania and costs of £330,000 to the SFO. Having avoided a protracted criminal prosecution, and with the DPA to be lifted in three years, the benefits to the bank of having come clean are clear.
Sweett Group was convicted of the offence of failing to prevent bribery and was ordered to pay a £1.1 million fine, £851,000 in confiscation and £95,000 in costs. It has also been subject to a significant amount of adverse press in relation to the matter.
The importance of co-operation in securing a DPA is clear, but questions still remain. The penalties imposed under a DPA must be broadly similar to those that would have been imposed in the event of a successful prosecution – so how much of a reduction can truly be expected? Is the failing to prevent bribery offence open to the SFO to prosecute – and if not, how likely is it to be able to prove corporate liability without significant assistance from the company itself? Is it in the best interests of the company to selfreport? All of these questions, and more, will need to be decided on a case by case basis, taking both a commercial and specialist legal view