Introduction

The director of the Serious Fraud Office (SFO), David Green, had spoken about deferred prosecution agreements on a number of occasions. In an August 6 2015 interview with The Guardian,1 he said that the SFO "expected to have two completed" by the end of 2015.

On November 30 2015 the president of the Queen's Bench Division of the High Court, Sir Brian Leveson, definitively approved2 the first deferred prosecution agreement in the Southwark Crown Court sitting at the Royal Courts of Justice. The agreement was between the SFO and Standard Bank Plc (now ICBC Standard Bank Plc), which was the subject of an indictment alleging failure to prevent bribery contrary to Section 7 of the Bribery Act 2010. This indictment – pursuant to deferred prosecution agreement proceedings – was immediately suspended for three years. Subject to Standard Bank's compliance with the deferred prosecution agreement, the SFO will subsequently discontinue the proceedings after three years. Leveson had first considered the deferred prosecution agreement at a private preliminary hearing on November 4 2015,3 where he declared that the then-proposed agreement was "likely" to be in the interests of justice and that its proposed terms were fair, reasonable and proportionate.

Facts

Standard Bank Group Ltd was a publicly owned company registered in South Africa, of which Standard Bank (a UK regulated bank) was (at the relevant time) a subsidiary. The group was also the ultimate parent of Stanbic Bank Tanzania Ltd, a Tanzanian company which was not licensed to deal with non-local foreign investors in the debt capital markets.

In 2012 the government of Tanzania needed to raise public funds. Standard Bank and Stanbic put forward a proposal by which they would be mandated to raise those funds for the government by way of a sovereign note private placement. Negotiations began in February 2012 when Standard Bank and Stanbic quoted a combined fee of 1.4% of gross proceeds raised. Stanbic subsequently increased the proposed fee to be paid by the government to 2.4%. It transpired that 1% of that fee would be paid to a 'local partner', Tanzanian company Enterprise Growth Market Advisors Limited (EGMA). EGMA's chairman and one of its three shareholders and directors, Harry Kitilya, was at all relevant times the commissioner of the Tanzania Revenue Authority and, as such, a serving member of the government of Tanzania. EGMA's managing director, Fratern Mboya, had been chief executive officer of the Tanzanian Capital Markets and Securities Authority between 1995 and 2011. There was no evidence that EGMA thereafter provided any services in relation to this transaction.

In September 2012 EGMA opened a bank account with Stanbic which obliged Stanbic to undertake regulatory 'know your customer' (KYC) checks. These KYC checks did not appear to have been conducted with the same level of detail as would have been the case had Standard Bank conducted its own KYC checks or due diligence on EGMA.

After the addition of EGMA, the proposal proceeded quickly. In November 2012 the government of Tanzania formally granted Stanbic and Standard Bank the mandate to raise the funds. By completion of the financing in March 2013, the amount to be raised stood at $600 million. In March 2013 Stanbic paid EGMA's 1% fee of $6 million into an account; shortly thereafter, the vast majority was withdrawn in large cash amounts by Mboya.

Despite the fact that Standard Bank had acted jointly with Stanbic on the transaction, the team at Standard Bank did not believe that it was required to conduct KYC checks and due diligence. Standard Bank relied entirely on Stanbic to conduct KYC checks and raise any concerns regarding EGMA.

Staff at Stanbic raised their concerns about the withdrawals from March 26 2013 onwards and on April 2 2013 Standard Bank Group began an internal investigation. On April 18 2013 – before the internal investigation had been carried out – the matter was reported to the Serious and Organised Crime Agency and on April 24 2013 it was reported to the SFO.

SFO decision

After the internal investigation, the SFO reviewed the material obtained and conducted its own interviews. It held that Standard Bank had failed to prevent persons associated with it from committing bribery and concluded that Standard Bank did not have a realistic prospect of raising the 'adequate procedures' defence to a Section 7 offence. However, in the circumstances, the SFO director considered that the public interest would likely be met by a deferred prosecution agreement and negotiations were commenced accordingly.

In declaring at the preparatory hearing that the then-proposed deferred prosecution agreement was "likely" to be in the interests of justice, Leveson first considered the seriousness of the conduct (the criminality which Standard Bank potentially faced was failure to prevent the intended bribery). The second feature to which Leveson attached considerable weight was the fact that Standard Bank had immediately reported itself to the authorities (without self-reporting, the conduct may not have come to the SFO's attention) and adopted a proactive approach to the matter, including fully cooperating with the SFO from the earliest possible date. The third consideration was that Standard Bank had no previous convictions for bribery or corruption; nor had it been the subject of any other criminal investigations by the SFO. Of further relevance was that Standard Bank was effectively now a different entity from that which committed the offence, as it was now differently owned (a majority shareholding having been acquired by ICBC).

Terms of agreement

Leveson considered that three years was sufficiently long for Standard Bank to implement the terms of the proposed deferred prosecution agreement. The requirements of the agreement finally approved on November 30 2015 include:

  • payment of compensation of $6 million (representing the additional fee of 1% paid to EGMA that would otherwise have been paid to the government of Tanzania), plus interest of $1,046,196.58;
  • disgorgement of profit on the transaction of $8.4 million (the 1.4% fee that Standard Bank and Stanbic received);
  • payment of a financial penalty of $16.8 million;
  • past and future cooperation with the relevant authorities (as described in the agreement) in all matters relating to the conduct arising from the circumstances of the draft indictment;
  • at Standard Bank's own expense, commission of and submission to an independent review of its existing internal anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act and other applicable anti-corruption laws (as described in the agreement); and
  • payment of the costs incurred by the SFO, amounting to £330,000.

Future use of deferred prosecution agreements

Commenting on the deferred prosecution agreement, the SFO director said that "[t]his landmark [agreement] will serve as a template for future agreements", and that the judgment provides helpful guidance to those advising corporates.

The SFO subsequently stated that it is looking at other comparable cases and that, when deciding whether to enter into deferred prosecution agreement negotiations, it will give great weight to whether a company self-reports and proactively cooperates. Further, it noted that deferred prosecution agreements will be appropriate only in specific situations. It remains to be seen whether the use of deferred prosecution agreements in lieu of prosecution will now become commonplace.