Aziz Rahman, of Rahman Ravelli, examines the increasing popularity of DPA’s in various countries and explains how to maximise the chances of gaining one.
Deferred prosecution agreements (DPA’s) are set to become increasingly prominent, both in the UK and elsewhere around the world.
Recent months have seen the UK’s Serious Fraud Office (SFO) make it clear that it will not be giving DPA’s to everyone who wants one. It will take a certain type of case, it seems, to obtain one. The crucial thing for any companies, therefore, will be knowing how best to present their case in the hope of securing a DPA.
This may become increasingly important as other countries adopt the DPA approach. For example, June saw Japan introducing its own version of the DPA. It enables prosecutors to enter into what is called a cooperation agreement with an individual or corporate that is either a suspect or a defendant in cases involving bribery, embezzlement, fraud, tax or financial products. Notably, such an agreement will only be offered to those that implicate a third party – either in the same crime or another. And, also unlike the UK DPA, the cooperation agreement will not be available to self-report one’s own misconduct.
The Japanese agreement approach may differ from that of the UK. But it must be seen as another indicator of the need to ensure that compliance procedures are appropriate - and of the importance of knowing how to respond if such an agreement is a possibility in any country.
We have mentioned the UK and Japan but the US has had DPA’s since the 1990’s. In January 2018, France’s first DPA was reached when the Geneva-based private banking unit of HSBC agreed to pay 300 million euros to settle allegations it had helped clients evade taxes and launder money. In March 2018, Singapore passed the Criminal Justice Act which, among other things, introduced DPA’s into its legal system; while 2017 saw Australia indicate its preference for the introduction of DPA’s.
DPA’s, therefore, are on the rise. As a result, many more in business in various parts of the world may need to know how to obtain a DPA. And this is not simple. As we mentioned, the SFO has made it clear that DPA’s will not be given to each and every company seeking one. There will be little or no chance of a DPA for those who do not self-report, offer little or no genuine cooperation with an SFO investigation or show no real appetite for changing working practices. As DPA’s are likely to be more common in the future, a company that does not know how to maximise its chances of obtaining one could be making a costly mistake.
In the UK, DPA’s were introduced under the provisions of Schedule 17 of the Crime and Courts Act 2013 - which made them available to the Crown Prosecution Service (CPS) and the SFO. A DPA is an agreement reached between a prosecutor and an organisation that could be prosecuted. It is finalised under the supervision of a judge and allows a prosecution to be suspended as long as the organisation meets certain specified conditions. Such conditions could be the payment of fines or compensation or changes to the way a company functions. Whatever conditions are imposed, there will be no prosecution if they are met. But not meeting those conditions will lead to prosecution.
But, as indicated earlier, it is not that straightforward. The SFO will only offer a DPA to a company that it believes deserves one. Camilla de Silva has warned companies that any attempt to give the “impression of co-operation” will be seen through. Such an approach is a guaranteed failure when it comes to gaining a DPA.
Companies, therefore, need to know exactly how to proceed if they are to stand any chance of one. And while it is the SFO that has been most vocal in its requirements, it is likely that its counterparts in the other countries adopting the DPA model will take a similar stance.
The SFO clearly views the granting of a DPA as a reward for openness. Any cooperation with the SFO is only likely to secure a DPA if it is genuine and not a last, desperate attempt to avoid prosecution when all other approaches have failed. The sooner a company self-reports and the more open it is with SFO investigators, the greater the possibility of a DPA.
A company reporting its own wrongdoing has a greater chance of a DPA; especially if it has taken that step as early as possible. In the UK’s second DPA – the case referred to as XYZ – the judge remarked on the swiftness of the self-reporting and stated that such openness should be of benefit to the company.
Self-reporting, however, must not be seen as a simple, one-off escape route from prosecution in any country. The way it is done and the subsequent negotiations have to be overseen by those with legal expertise and experience of such situations – otherwise it could be regarded by Ms de Silva and her colleagues as that “impression of cooperation’’ that will count for nothing.
Investigation and Cooperation
If any interaction with the SFO (or foreign authorities) is not to be regarded as a mere impression of cooperation by its investigators, much will depend on how much genuine assistance a company gives to an investigation. This is the case however early it self-reports.
The amount of work a company has put into an internal investigation, how much access to its findings it gives investigators and the quality and quantity of the records of such efforts can all be factors in determining whether a DPA is granted. No DPA will be offered if the investigating agency feels that it has not been given all the information it needs or if it believes an internal investigation has tipped off potential suspects, prompted the deleting of potential evidence or failed to go high enough up the management structure.
Rolls-Royce did not report its bribery in far-flung countries - the SFO found out about it from a third party - and yet it obtained a DPA. But once the SFO did know, Rolls-Royce offered complete cooperation and reported wrongdoing that the SFO had not known about. The DPA settlement even referred to the “extraordinary cooperation’’ that Rolls-Royce offered: clear proof of the value of genuine cooperation if you want a DPA.
Co-operating, however, will never be enough to obtain a DPA. Companies must make genuine changes to their working practices; which can include removing senior staff who were involved in the wrongdoing or allowed it to be committed. All DPA’s granted so far in the UK have come after the companies under investigation removed such staff.
A DPA will simply not be offered if a company cannot show that it has made comprehensive changes. As an example, Rolls-Royce devised tougher anti-bribery measures, revised its ethics and compliance procedures and examined its due diligence, activities with third parties and risk assessment The DPA settlement it obtained noted that Rolls-Royce is “no longer the company that once it was’’: a clear indicator that the company had reformed itself and that such reform had gone a long way to gaining the DPA.
Self-reporting, internal investigation, cooperation with the investigating authority and reform are all factors which the SFO appraises. And that will be the case in other countries where a DPA is an option.
What must also be considered is negotiation. If a company does not, for example, self-report at the right time or in the right way, or fails to properly communicate its willingness to be totally open with the authorities, it will place itself at a disadvantage.
If it does not clearly emphasise how thorough its internal investigation was or misses opportunities to highlight the extent and importance of any changes it has made, it is hampering its chances of a DPA.
As we have already outlined, any attempt to secure a DPA has to be methodical. But it is also important that a company emphasises exactly what it has done, its belief in the actions it has taken and the value of a DPA – to both it and the investigation agency - as opposed to a prosecution. Such concerns and arguments must be voiced in a way that will not alienate the investigators; which is why it is a task best left to those who deal regularly with the relevant authorities.
The SFO knows what it wants from companies who seek a DPA. It also knows that many companies will want a DPA. Such companies need to know how to prove to the SFO that they meet all the requirements. It is an approach that may need in an increasing number of countries in the future.