On February 24 2014 the Serious Fraud Office (SFO) was given the power to enter into deferred prosecution agreements with companies charged with certain financial offences, including both fraud and bribery. Upon agreeing to a deferred prosecution agreement, which must be approved by a judge, the prosecution is suspended for a set period in return for an investigated company's agreement to be bound by specified conditions.
On February 14 2014 the SFO and the director of public prosecutions published a joint code of practice which sets out their intended approach to the use of deferred prosecution agreements under the Crown and Courts Act 2013. The code sets out a series of factors that prosecutors may take into account when deciding whether to enter into a deferred prosecution agreement. It also includes information on:
- how deferred prosecution agreement negotiations should start;
- the use of information obtained during the deferred prosecution agreement negotiation period;
- the terms of a deferred prosecution agreement;
- financial penalties;
- breach of a deferred prosecution agreement;
- discontinuance; and
- publishing decisions.
The SFO and the director of public prosecutions have also published their formal response to the public consultation on deferred prosecution agreements, which summarises submissions received and provides a joint response to each in turn. Both the code of practice and the formal response are available on the SFO website.
The Sentencing Council has published new guidelines for the sentencing of organisations convicted of fraud, money laundering and bribery offences. The guidelines apply to all corporate offenders sentenced on or after October 1 2014.
Although these new guidelines do not apply to deferred prosecution agreements, they are important for the calculation of the likely level of a financial penalty that would form part of a deferred prosecution agreement. Such a penalty should be largely comparable to the fine that would likely be imposed following a guilty plea. Companies and other bodies are expected to provide comprehensive accounts for the previous three years in order to assist the court in establishing the appropriate level of any fine.
The court must consider first whether a compensation order should be made and second – where the crown asks or the court thinks appropriate – whether confiscation should be considered. To assess the level of any fine, the court must then determine the offence category by reference to culpability and harm indicators, after which an appropriate starting point and range is arrived at on a percentage scale of culpability.
Having arrived at an appropriate level, the court should consider other factors which might indicate that the fine should be adjusted to reflect the size and financial position of the organisation and the seriousness of the offence. In some cases, putting the offending organisation out of business may be an acceptable consequence.
For further information on this topic please contact Kathleen Harris at Arnold & Porter LLP by telephone (+44 20 7786 6100), fax (+44 20 7786 6299) or email (firstname.lastname@example.org). The Arnold & Porter website can be accessed at www.arnoldporter.com.