From 24th February, the Serious Fraud Office and the Director of Public Prosecutions will have the power to offer and, subject to the court’s approval, enter into deferred prosecution agreements (DPAs) with companies suspected of bribery, fraud, money laundering and certain other types of economic crime.
In theory, DPAs may signal a seismic shift in how UK prosecutors pursue corporate offenders for certain criminal offences. For prosecutors, the procedural framework regarding DPAs presents some significant opportunities. For business, various challenges and concerns remain. The following issues, in particular, are likely to create tough calls for any business invited to the negotiating table:
- The evidential threshold for DPAs;
- The degree of co-operation expected/demanded by the prosecutor in return for a DPA resolution. The SFO Director states that he expects 'unequivocal cooperation'; and
- The severity of financial penalties.
For more on these specific points, please see the summary below. Further, we have prepared the attached briefing which outlines the DPA process and describes the new, related, sentencing regime for corporate offenders.
Evidential threshold: Is the test for DPAs too low bearing in mind it is a criminal sanction?
A key objective of DPAs is to resolve cases of corporate criminality quicker. Prosecutors will not need to satisfy themselves that there is sufficient evidence to provide a realistic prospect of conviction. Instead, they are able to start the DPA process where: (1) they have a reasonable suspicion, based upon some admissible evidence, that the company committed an offence; and (2) there are reasonable grounds to believe that a continued investigation would provide further admissible evidence in a reasonable time.
This is a dilution of the initial approach proposed by the draft DPA code of practice, upon which we commented during the public consultation last year. Nonetheless, this evidential test does expand the circumstances in which companies will effectively be subject to the criminal law. In short, this does make life significantly easier for prosecutors.
Co-operation: Are companies ready for a co-operative, collaborative, approach to self-reporting?
For companies seeking a DPA, a prosecutor may ascribe considerable weight to a timely, genuinely proactive, self-report. A simple notification will, however, not be enough. When assessing how much weight to ascribe to the self-report, the prosecutor will consider the totality of information provided regarding the offence. For instance, withholding material necessary to the effective prosecution of individual company employees will be a serious aggravating factor in favour of prosecution, instead of a DPA.
Further, the prosecutor will expect notified wrongdoing to be verified. The prosecutor willalso expect to be involved in internal investigations from an early stage and to receive full disclosure of related reports, witness accounts and source documents. As we have noted previously, this expected degree of cooperation sits uncomfortably with preservation of theself-reporting company’s legal professional privilege.
Penalties: Is the economic impact likely to be too severe?
It is expected that a financial penalty will be a standard term of any DPA. The new sentencing methodology means that businesses may face far higher fines than previously imposed by the SFO. In the most egregious cases, the sentencing formula permits a starting point of up to20 per cent of the worldwide revenue derived from the offending conduct, which may thenbe multiplied by as much as 400 per cent. A fine of that magnitude will most likely have financial consequences for shareholders and employees as well as for the company itself.