Legislation introducing deferred prosecution agreements (DPAs) was given royal assent on April 25 2013, and is set to come into force in early 2014. The director of public prosecutions and the Serious Fraud Office (SFO) will have the power to enter into DPAs for a range of offences, including:
- conspiracy to defraud;
- cheating the public revenue; and
statutory offences covering:
- value added tax;
- money laundering; and
DPAs apply solely to corporates, not to individual defendants. The UK DPA differs from the US model in that it requires a greater degree of judicial oversight. Guidance will be published setting out when a DPA should apply and how material acquired by prosecutors during the course of negotiations will be used. The impact of DPAs in the United States has been subject to some criticism and it will be interesting to see whether they will be effective in the UK system. Corporates will need to consider the implications of a DPA carefully. A self-reporting company may find itself in a vulnerable position in the event of a DPA being rejected by the court, leaving it (and/or senior company officers) liable to prosecution and criminal penalties.
The director of the SFO, David Green CB QC, has issued a statement on how his agency will use civil recovery powers under Part 5 of the Proceeds of Crime Act 2002. He asserted the principle of primacy of prosecutions – set out in the attorney general's guidance – which he had pledged that the SFO would follow, and also confirmed that the SFO would provide greater transparency in its decision making.(1) In the inaugural Fraud Lawyers' Association speech on March 26 2013, Green emphasised that this alternative should never be used as a substitute for a prosecution, stating that "we investigate and prosecute: civil settlement is still alive and well, in the right circumstances but we are not there to offer deals and a special easy path for white collar criminals". The timing of this statement is interesting, in view of the imminent arrival of the DPA. It is anticipated that the awaited DPA guidance will contain a similar warning to prosecutors, to ensure that DPAs are not seen as a soft option.
The Financial Conduct Agency (FCA) has been busy since its formation on April 1 2013. The FCA supersedes the Financial Services Authority and, as the name suggests, will focus more on conduct. The regulation of the banking industry will reside with the newly formed Prudential Regulation Authority. Recent FCA enforcement initiatives include the following actions: ?
- Eight men were charged in relation to land banking.?
- EFG Private Bank Ltd, the UK subsidiary of Swiss banking group EFG International, was fined £4.2 million for failing to take "reasonable care to establish and maintain effective anti-money laundering controls" for wealthy customers. These failings are said to be "serious and lasted for more than three years". The FCA found that the risks highlighted in a sample of EFG's files related to allegations of criminal activity, or that the customer had been charged with criminal offences including corruption and money laundering. EFG was found to have failed to monitor its higher-risk accounts appropriately. EFG follows the likes of Coutts (fined £8.75 million) and Swiss-owned Habib Bank AG Zurich (fined more than £500,000 in 2012) in having been fined by the FCA for similar breaches of anti-money laundering controls. Tracey McDermott, head of enforcement and financial crime, reiterated that while EFG's policies "looked good on paper, in practice it manifestly failed to ensure that it was addressing its anti-money laundering risks".
- On April 30 2013 the FCA arrested two individuals for alleged insider dealing and market abuse. While the names have not yet been confirmed, it has been widely speculated that one of the suspects is a professional working for a large fund or asset manager. These arrests continue a crackdown on insider trading and market abuse offences begun by the Financial Services Authority and fits into the FCA's broader pattern of scrutiny of hedge fund asset managers.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.