Deferred Prosecution Agreements (“DPAs”) became available on 24 February 2014, when it was introduced by the Crown and Courts Act 2013 (“the Act”). It was not long after this, in November of the same year, that the Serious Fraud Office (“SFO”) made an application to have the first DPA approved before Lord Justice Leveson.
Inspired by the US model, DPAs represent a change in the UK’s response to financial and corporate crime. The first DPA was described as a landmark that would serve as a template for future agreements by the Director of the SFO, David Green CB QC. On 8 July 2016 the second application for a DPA was approved.
This snapshot summarises the key ideas behind the DPA and its implications.
What is a DPA?
A DPA is an agreement, reached between an organisation and the prosecutor. It entails a criminal charge against the organisation, but with those proceedings being automatically stayed. In return, the organisation agrees for certain requirements to be imposed. These may include financial penalties, payment of compensation, cooperating with the prosecution of individuals or the implementation of a compliance program.
The negotiations over the terms of the DPA are monitored by a Judge and are confidential. Once the DPA is approved by the Court, the terms of the DPA are made public.
Potential advantages of a DPA
Alleged offences of economic crime are expensive and time-consuming to investigate and prosecute.
Advantages for the prosecutor
For a prosecutor, the DPA procedure would provide a number of benefits:
- A reduction in time and costs incurred in investigating and prosecuting alleged offences; this is particularly important during times of austerity when the resources available to tackle economic crime are being squeezed. The publicity attaching to efficient, proportionate regulation is invaluable.
- The reduction of crime, by imposing conditions to deter future offending by the organisation concerned. Further, it is likely to encourage self reporting.
- The opportunity to reduce potential damage to third parties, such as shareholders, employees and victims, caused by an investigation into an organisation’s conduct.
- DPAs go further than civil recovery orders and allow for victims to be compensated and penalties to be imposed. This would allow victims of crime to receive an earlier resolution to their claims without the need to bring their own proceedings.
Advantages for the potential defendant organisation
The DPA procedure would offer a corporate organisation several advantages:
- Spared a potentially lengthy period of investigation, court process, negative publicity and collateral damage to employees and shareholders.
- Afforded an element of certainty as to its treatment and penalty.
- The consequences of criminal sanctions, such as debarment from tendering for public contracts and work in certain jurisdictions and areas of work, would be avoided.
- Provided with the opportunity to provide full reparation, reviewing its processes through on-going monitoring where appropriate.
The mechanics of a DPA
The DPA can be proposed only at the discretion of the prosecutor. The SFO and Crown Prosecution Service have published a Code of Practice for prosecutors which must be applied when considering whether or not to propose a DPA. The Code of Practice can be found on their respective websites.
DPAs can be used for fraud, bribery and other economic crime. They apply to organisations but not individuals. A full list of the offences can be found in Part 2 of Schedule 17 of the Act.
The prosecutor is obliged to consider a two stage test before deciding whether to propose a DPA, as set out below:
- Is there sufficient evidence (or reasonable suspicion based on evidence) that an offence has been committed?
- Is the public interest properly served by not bringing a prosecution and instead entering into a DPA?
There are a number of factors that the prosecutor must consider when deciding what is in the public interest to prosecute.
Factors of particular note include:
- Is there a history of similar conduct? It may not be appropriate to enter into a DPA where there has been previous criminal, civil or regulatory enforcement actions taken against the organisation.
- Does the company have a proactive compliance programme in place and how far has the company come since the offending took place in changing its practices?
- Where the wrongdoing concerns an infringement of the Bribery Act 2010, has the organisation complied with the guidance in relation to adequate procedures? (Section 9)
- Has the organisation notified the authorities of the wrongdoing within a reasonable time?
- Has the company co-operated with the prosecutor following the identification of the wrongdoing?
After deciding to proceed with a DPA, the prosecutor will then seek a declaration from the Court that the DPA is likely to be in the interests of justice and that the proposed terms are fair, reasonable and proportionate.
Practical implications for organisations
If an organisation does not have an effective compliance programme in place, it is more likely that the prosecutor will decide that a prosecution is in the public interest.
A DPA has the potential to deliver significant benefits to organisations. A vigorous compliance programme increases the options available to the organisation should an allegation of wrongdoing prove to be substantiated.
Some argue the DPA legislation does not go far enough and remain unconvinced of its ability to assure organisations that they potentially offer a better outcome than taking the chance of a full investigation and trial. There is also a specific concern for organisations in relation to documents provided to prosecutors during the DPA negotiations being available for use in subsequent prosecutions should negotiations fail.
Any additional tool to tackle financial crime is, however, to be welcomed and the two examples of applications being agreed to date are certainly encouraging. The legislation demonstrates the government is keen to increase the number of economic crimes processed in the criminal arena and a willingness to be creative in achieving that aim.