The SFO has announced a new process for self-reporting by companies concerned about their possible exposure to corruption proceedings.
This is an important new development reflecting a move by the SFO to reposition itself after recent challenging times. It also enables the SFO both to respond to criticism of its success rates, in particular the recommendations made by Jessica de Grazia, as US prosecutor, who undertook a comparison with New York practice in 2008, and to reflect the approaches taken by other regulatory agencies.
The process is a significant step towards a system that is more American in style. The key issues are as follows.
- The SFO is encouraging self-reporting by companies. It is putting in place a new (generally defined) process and criteria to operate it.
- Self reporting will require a company, inter alia, to commit to resolve any corruption issues, to work (seemingly closely, using external advisers, at its own cost) with the SFO in investigating the issue, and (usually) to a public resolution of the matter (albeit agreeing public statements).
- Critically, resolution would include a discussion of restitution through a civil recovery order (which could involve significant payments), appropriate action against individuals and (possibly) proportionate external monitoring.
- The incentive for companies is an expressed willingness by the SFO to consider agreed civil remedies (ie civil recovery orders rather than criminal sanctions) and, it seems, a more lenient approach to the level of those civil remedies - provided board members were not involved. The company is also, thereby, likely to avoid debarment obligations under EC legislation.
- The SFO would facilitate a single resolution with other regulators, including overseas agencies, and would expect to be notified (where appropriate) at the same time as any self-reporting to the Department of Justice in the United States.
- Of particular interest to companies will be an ability to seek guidance from the SFO when making an acquisition where there are corruption risks associated with the target. The result could be assurances of non action, provided the acquirer implements an agreed programme of compliance in the target.
The risk for companies is that a failure to self report will be seen as a sign of not being prepared to adopt a compliant culture on corruption, a conclusion that is likely to be reflected in the type and size of sanctions sought, whether criminal or civil. The risk and scale of these sanctions will, of course, be strengthened considerably if the new Bribery Bill becomes law, since it would make it much easier to make companies criminally liable.
The obligations to report receiving criminal property under the Proceeds of Crime Act 2002 and to be authorised, to avoid committing a fresh offence, remain unchanged. They provide the SFO with an important source of data to assess how companies have behaved in relation to self-reporting to the SFO under this new scheme.
The SFO's approach has been signalled in the landmark Balfour Beatty case last year and in a series of public speeches, in particular by Richard Alderman, the new Director, who has led the initiative. It is likely to lead to a culture, in relation to corruption, that is closer to the relationship with the Department of Justice under the US Foreign Corrupt Practices Act, with a developed internal investigations element. This is very much a first step, however, and the SFO is expressly open to reviewing the effectiveness of the initiative and adapting it in the light of changing experience.