On October 9, 2012, the Serious Fraud Office (“SFO”) issued revised guidance on corporate self-reporting of corruption. Initial press reports suggest that this guidance marks a shift in the SFO’s approach towards stricter enforcement and prosecution of companies.
The SFO’s previous detailed guidance on self-reporting has been replaced by five short statements posted on the SFO’s website. The previous guidance encouraged companies to self-report and opened the door to a civil rather than criminal resolution. Corporations discovering bribery problems in target companies during M&A transactions were encouraged to seek the SFO’s advice. The revised guidance changes the message, emphasising that a company’s decision to self-report is only one factor to be considered in a prosecution/civil disposal. The comfort previously given regarding M&A transactions has gone. The SFO now states that its “primary role” is to investigate and prosecute and that there is “no presumption in favour of civil settlements.”
Instead of providing detailed guidance, the SFO refers to settled UK prosecution codes and guidance, and the short Bribery Act prosecution guidance, which it and the Director of Public Prosecutions issued in March 2011.
Notably, the old SFO guidance stated that the SFO “want[ed] to settle self referral cases . . . civilly wherever possible,” if the corporation was committed to resolving the issue. In contrast, the revised guidance says that self-reporting is merely a relevant consideration in deciding whether to prosecute. The manner of self-reporting, including the attitude of management, is a factor that remains in the revised guidance.
The SFO states in the new “question and answer” section of its website that while “the SFO encourages corporate self-reporting and will always listen to what a corporate body has to say about its past conduct . . . [it] offers no guarantee that a prosecution will not follow any such report,” and “it is not the role of the SFO to provide corporate bodies with advice on their future conduct.”
The revised guidance also explains that the SFO may use its powers “under proceeds of crime legislation as an alternative (or in addition) to prosecution.” These laws and relevant Attorney General (“AG”) guidance cover civil asset recovery. But the AG guidance cautions that civil recovery orders should not simply be used as a replacement for criminal prosecutions when a criminal prosecution is appropriate.
The SFO acknowledges that its revisions take account of prior OECD recommendations. The OECD issued a report in March 2012, which criticized the lack of transparency in SFO civil settlements. Lord Justice Thomas also criticized the SFO’s proposed approach in the Innospec case in 2010, stating that it is rarely appropriate for corporate criminal conduct to be dealt with by means of a civil recovery order.
Furthermore, if the SFO decides not to prosecute a self-reporting corporation, it reserves the right (i) to prosecute any unreported violations of the law; and (ii) to provide information on the reported violation to other bodies (such as foreign police forces).
We await clarification on how the new guidance fits into the UK’s new proposed Deferred Prosecution Agreement (“DPA”) architecture. The UK government held a consultation on DPAs this summer, and a response to the consultation is due for publication on 31 October 2012.
Facilitation Payments & Business Expenses
The SFO has also released additional guidance regarding facilitation payments and business expenses. The SFO’s statement on facilitation payments reaffirms its earlier position that facilitation payments are illegal under the Bribery Act and that bona fide hospitality or promotional or other legitimate business expenses are an important part of doing business, but that bribes are sometimes disguised as legitimate business expenses.
The SFO’s new guidance can be found by clicking the following links:
The other guidance documents referred to by the SFO can be found by clicking the following links:
The Code for Crown Prosecutions:
The Joint Prosecution Guidance on Corporate Prosecutions:
The Joint Prosecution Guidance on the Bribery Act 2010:
The Attorney General Guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002: