All you need to know about self reporting, Concerned about possible bribery? - Written by Barry & Richard on Tuesday, July 12, 2011 3:31 - 0 Comments
Self report in Scotland to avoid prosecution?
We reported last week that the Lord Advocate has approved a 12 month initiative in Scotland for business to self-report potential bribery offences “with a view to consideration being given by the Crown to refraining from prosecuting the business and referring the case to the Civil Recovery Unit (“CRU”) for civil settlement”.
Guidance has been issued on how reports should be submitted and how they will be approached by the Crown. Reports must be submitted to the Serious and Organised Crime Division (“SOCD”) of the Scottish prosecuting authority, the Crown Office & Procurator Fiscal Service (“COPFS”). The SOCD is a relatively new body, having been launched less than four months ago to tackle serious and organised crime in Scotland.
Perhaps in an attempt to avoid the SOCD being overburdened by the cost and manpower involved in investigating from scratch every report of a potential bribery offence, there are a number of hurdles that an organisation must overcome before it can be considered for a civil settlement.
Those minimum requirements are that the business:
- “has conducted a thorough investigation of the circumstances, which may include an assessment by forensic accountants. The business must be willing to share any resulting report with SOCD and must acknowledge that the report is being provided to SOCD on its behalf.
- agrees to disclose to SOCD the full extent of criminal conduct which has been discovered,
- describes what has been done to prevent a repetition of this conduct in the organisation, and
- is committed to meaningful dialogue with the Crown in their assessment of the case and in any investigation.”
Essentially what the SOCD is looking for, before it will consider referring a business for a civil settlement, is that the business has conducted a thorough investigation into the allegedly corrupt activity and provided it with a complete account of the findings of that investigation.
If the SOCD considers that a business is withholding some of the findings from it, is putting ‘a spin’ on the conclusions reached in the internal investigation or has failed to rectify any deficiencies in the procedures in place to prevent bribery, then it may send all of the information that it receives from the business to a law enforcement agency for the purpose of a prosecution being considered.
The Guidance itself states that “There may be some cases where SOCD will advise that it would be more appropriate to refer the matter to a regulator than to the Crown” and that while information disclosed to the SOCD “will be treated in confidence [it] may be used by the Crown (or by law enforcement on behalf of the Crown) in any subsequent criminal investigation and prosecution, or in any civil recovery investigation”.
The Lord Advocate has said that self-reporting to the SOCD is “not a soft option and is about finding the right solutions to this type of offending. Importantly where it is in the public interest there will be criminal proceedings and in other cases the business will face the sanction of civil recovery of assets. Where criminal proceedings are required the business will be entitled to advise the court that they have come forward and have taken steps to deal with the issues. In other cases where criminal proceedings are not required in the circumstances the matter can be dealt with through the civil recovery of assets.”
In determining whether or not the public interest favours referring a case to the CRU with a view to a civil settlement being agreed or referring the business or any individuals involved for prosecution, the SOCD will be guided by a number of factors, including:
- “the nature and seriousness of the offence and the extent of the harm caused;
- the extent of the wrongdoing within the business, including whether conduct was authorised by, or connived in, by senior management, or restricted to a small number of lower-ranking individuals;
- whether it is clear that the business is taking action as soon as the matter comes to the attention of senior management (as opposed to taking no action until it becomes aware that there is a risk that the conduct is going to come to light);
- whether the business (or the individuals involved in the matter reported) has any previous record for this type of conduct. This would go beyond a previous criminal conviction, and would include any regulatory enforcement action or warning;
- whether the individuals involved in the wrongdoing have left the business and, where decisions were taken at Board level, whether there is a new Board in place, and in both cases the timing and reasons for the departure of these individuals;
- whether the business has honoured its commitment to engage with the Crown meaningfully and in particular to disclose the full extent of the wrongdoing;
- whether the business had in place adequate anti-bribery systems at the time of the criminal conduct and whether it has further addressed this following the conduct; and
- whether there are particular considerations which may weigh against prosecution, such as the consequences of prosecution for the company’s employees and stakeholders.”
Careful consideration will always need to be given to whether or not to submit a report to the SOCD. We recommend that legal advice be taken to consider the legal position generally including the new guidance and the impact of any applicable money laundering legislation.
Importantly, while there is the possibility (and strong hint) of civil settlement there is no guarantee that information disclosed in the report will not be passed on to a prosecutor (potentially sitting at a desk across from the SOCD staff member) with a view to prosecuting the business or any individuals connected to the business.
Legal advice should also be taken on carrying out the internal investigation to route out whether or not a bribery offence has been committed.
As we advise in our guidance on the steps to be taken when a potential bribe is uncovered, instructing external legal advisors to carry out an investigation has significant benefits if the allegations are material and come from a credible source. First, they will ensure legal privilege over the materials generated as a result of the investigation itself. Second, and more importantly in a criminal law context, an investigation conducted by outside counsel will give the investigation credibility.
On a more practical basis, the SOCD Guidance states that a business must make clear in the submitted report that “the business has received legal advice before making the report or disclosing any information to the Crown”.