News & what's on - Written by on Monday, December 10, 2012 23:25 - 0 Comments

The devil in the detail & the dangers of not self reporting

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The Serious Fraud Office has published new additional detailed and supplemental guidance on the process of Self-Reporting financial crimes on top of the new guidance published in October.

The new guidelines require corporates Self-Reporting to the SFO to provide full details of their internal investigations into any wrongdoing, as well as evidence including emails, documents, banking or financial evidence, and witness accounts.

The new guidance is welcome.

The requirements, while onerous, underscore the importance that the SFO attaches to self-reporting, and the rigour they expect businesses to display in dealing with compliance and wrongdoing.

Self-Reporting used to be portrayed in a more friendly way by the SFO. Now the curtain has been pulled back. Corporates need to provide a large amount of information from bank statements and emails to witness accounts.

It’s a tough compliance challenge to pull all of this information together to the standard the SFO expects. But, if corporates can’t deliver it they will not be seen as ‘self-reporters’ in the eyes of the SFO. As a result, they will lose ‘brownie points’ with the SFO increasing the risk of prosecution.

Devil on the detail

If Self Reporting is done it is critical that it is done right.

While the new SFO director has rightly said that there can be no guarantees of non-prosecution for corporates who Self-Report in line with the SFO process, he has confirmed that the fact a company properly Self-Reports will weigh heavily on the minds of prosecutors when they weigh the public interest test deciding whether to pursue a prosecution.

Reports say that Rolls-Royce’s discussions with the SFO were prompted by the SFO contacting Rolls Royce over concerns about irregularities in Indonesia and China.

The proof of the pudding was always going to be in the eating.

Reports say the SFO investigation into Rolls Royce was prompted by the SFO. If so it underscores the increased risk of getting caught that the new SFO Director has been warning.

Businesses should not kid themselves. There is a real risk they might be found out. If they are the SFO will be even tougher.

The new guidance follows the withdrawal of previous guidance issued under former Serious Fraud Office (SFO) director Richard Alderman, and the publication of revised guidance in October.

The SFO’s new guidance explains that, in determining whether or not to prosecute, the fact that a corporate body has reported itself will be a relevant consideration to the extent set out in the Guidance on Corporate Prosecutions.

For a self-report to be taken into account, it must form part of a genuinely proactive approach adopted by the corporate management team when the offence is brought to their notice. This proactive approach can include self-reporting and remedial actions, including the compensation of victims.

Prosecutors will also consider whether a company has provided sufficient information, including making witnesses available and disclosing the details of any internal investigation, in good time.

The self-reporting process involves jumping through a lot of hoops, but it is important that companies do the right thing and Self-Report in appropriate circumstances.

Corporates need to remember that the SFO might have information about wrongdoing in a corporate other than that corporate’s own Self-Report. The whistleblowing culture is alive and well, so corporates can’t assume that the SFO doesn’t know about something if they haven’t yet reported it. Rolls Royce appears to be a good example of what might happen.

In the right circumstances it is still better to come forward, be honest and take steps to prevent the problem happening again to reduce the risk of prosecution. Burying heads in the sand is not a long term solution and will tip the public interest in favour of prosecution.

Anne-Marie Ottaway who recently joined Pinsent Masons from the SFO where she was the contact person for Self Reports says: “Ultimately the SFO is interested in focusing its limited resources on those companies who do not take their responsibilities seriously not those who are trying to do the right thing.”

Opinion

For all the rhetoric, the reality remains that corporates can limit some of the damage if they are up front with the SFO. Getting proper advice is critical.

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