All you need to know about self reporting, Bribery Act & Proceeds of Crime - Written by on Sunday, December 16, 2012 10:41 - 0 Comments

Self Reporting in Scotland

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By Tom Stocker, Partner, Pinsent Masons Edinburgh

The first corporate self-report to the Crown Office and Procurator Fiscal Service (Crown Office) resulted in a civil settlement of £5.6m.

What does the settlement tell us about how self-reporting and civil settlement works in Scotland?

This first corporate settlement in Scotland shows that the self-reporting process works and, despite much initial doubt, civil settlement is achievable. Although there is no presumption that corporate self-reports will result in a civil settlement, Crown Office is genuinely committed to giving companies which self-report the opportunity to achieve an out of court civil settlement if there are sufficient grounds to justify such a disposal.

The case also serves as a precedent for future Scottish settlements being quantified based on the profit derived from the misconduct. In contrast, if a case is dealt with on a criminal basis, companies risk an unlimited fine plus confiscation of potentially the entire tainted turnover received and the prospect of debarment from public sector contracts throughout the EU and in other countries. There is therefore a major financial and business upside to achieving a civil resolution with the criminal authorities.

Crown Office’s self-reporting process is modelled on the process that the Serious Fraud Office (SFO) in England & Wales first put in place in 2009 (and withdrawn in October 2012!). The Scottish process is designed to give a company which is prepared to investigate thoroughly suspicions of bribery connected to its business and which makes a full disclosure of its findings, the opportunity to reach a civil settlement if it has indeed benefited from unlawful conducted.

Crown Office published its “Guidance on the approach of the Crown Office and Procurator Fiscal Service to Reporting by Business of Bribery Offences” on 1 July 2011. The guidance was stated to be an initiative that would run for 12 months to 30 June 2012. The initiative was renewed and is now running to 30 June 2013. The self-reporting initiative applies only to companies.

Companies therefore have a window of opportunity to self-report to the Scottish authorities with the objective of having the case dealt with under the self-reporting regime and achieving a civil settlement.

Crown Office will accept self-reports by companies operating or headquartered in Scotland or by companies outside of Scotland if criminal conduct occurred in Scotland.

Companies should take legal advice before embarking on self-reporting as Crown Office will only accept reports from solicitors.

Factors for and against self-reporting are often finely balanced.

Despite there being an opportunity to settle, self-reporting remains a daunting and onerous undertaking. There are no guarantees that a civil settlement will be achieved and there is always the risk of a criminal investigation being launched following a self-report.

However, significant criminal liabilities arise should corruption issues not be addressed. In particular, money laundering and Companies Act offences could be committed by a company and individuals if money laundering disclosures are not made and the company’s auditors not informed. Auditors have a statutory duty to report suspicions of criminal conduct that come to their attention to the Serious Organised Crime Agency. The making of money laundering disclosures increases the risk of a criminal investigation being triggered.

Self-reporting enables companies to be frank with their auditors and promotes a corporate culture in which misconduct is not hidden. Importantly, it enables companies to draw a line under historic wrongs and to move forward with their business.

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