All you need to know about self reporting, Bribery Act & Proceeds of Crime - Written by Barry & Richard on Tuesday, February 19, 2013 2:36 - 0 Comments
UK Self Reporting 101 & why it still makes sense in the right case.
asked the recent Inspectors Report into the Serious Fraud Office.
Self Reports the SFO toughens up
David Green CB QC the new Director has said that Self Reports with civil recovery in mind will lead to consideration of all options including prosecution, and that consent to a civil recovery order will only be granted where it can be fully justified according to the guidelines.
The SFO under the new Director remains happy to receive voluntary and genuine Self Reports with the possibility of a carrot of non prosecution (but only in so far as that is appropriate) using the Full Code Test in the Code for Crown Prosecutors, the joint prosecution Guidance on Corporate Prosecutions and, where relevant, the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010.
The stick approach
Importantly the new Director has emphasised the importance of the stick approach.
This includes beefing up the SFO’s intelligence function to ensure that there is a realistic prospect of uncovering wrongdoing if it is not Self Reported. In other words increasing the enforcement risk or put another way – upping the chances of being caught.
The tougher message from the SFO was recently backed up when the SFO removed the prior guidance around Self Reporting and in particular the promise of a Civil Settlement with this statement:
Whether or not the SFO will prosecute a corporate body in a given case will be governed by the Full Code Test in the Code for Crown Prosecutors, the joint prosecution Guidance on Corporate Prosecutions and, where relevant, the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010.
If on the evidence there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so. 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. That Guidance explains that, for a self-report to be taken into consideration as a public interest factor tending against prosecution, it must form part of a “genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice”. Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.
In appropriate cases the SFO may use its powers under proceeds of crime legislation as an alternative (or in addition) to prosecution; see the Attorney General’s guidance to prosecuting bodies on their asset recovery powers under the Proceeds of Crime Act 2002. If the SFO uses its powers under proceeds of crime legislation, it will publish its reasons, the details of the illegal conduct and the details of the disposal.
In cases where the SFO does not prosecute a self-reporting corporate body, the SFO reserves the right (i) to prosecute it for any unreported violations of the law; and (ii) lawfully to provide information on the reported violation to other bodies (such as foreign police forces).
This statement of policy has immediate effect. It supersedes any statement of policy or practice on self-reporting previously made by or on behalf of the SFO.”
A different picture in Scotland?
This statement now contrasts with Guidance issued in Scotland on how reports should be submitted and how they will be approached by the Crown in Scotland.
In Scotland the guidance states that reports should be submitted
“should be made to SOCD by a solicitor acting on behalf of the business. Minimum requirements for acceptance of a report will be that the business:
• has conducted a thorough investigation of the circumstances, whichmay include an assessment by forensic accountants. The businessmust be willing to share any resulting report with SOCD and mustacknowledge that the report is being provided to SOCD on itsbehalf.
• agrees to disclose to SOCD the full extent of criminal conduct whichhas 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 theirassessment of the case and in any investigation”
As we previously reported in Scotland, reports must be submitted to the Serious and Organised Crime Division (“SOCD”) of the Scottish prosecuting authority, the Crown Office & Procurator Fiscal Service (“COPFS”). As we reported in July last year the COPFS guidance set forth the following criteria to be considered in the decision to refer the case to the Civil Recovery Unit for an extra-judicial settlement namely:-
- “the nature and seriousness of the offence and the extent of the harm caused;
- the extent of the wrongdoing within the business, including whether the 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;
- whether there are particular considerations which may weigh against prosecution, such as the consequences of prosecution for the company’s employees and stakeholders.”
This language was recently endorsed and recited in the COPFS press release reporting the first Scottish Civil recovery order in November last year (which was NOT as has been misreported elsewhere a Bribery Act case) and which we reported on in detail in an earlier post here.
So. The position North of the border remains that a civil settlement is potentially still on the cards.
Devils in the Detail: SFO augments Self Reporting ‘guidance’
Returning, south of the border, the Inspectors Report on the SFO concluded with the following recommendation (largely missed by commentators):
“The SFO needs to design and document a transparent process for deciding to pursue civil recovery, and negotiating/agreeing any consent order.”
It is against that backdrop that the SFO has published the following additional guidance around Self Reporting. It underscores the importance of getting decent advice (on both sides of the border) if this is an approach which is being contemplated:
The SFO’s restatement of policy on corporate self reporting 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.
According to the guidance, for a self-report to be taken into account as a public interest factor tending against prosecution it must form part of a genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice, involving self-reporting and remedial actions, including the compensation of victims. The guidance also explains that, in considering whether a self-reporting corporate body has been genuinely proactive, prosecutors will consider whether it has provided sufficient information, including making witnesses available and disclosing the details of any internal investigation, about the operation of the corporate body in its entirety.
Prosecutors will also be mindful that a failure to report the wrongdoing within a reasonable time of the offending coming to light is a public interest factor in favour of a prosecution. It should be borne in mind that the SFO may have information about wrongdoing from sources other than the corporate body’s own self-report. The timing of any self-report is therefore very important. A failure to report properly and fully the true extent of the wrongdoing a further public interest factor in favour of a prosecution.
The following is an outline of the process to be adopted by corporate bodies and/or their advisers when self-reporting to the Serious Fraud Office.
- Initial contact, and all subsequent communication, must be made through the SFO’s Intelligence Unit (email@example.com). The Intelligence Unit is the only business area within the SFO authorised to handle self-reports.
- Hard copy reports setting out the nature and scope of any internal investigation must be provided to the SFO’s Intelligence Unit as part of the self-reporting process.
- All supporting evidence including, but not limited to emails, banking evidence and witness accounts, must be provided to the SFO’s Intelligence Unit as part of the self-reporting process.
- Further supporting evidence may be provided during the course of any ongoing internal investigation.
As stated within the SFO’s revised policy, self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.
Apart from the information provided above, the SFO will not advise companies or their advisers on the format required for self-reports. Nor will the SFO give any advice on the likely outcome of a self-report until the completion of that process. For further information visit our Q&A section.”
The Q&A records:
Why is there a revised approach to self-reporting?
As explained above, the revisions have been made to:
- restate the SFO’s primary role as an investigator and prosecutor of serious and/or complex fraud, including corruption;
- ensure there is consistency with the approach of other prosecuting bodies; and
- take forward certain OECD recommendations.
The revised statement of policy explains in clear terms that that any decision to prosecute unlawful activity will be governed by the Full Code Test in the Code for Crown Prosecutors and the applicable joint prosecution guidance.
The revised statement of policy is not limited to allegations involving overseas bribery and corruption.
If the requirements of the Full Code Test are not established, the SFO may consider civil recovery as an alternative to a prosecution.
Will the SFO communicate with corporate bodies about their past or future conduct?
The SFO encourages corporate self-reporting, and will always listen to what a corporate body has to say about its past conduct; but the SFO offers no guarantee that a prosecution will not follow any such report.
The SFO is primarily an investigator and prosecutor of serious and/or complex fraud, including corruption. It is not the role of the SFO to provide corporate bodies with advice on their future conduct.”
There are many who against this backdrop will take the view that Self Reporting to the SFO is now about as attractive as a cup of cold sick.
However, that misses a critical point:
A genuine Self Report will still place a corporate in a better position with the SFO than if, for example, the wrongdoing is uncovered by the SFO on its own using beefed up intelligence capability. Put another way, the prospect of a Civil Recovery Order or Deferred Prosecution Agreement (when they come in) is still, in our opinion, very much on the table – in the right circumstances and handled correctly.
For those who scoff at the chance of being caught – keep in mind that the new Director of the SFO successfully beefed up intelligence with results to match in his old job.
But don’t just take our word for it, hear from the SFO Director himself who said at the recent Justice Committee:
“What you can say, without question, is that the fact of a genuine self-report-by a genuine self-report I mean, in its purest form, telling us something that we did not know already, and the corporate acting proactively to investigate it-must be very significant as a factor in weighing up the public interest limb of the decision to prosecute; that is the code test. That is what I am about…”