Bribery Act & Proceeds of Crime - Written by on Thursday, May 1, 2014 9:40 - 0 Comments

Opinion: SFO say Self Report as early as possible. We say (just like they do). Not so fast…

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harlequin-fraud-officeFlying in the face of what most would say and the practical position in the United States the SFO has underscored again that it expects companies to Self Report potential problems at a very early stage.

We think the position in real life is more nuanced.

David Green QC, the SFO Director has said previously that he is of the view that Companies should be disclosing to the SFO at the same time as filing a suspicious authorised disclosure under UK money laundering laws.  However, this loses sight of the fact that a report of a suspicion which is ‘more than fanciful’ is not the same as a Self Report.  Put another way, in our view there are cases where it will be necessary to file a disclosure under UK money laundering laws but where a simultaneous Self Report to the SFO would be inappropriate.

Speaking recently Alun Milford, General Counsel of the SFO said:

“At the very outset [of hearing about a problem], you will want to discuss with [your lawyers] likely outcomes. That then will lead directly to the decision whether or not to notify the SFO. I know that some lawyers tend to advise against doing so. Whether you choose to follow such advice is, of course, a matter for you. It might be that you are lucky, and word of your problem does not get out as so often it does, eventually. On the other hand, you might decide, on advice, to notify the SFO and to co-operate with any investigation we might undertake. You will not be surprised to hear me say that this would be a wise course of conduct.”

Mr. Milford’s statement paints a very black and white picture.

The proposition is that you hear about a problem, ask your lawyers at the beginning for the prognosis and make a decision to self report at the very start.

If only life was so simple.  It often takes time to get to grips with exactly what you have been told and to assess whether the concern raised has legs.

It is hardly a surprise that the SFO should demand early disclosure.  Yet in most cases the picture on day 1 (and often for many days after) will not be so clear.

The US authorities started from the same position as the SFO some years ago, but in practical terms, their position has changed.  We don’t think that they would now expect companies to phone them up every time someone raised a corruption concern.

For a start, it is unlikely companies will ever take such an approach.  Instead the corporate approach to such a question is likely to be taken only after careful consideration when the mists have cleared…at least a little.

But for the prosecutors and the investigators there is a real question of be careful of what you wish (or ask) for.

Triage

In the real world companies will in most cases need to do some early investigatory work before understanding their exposure (and making a determination that the concern has some foundation) and making a decision on whether to Self Report to the SFO.

It is likely that that decision  (if the answer is ‘not now’) will be kept under review.

Of course, there is a risk that as Mr. Milford highlighted  “you gamble that [if a Self Report is not made at the outset] it will not leak: that no-one in the company will act as a whistle-blower; that a disgruntled business rival won’t tell us; that the person who accepted the bribe will not be exposed; that news of the transaction will not be picked up by the network of intelligence which we plug into. If we do find out about a company’s misconduct in such a way, we will open an investigation.”

Opinion

It is a balancing act.

At the appropriate time and in appropriate circumstances it is, and has always been, our view that there are significant advantages to  a corporate in making a Self Report.  In much the same way, the SFO are (rightly) coy about their ability in the early stages of being notified of a problem by a corporate to talk about possible outcomes.

The timing of any such Self Report will always be extremely fact specific.  We would strongly advocate that if the SFO find out about alleged misconduct before a corporate has Self Reported (but after a corporate has genuinely started down the road of its own investigation to triage the problem with a view to ultimately taking necessary steps including Self Reporting) that that would be taken into account and (ultimately) viewed positively by the SFO.

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