Bribery Act & Proceeds of Crime - Written by on Sunday, August 17, 2014 23:46 - 0 Comments

OPINION: SFO’s Ben Morgan comments on Self Reporting post Innospec 4. We say: not *quite* so fast.

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Lupo Cattivo e Cappuccetto Rosso: l'ombra mostra il pericolo

After sentencing of the Innospec 4 Ben Morgan, joint head of corruption at the SFO, wrote a lengthy blog post in Legal Week in support of Self Reporting and cooperation. It’s worth a read and we agree with much of what he says but…  Ben Morgan’s blog included:

“There is an overwhelming imperative on executives who suspect corruption in their organisation to speak up. There has always been a moral driver for that, but now there is a tangible, practical one too. If you know of something and you are not implicated yourself, then covering it up or passively going along with it can create its own legal risk. And if it is too late for that and you are already implicated, it seems your options are quite clear: fight and risk prison, or come clean and cooperate and, hopefully, don’t.”

“For now there is one final significant point to all of this. I have spoken publicly about the decision a company itself has to make when it suspects it has a corruption issue, which is to choose its fork in the road. Does it want to keep the matter from the SFO, and run all the risks that entails, or does it choose to cooperate with the SFO in the hope of, effectively, a more lenient outcome if it turns out there has been criminal conduct?

I have given my reasons before about why I say the latter position is the obvious legal, commercial and moral choice, and since deferred prosecution agreements became available, numerous companies have come to talk to us.”

We agree that there are good reasons to Self Report wrongdoing in some cases not least the thinly veiled carrot offered by the SFO that a Deferred Prosecution will likely follow provided it is done properly.

The SFO is driven by a desire to see more Self Reports for obvious reasons.  However, its not all quite as simple as the SFO, or should we say *Granny*, would have you believe.

To help Little Red Riding Hood PLC navigate its way through the forest we like to clarify a couple of points:

Suspicion alone does not of itself equate to a Self Report

If a company *suspects* criminal behaviour then it is highly likely that failure to make a disclosure of that activity will itself be a criminal offence under UK money laundering laws.

The threshold for suspicion is very low: ‘more than fanciful’.

Responsible corporates and Boards have little choice if the law is triggered – suspicious conduct should be disclosed to the National Crime Agency.  Otherwise a criminal offence will, broadly speaking, have been committed for failure to report.

The SFO would like corporates to go in to talk to them at the same time that a suspicious filing is made with the NCA.

This seems to us too early and unnecessary.

The SFO’s threshold for a Self Report is an admission of wrongdoing on the part of the company.  *Suspicion* is not enough.

Annually there are around 10,000 suspicious activity reports which are made to the NCA dealing with corruption.  The NCA is supposed to filter these and pass them on to relevant law enforcement.

Historically the SFO have had representatives assigned to the NCA or its predecessor.   When it comes to filtering these reports – we understand that of the c. 10k corruption reports submitted annually to the NCA just over 50 turn into so-called intelligence packs circulated to other agencies.  This seems low and we have previously highlighted that the NCA needs to be better resourced.

Given the low threshold for filing these sorts of reports, we consider that only a fraction would likely merit passing on to the SFO.  It is those (not every report of suspicion) that should be the suspicious activity reports or authorised disclosures which are in the category which should be considered as potential Self Report material to the SFO.

Self reporting *is* more complicated & requires more understanding of the facts

Whether a company ultimately Self Reports to the SFO on top of complying with its *obligation* to disclose under UK money laundering laws, will depend on variety of factors.

Companies will need lawyers who know what they are doing to guide them through the forest.

However, having taken all those factors into account, at the end of the day, the number of Self Reports sent into the SFO should in an ideal world closely mirror the number of money laundering reports sent on to the SFO after having been filtered by the NCA.

If companies go in too soon two problems will ensue:

First, the SFO would be inundated.

Second, the proverbial mountain would be created out of a molehill in many cases for the corporate.

Few corporates will be as trusting as Little Red Riding Hood and many will likely be inherently suspicious that just like Little Red Riding Hood they risk being gobbled up by the SFO if they go in.

The SFO for its part is concerned that companies are all too keen to sweep problems under the rug.

Neither preconception is quite true.

The solution to the SFO’s desire to see more companies Self Report is simple.

The SFO needs to build a demonstrable track record of Prosecutions, DPA’s and cases where it elects to take no action.

Corporates on the other hand should take suspicions of wrongdoing doing seriously.  Triage them to work out whether they have legs or not and if they do take appropriate steps up to and including Self Reporting in the right circumstances.

Simples.

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