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Guide to SFO Self Reporting

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harlequin-fraud-officeThe definitive guide to Corporate Self Reporting

We have aggregated below the SFO guidance on Self Reporting (available on its website on a number of pages) and importantly recent comments from the Director about it.  If you are considering Self Reporting as an option we strongly advise you consider the following and obtain independent legal counsel.  We would be delighted to talk to you if you have any questions.  Self Reporting is a big step and should not, in our view, be undertaken without advice.

Will my company be prosecuted if it Self Reports?

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.

Self-reporting process. How does a corporate Self Report?

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 (confidential@sfo.gsi.gov.uk). 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.

FAQ

The Serious Fraud Office has reviewed its policy on…corporate self-reporting.

Q. Why are revisions being published?

A. Following his appointment, the Director of the SFO decided to review SFO policies and take forward recommendations made by the OECD Working Group on Bribery. The revisions have been published 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 SFO’s primary role is to investigate and prosecute. The revised policies make it clear that there will be no presumption in favour of civil settlements in any circumstances.

Q. Is this a shift in the SFO’s position?

A. The new approach restates the SFO’s primary purpose.

Around the time when the Bribery Act 2010 came into force, joint guidance was issued by the Director of Public Prosecutions and the Director of the SFO, and separate guidance was published by the Ministry of Justice. Save for one change, that guidance continues to apply. The only change is that the reference in the joint prosecution guidance to the SFO’s former policy on self-reporting has been removed.

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.

Q. What about companies that have already acted on the old guidance?

A. Each case will be reviewed and assessed according to its own circumstances. If there has been reliance on a previous statement of policy or practice the SFO will consider such reliance in the context of the Full Code Test. If before the publication of the revised policy statements the SFO entered into an agreement with a corporate body based on an earlier SFO statement of policy or practice, and the corporate body has fully complied with the terms of that agreement, then the previous statement of policy or practice will continue to apply

Q. Why is there a revised approach to self-reporting?

A. 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.

Q. Will the SFO communicate with corporate bodies about their past or future conduct?

A. 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.

What the Director of the SFO says

Director of the SFO, David Green QC CB Quoted at Pinsent Masons annual regulatory conference on Self Reporting on 24 October 2013. He said:

“I recently attended a private gathering of general counsel from a number of major multi-national corporations. I spoke on the subject of corporate self-reporting of instances of suspected criminality, including bribery and corruption.

There was then a Q&A session, during which 2 attendees indicated that the advice they were receiving from their external lawyers was that such matters should NOT be reported to the SFO, because “the SFO was not as helpful as it used to be”. There followed a vote on the issue, which was firmly in favour of self-reporting. Well they would, wouldn’t they.

I became DSFO in April 2012.

It is now a year since I changed the published SFO guidance on self-reporting by corporates.

The guidance I inherited contained an implied presumption that self-reported misconduct would be dealt with by civil settlement rather than prosecution.

I took the view that no prosecutor should appear to offer such a guarantee in advance. As a prosecutor, you can never anticipate what set of facts and conduct might be next in through the door.

I took the guidance back to the historic position agreed with the Director of Public Prosecutions: that we would apply the full code test for crown prosecutors to self-reported criminality. In other words, we ask (after our own investigation): is there sufficient evidence to prosecute, and if so, is a prosecution in the public interest?

The SFO’s message is carefully expressed and nuanced. Assume the evidential sufficiency test is passed. If a company made a genuine self-report to us (that is, told us something we did not already know and did so in an open- handed, unspun way), in circumstances where they were willing to cooperate in a full investigation and to take steps to prevent recurrence, then in those circumstances it is difficult to see that the public interest would require a prosecution of the corporate.

Some parts of the blogosphere seem to have difficulty with this, writing that it means self-reporters will be prosecuted. It means no such thing.

Some corporate lawyers complain that the new approach (actually, the principled, established approach) creates “uncertainty”. I disagree: and I think that when they say “certainty” it is code for “guarantee”.

For the avoidance of doubt, the SFO continues to receive self-reports, and I anticipate the numbers will only rise as Deferred Prosecution Agreements (DPAs) bed in next year.

So why should a company self-report instances of suspected criminal misconduct to the SFO?

(i)                A self-report at the very least mitigates the chances of a corporate being prosecuted.  It opens up the possibility of civil recovery or a DPA.

(ii)             There is the moral and reputational imperative: it is the right thing to do and it demonstrates that the corporate is serious about behaving ethically.

(iii)           If the corporate chooses to bury the misconduct rather than self-report, the risk of discovery is unquantifiable. There are so many potential channels leading to exposure: whistle-blowers; disgruntled counterparties; cheated competing companies; other Criminal Justice agencies in the UK; overseas agencies in communication with SFO; and the SFO’s own developing intelligence capability, to name but a few.

(iv)           If criminality is buried and then discovered by any of the above routes, the penalty paid by the corporate in terms of shareholder outrage, counterparty and competitor distrust, reputational damage, regulatory action and possible prosecution, is surely disproportionate.

(v)             Last but not least, burying such information is likely to involve criminal offences related to money laundering under sections 327-9 of the Proceeds of Crime Act.

There are, I suggest, very powerful arguments in favour of self-reporting.

Once the decision to self-report has been made by the corporate, then the question of timing arises. Common sense suggests that an initial report of suspected criminality should be made to the SFO as soon as it is discovered. This surely protects the company against the SFO finding out by other means whilst the company investigates further. The corporate can then investigate in depth and report back to the SFO. The SFO will   carry out its own assessment with possible use of S2A powers (in the case of bribery), and, if justified, the opening of a criminal investigation and the exercise of S2 powers.”

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