The Serious Fraud Office (SFO) has announced a new process for self-reporting by companies concerned about their possible exposure to corruption proceedings, increasing the importance of investigating corruption by corporates and placing greater onus on business to disclose their own dishonest behaviour, says international law firm Freshfields Bruckhaus Deringer.
The process is a significant step towards a similar system operating for years in the US. The SFO is encouraging companies to self-report corruption by working, at their own cost, with the SFO when investigating an issue, and to then commit to resolve any corruption issues and typically bring the matter to a public resolution (with agreed public statements).
Paul Lomas, a litigation partner at Freshfields, says the new regime signals a step change in the SFO’s approach to corporate corruption by encouraging businesses to talk by a ‘carrot and stick’ approach.
He says, ‘Essentially, the new system offers cooperating companies, those who actively seek to expose and investigate corruption in their business practices, agreed, and presumably lower, civil remedies in preference to criminal sanctions - provided board members were not involved.’
In these cases, resolution would include a discussion of restitution through a civil recovery order (which could still involve significant payments), appropriate action against individuals and proportionate external monitoring in appropriate cases.
‘However, if a business is not engaging with the SFO, by failing to self report and adopt a compliant culture on corruption, the SFO is threatening to hit it hard with severe civil sanctions and more use of existing criminal powers,’ says Lomas.
He adds, ‘The risk and scale of these sanctions will, of course, be strengthened considerably if the new Bribery Bill becomes law, since it would make it much easier to make companies criminally liable for corruption.’
The SFO would be looking to help orchestrate a single resolution with multiple regulators (as has occurred in a number of other areas over the past few years). The SFO would also expect self-reporting to it if a company self-reported to the Department of Justice in the USA and the SFO also had jurisdiction.
Of particular interest to companies will be a new ability to seek guidance from the SFO when making an acquisition where there are corruption risks associated with the target. The result could be assurances of a period of amnesty, provided the acquirer implements an agreed program of compliance in the target.
‘Companies should expect this to signal a significant change in the approach taken by the SFO to corruption issues. This will be seen both in the organisation being more open to approaches by companies and more heavily involved in their internal investigations, but also in being more aggressive in the prosecution of corruption, particularly where it discovers cases which have not been the subject of self reporting,’ he says.
Lomas also says that the new regime enables the SFO to respond to criticism of its success rates, in particular the recommendations made by Jessica de Grazia, as US prosecutor, who undertook a comparison with New York practice in 2008.
He concludes, ’This is very much a first step and the SFO seems expressly open to reviewing the effectiveness of the initiative and adapting it in the light of changing experience.’