By Dan Smith
On November 26, 2015, the UK Serious Fraud Office secured its first Deferred Prosecution Agreement against UK-based ICBC Standard Bank Plc for failure to prevent one of its sister companies from bribing Government of Tanzania officials, an offence under Section 7 of the Bribery Act 2010 (the “Failure Offence”).
Standard Bank agreed to pay approximately US$33 million in compensation, disgorgement of profits, penalties and costs. In addition, Standard Bank settled charges with the US Securities and Exchange Commission under an administrative order for an additional US$4.2 million penalty related to the same conduct. The US Department of Justice reportedly worked with the SFO in this matter.
Further details of the events, the SFO’s response, and the DPA are in our Client Alert. The key points for international organisations are:
- The SFO is willing to investigate top-end fraud, and is empowered and willing to settle matters, if appropriate and approved by the English court.
- Corporations carrying on business in the UK may be criminally liable under the Failure Offence for bribery by third parties — including a sister company and senior personnel of that sister company — at least if such third parties are “performing services for or on behalf of” the company subject to UK jurisdiction.
- UK and US authorities continue to grant credit for prompt self-reporting and ongoing cooperation, through reductions in financial penalties and resolution through DPAs. Indeed, the SEC has expressly stated that self-disclosure is mandatory for a DPA or NPA. Corporations will, however, continue to face a difficult decision when managing early reports of potential wrongdoing before the facts have been fully investigated: self-reporting may have advantages, but corporations must balance those advantages against the risks of disclosing information that might ultimately demonstrate no criminality or violations, which authorities would not have otherwise discovered.
- Corporations must maintain anti-corruption compliance programs that address unique risks, including risks that third parties could commit bribery on their behalf. The defence of “adequate procedures” may be limited.
- The SFO, with the approval of the English court, is willing to enter into a DPA if it is in the interests of justice, including if the corporation lacked knowledge of the corrupt conduct, which may be common where the Failure Offence is concerned.
- Financial sanctions in DPAs could be significant, albeit likely reduced based on self-reporting, cooperation, remediation and admission of wrongdoing.
- Corporations may face further consequences in entering into DPAs. They must admit wrongdoing, which may expose them to civil claims, and potentially regulatory consequences. They may also be required to submit to external assessments of compliance enhancements and to cooperate with investigations by other authorities, including investigations into individuals. Finally, a DPA will not prevent other authorities from taking enforcement action.
- Corporations analysing exposure under US laws should recognise that, even if they are not subject to the FCPA, US regulators may still use alternative enforcement mechanisms in foreign bribery cases.
- The SFO continues to coordinate with its foreign counterparts, including the DOJ and SEC, and the English court may look to approaches US authorities employ in assessing DPAs. The settlements reached in this case demonstrate the strong relationship between US and UK authorities. Indeed, SEC and DOJ leadership have been working for years with foreign regulators and law enforcement to obtain evidence and secure justice in the appropriate jurisdiction. This suggests an increase in multi-jurisdictional prosecutions.
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