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Bribery Act 2010: SFO concludes first deferred prosecution agreement
Practical Law UK Articles 3-622-1169 (Approx. 4 pages)
Bribery Act 2010: SFO concludes first deferred prosecution agreement
by Marcus Bonnell and Rebecca Dulieu, RPC
| Published on 28 Jan 2016 |
The Serious Fraud Office has entered into the first deferred prosecution agreement (DPA) since DPAs were introduced under the Crime and Courts Act 2013.
In November 2015, the Serious Fraud Office (SFO) entered into the first deferred prosecution agreement (DPA) since DPAs were introduced under the Crime and Courts Act 2013.
The DPA with ICBC Standard Bank Plc was also the first successful resolution of an allegation against a firm for failure to prevent bribery under section 7 of the Bribery Act 2010 (section 7) in England and Wales. The settlement represents a genuine landmark in tackling corruption, the evolution of the criminal justice system and for the SFO (see feature article “Corporate criminal liability: looking across borders”, this issue).
All firms that could be caught by the remarkably wide ambit of the UK law in this area should take this opportunity to reassess their anti-bribery and corruption procedures (see box “Other recent enforcement actions” and feature article “SFO enforcement: has the tanker turned?”).
The case against Standard
Standard admitted to misconduct arising from a transaction in which the government of Tanzania wanted to raise funds through a sovereign note private placement. Stanbic Bank Tanzania, a Tanzanian sister company of Standard, was not licensed to deal with non-local foreign investors in the debt capital market and so involved Standard, which held the necessary licence, in the arrangement.
Standard and Stanbic were joint lead arrangers in raising the funds. Stanbic appointed a Tanzanian company, Enterprise Growth Market Advisors, as an agent and agreed to pay it a fee of 1% of the amount raised. Two of the three directors and shareholders of Enterprise Growth were connected to the Tanzanian government. Standard relied on Stanbic for its due diligence and made no enquiries into Enterprise Growth.
Soon after the appointment of Enterprise Growth, the fundraising progressed quickly and $600 million was raised. Enterprise Growth was paid its 1% fee despite there being no evidence that it had provided any real services for its part in the transaction. Enterprise Growth quickly removed the majority of its payment by cash withdrawals from an account with Stanbic.
Stanbic became concerned by the withdrawals and made a report to its parent company, which alerted Standard. Standard conducted an investigation and reported the issue to both the SFO and the Serious Organised Crime Agency (now replaced by the National Crime Agency).
The SFO’s findings
The SFO concluded that Standard did not have adequate anti-bribery policies and procedures (see feature article “Bribery Act 2010: what does it mean for your company?”). The SFO was particularly concerned by the standard of training in this area in the light of its findings that none of Standard’s employees had appreciated the need to carry out due diligence on Enterprise Growth or taken note of any red flags.
Standard was therefore charged with failing to prevent bribery by persons associated with it under section 7 by:
- Promising or giving, or both, Enterprise Growth 1% of the funds raised where Enterprise Growth was not providing any, or any reasonable, consideration for this payment.
- Intending by the payment to induce representatives of the Tanzanian government to perform improperly a relevant function or activity.
The SFO did not allege knowing participation in an offence of bribery against Standard or any of its employees.
The DPA
DPAs were designed to provide a mechanism to allow a company, partnership or unincorporated association to avoid prosecution for certain economic or financial offences by entering into an agreement with a prosecutor (see feature article “Deferred prosecution agreements: moving into the unknown”). DPAs are not available to individuals.
A DPA has to be scrutinised and approved by the court. When approving a DPA, the court needs to assess whether it is in the interests of justice, and the terms are fair, reasonable and proportionate.
As part of its DPA, Standard agreed to a number of terms. If it fails to comply with these terms, the DPA can be set aside and the SFO can proceed with the prosecution. The principle terms of Standard’s DPA include:
- Paying a penalty of $26 million.
- Co-operating with the relevant authorities.
- Commissioning an independent review of its current anti-bribery and corruption controls, policies and procedures, at its own expense.
- Paying costs incurred by the SFO.
However the terms, particularly the penalty, that are agreed with the relevant firm are not the sole determinant in deciding whether the DPA is fair, reasonable and proportionate. While the court took into account many factors to determine whether Standard’s DPA should be approved, it considered the promptness of the self-report, the fully disclosed internal investigation and the co-operation of Standard to be of particular significance. This was no doubt emphasised to send a message to other firms that may be considering what to do in similar circumstances.
The court also considered the attitude of the Tanzanian authorities and the US Securities Exchange Commission (SEC) to be supportive of its conclusion. The SEC announced on the day that the judgment on Standard was handed down that it had accepted a civil monetary penalty of $4.2 million from Standard.
The court commented that it was obviously in the interests of justice that, thanks to the self-report, the SFO had been able to investigate in circumstances where a UK firm had been involved in bribery. The court also said that Standard’s shareholders, customers and employees were far better served by Standard reporting this matter and it suggested that Standard’s approach could go a long way to repairing and, ultimately, enhancing its reputation and, as a consequence, its business.
There had been speculation that the courts might be ambivalent towards the concept of DPAs but, to the contrary, the court’s comments in approving Standard’s DPA reflect a thorough endorsement of the scheme.
Marcus Bonnell is counsel, and Rebecca Dulieu is an associate, in the regulatory and corporate crime department at RPC.
Other recent enforcement actions
Other recent developments show that the landscape in relation to corporate crime, in particular bribery, has changed dramatically. After a considerable period of inaction, it appears that bribery is now being tackled with some vigour. The following developments are particularly noteworthy:
- In September 2015, the Scottish authorities announced a civil settlement for Brand-Rex Ltd in relation to section 7 of the Bribery Act 2010 (section 7). This was the first case against a company for contravening section 7.
- On 2 December 2015, the Serious Fraud Office (SFO) announced that Sweett Group Plc has admitted to an offence under section 7 regarding its conduct in the Middle East. This admission follows an SFO investigation that began in July 2014.
- On 8 January 2016, the SFO announced that Smith & Ouzman Ltd had been ordered to pay £2.2 million following a sentencing hearing at Southwark Crown Court, at which two former officers of the company were ordered to pay confiscation and costs. The two individuals had previously received prison sentences for their conduct. The sentence was suspended for one of the individuals. The firm and individuals had been convicted of making corrupt payments contrary to the Prevention of Corruption Act 1906 in relation to payments made to officials in Kenya and Mauritania.