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UK SFO Director Explains when Prosecution would be Unlikely to Follow a Self-Report




by:
Jamie Humphreys
Antonio Suarez-Martinez
Edwards Wildman Palmer LLP - London Office

 
November 4, 2013

Previously published on October 29, 2013

In a recent talk, David Green QC, the director of the Serious Fraud Office (SFO), made a strong argument in favour of self-reporting and the changes that he had introduced when he replaced Richard Alderman. Last year, David Green withdrew the SFO’s guidance on self-reporting and clarified that the SFO would not be providing companies with the comfort that self-reporting would guarantee they avoid prosecution; the foremost consideration for the SFO in all cases would be whether it is the public interest to prosecute. In his talk last week, Mr Green acknowledged that he had provoked debate with his reboot of the SFO’s position, but very helpfully gave an indication of circumstances where prosecution was unlikely to take place following a self-report: “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.” This clarification will perhaps provide companies with a little more assurance than the more nuanced example he gave at the Inaugural Fraud Lawyers’ Association speech earlier this year where he said: “BUT in the case of a genuine self-report, where, say, a new board had discovered previous misconduct under previous management, had investigated it and reported it to [the] SFO and put in place measures to avoid repetition, then obviously the fact of self-reporting would weigh heavily in the public interest against prosecution.”
 
At the talk, David Green also listed five powerful reasons to self-report corruption:
 
(i) A self-report 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 hide the misconduct rather than self-report, the risk of discovery is unquantifiable. He highlighted the 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.
(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 considerably magnified.
(v) Last but not least, hiding such information is likely to involve criminal offences related to money laundering under sections 327-9 of the Proceeds of Crime Act.
 
These soon to be ‘famous five’ reasons to report corruption might be summarised another way - you have potentially so much more to lose if you don’t. Mr Green took the trouble to confirm that self-reporting was still taking place and he expected it to increase once the availability of deferred prosecution agreements were in place next year. But the fact that he has now put a clear marker down as to how a company might best avoid prosecution if it has uncovered wrongdoing perhaps suggests that he recognised that more needed be done to promote the benefits of self-reporting in circumstances where companies felt the messaging they were receiving was that it was now a lottery. Transparency and cooperation with the SFO will be key; which represents a much better bet than the gamble of not self-reporting.

 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Jamie Humphreys
Antonio Suarez-Martinez
 
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