SFO secures its first deferred prosecution agreement
By Peter Doyle QC.
The DPA regime came into force on 24 February 2014 and was seen as an important weapon in the SFO’s armoury to more effectively police corporate wrongdoing.
On 30 November 2015 Lord Justice Leveson approved the UK’s first DPA between the SFO and ICPC Standard Bank (“ICPC”) following a failure on the part of Standard Bank (60% of which was subsequently acquired by ICPC) to prevent persons associated with it from committing bribery; an offence contrary to s.7 Bribery Act 2010.
Neither Standard Bank nor its employees were implicated in knowingly participating in the bribery offence. The criticism against the bank was that it failed to have in place adequate measures to prevent bribery.
The Government of Tanzania (”GT”) attempted to raise funds through a sovereign note. Standard Bank and Stanbic Bank Tanzania (“STB”) (both of whom shared the same parent company) together sought to obtain GT’s instructions to raise the funds. To that end STB entered into a contract with a Tanzanian company for “consultancy services”. Pursuant to that contract a payment of $6m was paid. That payment was a bribe. The directors of that company were politically connected individuals and the payment was immediately withdrawn in cash. Standard Bank had relied on STB to conduct due diligence into the recipient company. In so doing and failing to identify that the parties associated with the recipient company were politically exposed individuals, it was found to have inadequate measures in place to protect against bribery.
Unlike the DPA regime in the USA, the UK requires a high level of judicial oversight and sanction. The DPA must be judged to be in the public interest. Lord Justice Leveson identified three critical factors that demonstrated that the public interest test had been met.
The first factor of relevance was the nature of the s.7 offence. It does not require a criminal state of mind; it is effectively a strict liability offence and thus not the most egregious offence on the spectrum of corporate misconduct.
The second factor was Standard Bank’s level of co-operation. It had embarked upon an internal inquiry as soon as the transaction was flagged as suspicious. It promptly reported the matter to the SFO and shared its internal inquiry findings with them.
Since the events in question, a majority stake in Standard Bank had been acquired by ICBC Standard Bank who had then appointed a new Board. There was thus in place a corporate administrative regime change.
What of any prior regulatory concerns? Standard Bank had previously been subject to regulatory action by the UK Financial Conduct Authority. Amongst a number of failings, the FCA found that the bank had failed to pursue adequate and proportionate enhanced due diligence for PEP customers in the context of anti-money laundering. It was not a case of bribery and corruption. Being factually different in nature and unconnected, the FCA action did not present an insurmountable barrier to satisfying the interests of justice test.
Lord Justice Leveson not only emphasised the important “gatekeeper” role that the court had in deciding whether a DPA was appropriate but also underscored the important role the court had in assessing whether its proposed terms were appropriate.
In that regard it is to be noted that under the DPA regime the judge is responsible for determining the appropriate financial penalty by reference to the appropriate sentencing guidelines effective from 1 October 2014.
Lord Justice Leveson stated:- “For my part, I have no doubt that Standard Bank has far better served its shareholders, its customers and its employees as well as those with whom it deals by demonstrating its recognition of its serious failings and its determination in the future to adhere to the highest standards of banking. Such an approach can itself go a long way to repairing and ultimately enhancing its reputation, and in consequence, its business.”
The facts of this case were almost tailor made for a successful DPA. In those cases where boardrooms recognise that a prompt appreciation of failings may, as an important by-product, result in an enhanced corporate reputation, such companies may well be motivated to seek a DPA; particularly in the case of a strict liability offence.
As such this DPA may not provide any clear insight into whether it will whet the corporate appetite for embracing the regime and thus trigger a significant increase in self-reporting.
As no substantive bribery offence had been committed by the bank and the bank had demonstrated an immediate and wholesome level of co-operation with the SFO, it was clearly a safe case for the SFO to pursue and one where predictably it was likely to be viewed as not only uncontentious but also unlikely in the circumstances to attract either political or public objection.
It is a start but perhaps not a clear route map for future resolution of more culpable corporate misconduct.
Peter Doyle QC
25 Bedford Row