Corporate self-reporting corruption and fraud to the SFO: can you avoid prosecution in the David Green QC era?

18 January 2013

Gone are the days when the Serious Fraud Office (SFO) appeared not to have the stomach to do anything other than deals with large corporations.  Gone too are the days when corporate advisers and their lawyers could speak to the SFO about the format required for self-reports or seek assurances from the SFO as to the likely outcome. 

David Green QC was appointed Director of the SFO in April 2012 and is determined to reinstate the SFO’s role as a crime fighting agency, rather than the ‘nightmare on Elm Street’ he referred to during his speech to the Cambridge Symposium, 3 September 2012.  One of the most pressing questions for corporations in the post Alderman era is how they should deal with the question of self-reporting wrongdoing to this newly tough SFO?

One of Mr Green’s first acts was to remove the SFO’s previous policy on self-reporting and replace it with two short policies, entitled ‘corporate self-reporting’ and the ‘self-reporting process’.  Mr Green has removed the ‘gloss’ put on previous policies by his predecessor, so that there is no longer a near-guarantee that corporate bodies who self-report wrongdoing will not be prosecuted in the criminal courts. 

How has the position changed for corporate bodies under the new regime? 

Mr Green has made clear (according to Oral evidence to the Justice Committee on 13 November 2012 – uncorrected transcript) that his view of self-reporting differed from his predecessor’s.  Non-criminal sanctions may still be available for corporate bodies who self-report, but only those companies who provide a genuine self-report.  A corporate body will only provide a genuine self-report if:

  • It tells the SFO something that they did not know already, and
  • The corporate is acting proactively to investigate it

The self-report must tell the SFO something they did not know already:

A company does not genuinely self-report if, for example, it has already admitted corrupt activities to the World Bank and this has been reported.  Nor does it genuinely self-report if it becomes aware that a whistle blower has contacted the SFO about its activities.  The SFO would have us believe that, with the use of their increased intelligence capability and the whistle blowing hotline, they are likely to uncover unreported fraud or corruption.  If that is correct and they uncover it before the corporate body self-reports, then the public interest may point towards criminal prosecution of both the company and its individuals. 

The corporate must proactively investigate:

As soon as a company becomes suspicious then it must investigate and report any wrongdoing ‘within a reasonable time of the offending coming to light’ (in accordance with the self-reporting process).  The corporate body ‘must report properly and fully the true extent of the wrongdoing’ and should give consideration to the likelihood that the SFO could get information from other sources to check the veracity of the report. 

Even with genuine self-reports, are there guarantees that the corporate bodies will not be prosecuted? 

No such assurances have been given that genuine self-reports would be dealt with through civil settlements as they have in the past, although it is clear that a genuine self-report would be a factor which would weigh very heavily against criminal prosecution.  However, even if the SFO uses its civil powers of asset recovery, in future the details of the illegal conduct and disposal will be published, so the confidentiality clauses appearing in settlements made at the height of Mr Alderman’s directorship will no longer be seen.  In addition, self-reports may, from Spring 2014, be dealt with in appropriate cases by way of Deferred Prosecution Agreements. 

The conclusion?

Time is of the essence for companies who uncover fraud or corruption.  An important decision for corporate bodies is whether to deal with the investigation in-house or obtain external advice. 

Where there is a suspicion of fraud or corruption it is important to obtain external advice immediately to ensure that the scope of the investigation is properly managed, personnel are protected and to draw a clear line between the investigation and on-going business activities.

See also: The Serious Fraud Office and self-reporting: recalibrating the risk

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