DPAs: A St Valentine’s Day present?
17 February 2014
24 February 2014
12 February 2014
1 September 2014
21 February 2014
4 March 2014
The new DPA code of practice might just be the way to combat economic crime
On 14 February the directors of the Serious Fraud Office (SFO) and Public Prosecutions published their joint deferred prosecution agreement code of practice (CoP).
The CoP has been long-awaited and there has been much speculation about its content. Now it has arrived how might it be applied in combating economic crimes?
Outside of the CoP there is no UK practice or precedent in respect of the operation of deferred prosecution agreements (DPAs) so commercial organisations and their advisers will need to study the code very carefully before they embark on disclosures. The SFO has already made it clear that it will prosecute if it is in the public interest to do so. Also this is not simply a test that is specific to the SFO; the CPS will be applying the same considerations when the likes of the police or HM Revenue & Customs ask it for a prosecution decision.
Not all organisations can expect to be invited by the prosecutor to engage and negotiate a DPA. Each case will be judged on its own facts and will be considered by the prosecutor according to the test to be applied by the Crown prosecutor. Whether the organisation self-discloses offences or is the subject of ongoing interest, one thing is certain: the prosecutors will be helped in their deliberations on whether to invite DPA negotiations by the investigations undertaken by law enforcement and the exchange of information and intelligence available to them. Any organisation invited to negotiate a DPA needs to go into the process with ‘eyes wide open’ and with a clear understanding that co-operation to assist the prosecutor in being able to explain to the court why a DPA should be proceeded with is paramount to a successful, though likely costly, DPA outcome.
Although the DPA will not apply to individuals, the organisation will need to be able to help the prosecutor in any proceedings against individuals. The prosecution of individuals previously connected with the organisation might present the DPA negotiations with a complication should a prosecutor consider that the individual, under the provisions of the Serious Organised Crime and Police Act 2005, might be able to assist the investigation or prosecution.
At this point the corporate should take some comfort from the knowledge that a full and complete forensic investigation, to a criminal standard, had been undertaken (as recommended) and nothing that the individual might claim against the organisation will come as a complete surprise to the prosecutor. If it does then, frankly, the DPA negotiation is likely to be on very shaky ground.
Potentially many of the organisations that will come within the prosecutors’ cross hairs will be those that have interests across several different jurisdictions, with many of them in areas of the world where bribery and corruption are real risks. This is a significant issue and organisations need a clear strategic and tactical plan for dealing with multi-jurisdictional issues as soon as it is considered that an internal investigation is to be undertaken and disclosures made to the UK authorities.
The CoP confirms that the prosecutor will need to reference any concurrent jurisdictional issues so that the court can consider why a DPA is in the interests of justice as well as being fair, reasonable and proportionate. An organisation will need to be clear about how any concurrent jurisdictional issues will have been determined between the relevant prosecutors before stepping into the UK court room, as the DPA will only deal with UK criminal liability.
Although it is not expected that extensive cross-border investigations would have been undertaken before a DPA was applied, from my experience of leading discussions on primacy in multi-jurisdictional criminal cases with other jurisdictions on behalf of the UK, when chief investigator at the SFO, it is likely that the practice will develop where through co-operation with the UK prosecutors, agreement on global settlements will result. Without the co-operation and collaboration of UK prosecutors, organisations can expect to be dealing with investigations across multiple fronts and in many jurisdictions.
Handled correctly, DPAs might just present organisations with the opportunity to cleanse their business of some difficult, nasty problems. Taking an opposite view and choosing not to come clean gives a Valentine’s present to UK law enforcement and the Crown prosecutor.
Keith McCarthy, director, PwC