SFO self-reporting concerns misplaced

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Ben Morgan, head of bribery and corruption, Serious Fraud Office

Imagine you have a corporate client with a fraud or corruption issue. The client conducts its business responsibly. It has a code of ethics its leadership believes in. It wants to put its house in order and manage the associated risk. What do you advise?

You won’t be surprised to read what my recommendation would be and, judging by our present workload, it’s one a number of you agree with. My advice would be that your client co-operates with the Serious Fraud Office (SFO) to confront the issue it has identified. The case for doing so is compelling. Your client has power to control the financial and practical impact on its business, to reduce the period of uncertainty and to live its corporate values, emerging with integrity intact, demonstrably committed to honest business.

But even now I hear from some quarters that it is too risky to advise the route of self-report. There seem to be three perceived barriers: lack of certainty; the SFO’s presumed requirement for companies to waive privilege; and the impossibility of pinning down what ‘co-operation’ with the SFO really means. These concerns are misplaced.

Certainty

Some uncertainty is unavoidable – what complex matter is ever 100 per cent straightforward? But if your advice is to self-report and your client does so properly you can be certain that the matter will be dealt with fairly and promptly.

The SFO will engage on key areas including mitigating unnecessary costs and the consequences of enforcement, and deal constructively with multi-jurisdictional exposure, both domestic and international.

“From the minute you engage with us, if your client wants to co-operate we will explain how to do so”

If your client’s representations to us are genuine and there are no surprises when we test them it is unlikely to be in the public interest to prosecute: as Standard Bank found, a Deferred Prosecution Agreement (DPA) will be firmly in our minds as potentially the most appropriate disposal of conduct meeting the relevant evidential threshold (subject to the court giving a DPA its blessing).

If a financial penalty is appropriate it will be calculated in a transparent manner in accordance with sentencing guidelines, and wherever we can we will seek full credit for your client’s co-operation. Where, on proper examination, the evidential threshold is not met we will abandon cases.

That seems to me to be a reasonable degree of certainty.

Privilege

As to our supposed requirement to waive privilege, there is no such requirement. The conversation often centres on witness accounts given during a company’s internal investigation. Let’s be clear, these accounts are not automatically covered by litigation privilege – though it is possible to conceive of situations where privilege might arise. We ask ourselves whether witness interviews were for the dominant purpose of obtaining legal advice, evidence or information in preparation for actual or contemplated litigation. This is a factual question, not a default assumption: there are many reasons why companies might speak to employees about fraud or corruption incidents.

Taking a step back, if your client wants a timely resolution the SFO needs to understand what has happened.  You can explain it, and witness accounts may well assist. Or we use our own methods such as compulsory document production, interviews, covert operations and overseas enquiries. The first option may involve taking risks. Certainly, it will involve building trust with us and some fresh thinking. In my experience the lawyers who stand out from the pack manage to do this, to their clients’ advantage.

Co-operation

When it comes to claiming not to understand what co-operation with the SFO means I find this hard to comprehend. We have spoken freely, covering important matters like when to contact us, the scope of your client’s proposed own investigative steps, data retention and the supply and continuity of evidence. From the minute you engage with us, if your client wants to co-operate we will explain how to do so in the context of the matter at hand.

There are different ways of handling a fraud or corruption incident. If self-reporting is one you find hard to recommend I wonder whether that is because the barriers are genuinely insurmountable or because it’s just easier to rule it out.

Meanwhile, others are stepping lightly over the barriers. The game is moving on. Keep up.