23 June 2016
Late last year, the UK government saw its first Deferred Prosecution Agreement (DPA). The change in the law, which was introduced in 2014, enabled companies to avoid prosecution if a business admitted wrongdoing, paid a fine or compensation and agreed to overhaul its compliance monitoring. DPAs were heralded as a huge change, which aimed not only to stamp out corruption in the country’s top companies, but also signalled a move towards a US-style system. Over six months on and we have seen just the one DPA – are there more in the wings?
The SFO, and other regulators, have faced years of budgetary constraints and cuts, which have come in as business crime and global commerce has become even more complex. The UK’s anti-fraud agency has been encouraging more companies to self-report, and many are saying that it may just be too early at this point to say how effective the introduction of DPAs has been.
There is at least one major sticking point in DPA discussions, which is whether certain evidence is protected from disclosure by client privilege – either from in-house or external lawyers. The SFO has signalled its concern that retaining external advisers to investigate risks churning up the crime scene, and this is causing some consternation amongst businesses and their advisers who need to be able thoroughly and swiftly to investigate any alleged wrongdoing.
The US Department of Justice earlier this year announced a one year pilot programme intended to incentivise companies to disclose bribery of foreign officials. However the incentives for self-disclosing in the UK appear less generous than those being offered by the DOJ in their new pilot programme.
The fact that the DOJ has introduced this pilot programme suggests a lack of companies willing to self-report in the US. On this side of the pond the regime has been in place for a far shorter period of time, and lawyers and their clients will be watching the success of the US programme closely.
If it is a success and more companies do self-report and co-operate with the DOJ then there will be a clamour for the UK to follow suit. The UK government will be keen not be seen to be going “soft” on white collar crime, and it will have to provide concrete results from the DOJ programme before it proposes any further changes to UK legislation. The continued success of deferred prosecution agreements may well hinge on the results of the US’s pilot programme.