A lesson for unsuspecting Company Officers – recent SFO successes and what they mean for Company Officers

Criminal law and practice is evolving at a fast pace in the areas of economic crime, and area that includes fraud, bribery and corruption. As a result…

Criminal law and practice is evolving at a fast pace in the areas of economic crime, and area that includes fraud, bribery and corruption. As a result Company Officers need to be on their game if they are to avoid falling on the wrong side of the law.

Innovative and far reaching pieces of business crime legislation are now firmly embedded within the criminal justice system, and recent successes by the Serious Fraud Office ("SFO") have shown that Company Officers have to be more vigilant than ever if they are to protect the Company and to avoid falling foul of the law themselves.

Company Officers have traditionally been more vulnerable to criticism and investigation for economic crime offences than others engaged in business. They are an easy target, and are exposed through their own acts and omissions to both primary and secondary offences under economic crime legislation such as the Fraud Act, the Bribery Act, and the Money Laundering Regulations.

Take for example the so called "consent and connivance" offences which relate specifically to Company Officers and their duty to uphold the law when ensuring proper corporate governance.

It is not good enough to turn a blind eye to wrongdoing. Doing so could be an offence leading to prosecution and a sentence of imprisonment for an individual if convicted. Company Officers have therefore got to be vigilant in protecting the interests of the Company against wrongdoing. If a Company can be investigated, then so can a Company Officer and an investigation could have serious commercial consequences for a Company and career ending consequences for a Company Officer. Company Officers therefore need to protect the Company against any exposure as they could also be personally liable for their actions if they fail to do so.

The SFO, the UK's leading body responsible for investigating and prosecuting serious or complex fraud, bribery and corruption has had some notable successes recently. Working closely with regulators, and other enforcement bodies both here and abroad, it has, for example, secured convictions from the LIBOR litigation, with heavy prison sentences being imposed on those individuals convicted.

In its last available Annual Report, its Director, David Green CB QC stated that the SFO continues to focus on "cases that undermine UK plc in general and the City of London in particular" with investigations being conducted into companies such as Rolls—Royce, GlaxoSmithKline, Barclays Bank and Tesco. The most recent figures available indicate that it is securing a conviction rate of 78% per defendant.

This might be because the SFO is taking a proactive and flexible approach to combatting serious and complex fraud, bribery and corruption by adopting new enforcement tools now available to it, the most notable of those being Deferred Prosecution Agreements ("DPA").

DPAs are "an agreement reached between a prosecutor and an organisation which could be prosecuted, under the supervision of a judge. The agreement allows a prosecution to be suspended for a defined period provided the organisation meets certain specified conditions. DPAs can be used for fraud, bribery, and other economic crime. They apply to organisations, never individuals."

The SFO's website goes on to list the key features of DPAs. To paraphrase, they include:

  • Enabling a corporate body to make full reparation for criminal behaviour without the collateral damage of a conviction;
  • They are subject to judicial scrutiny;
  • They avoid lengthy and costly trials; and
  • They are transparent.

Mr Green is "confident that this new tool will make a real difference in the SFO's dealings with cooperative corporates" and it is certainly a useful tool in the SFO's armoury, adopted from US practices.

DPAs therefore require full cooperation from a Company and can be mutually beneficial. The benefits to a Company wishing to cooperate with enforcement bodies are set out in the recent judgement of Sir Brian Leveson in the case of the SFO and "XYZ Limited".

That case resulted in the SFO's second application for a DPA. "XYZ Limited", being a company which cannot be named because of on going related proceedings, was subject to a number of charges including conspiracy to corrupt, and to bribe, and the corporate offence of failing to prevent bribery under section 7 of the Bribery Act 2010.

Those charges were suspended as a result of the DPA, with the Company paying over £6.5m in financial orders.

Under the terms of the DPA, the Company has also agreed to cooperate fully with the SFO.

DPA's are therefore an important consideration for Companies faced with internal issues relating to economic crime. From a Company Officer's perspective, they are a factor that need to be kept in mind when acting in the best interests of a Company faces with such issues.

The message for Company Officers has to be that there is no substitute for diligence and to take all necessary steps to prevent wrongdoing. If in the unfortunate event that it does occur then Company Officers need to act decisively and to seek appropriate advice as soon as they become aware of the issue.

Company Officers are vulnerable to the actions of others in the context of economic crime given the existence of the consent and connivance offences that can be brought under anti fraud and bribery legislation. Moreover, as DPAs do not extend to individuals, they are arguably even more likely to be prosecuted in the future than Companies and so seeking advice at an early stage on how to prevent issues occurring, or on what steps to take when they do is therefore more important now than ever before.

If you have any questions or concerns around this topic or would like to discuss how our Business Crime team can help you or your company, please contact Euros Jones:

Euros Jones
Head of Business Crime
T: +44 (0)20 7822 1928 | M: +44 (0)7968 360 266

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