The Serious Fraud Office (SFO) can investigate companies operating both in the UK and overseas, prosecuting bribery wherever the offence takes place, but its efforts are frustrated by international obstacles to investigations and prosecution.
The SFO has spread its wings. It has visibly increased its efforts to investigate companies for bribery and corruption offences and in the last year it has had success with a new weapon: the Section 7 UK Bribery Act offence, which allows the SFO to prosecute companies for failing to prevent bribery. Those who have followed progress in this area will be aware of the guilty plea by Sweett Group to the Section 7 offence for bribery involving payments made by its employees in the Middle East.
Allegations of corrupt behaviour investigated by the SFO are commonly international in nature and, accordingly, as many UK-based companies operate on a global scale, the SFO has been given a passport to prosecute conduct all around the world. However, international conduct brings its own challenges to the SFO and provides obstacles in the way of a successful investigation. Aside from the obvious practical issues—including resources and time, bribery and corruption allegations often occur in jurisdictions considered as high risk or 'red flag'. This provides the SFO with fundamental evidence gathering challenges; primarily mutual legal assistance (the collection of evidence from foreign jurisdictions) and extradition (the prosecution of suspects based in foreign jurisdictions). Self-reporting provides a useful tool for the SFO to overcome some of these hurdles.
With many UK companies operating on a global scale, the SFO has a global passport to prosecute bribery wherever the offence takes place
UK organisations experienced economic crime
Source: PwC Global Economic Crime Survey 2016
Mutual legal assistance (MLA)
The investigation of international conduct forces the SFO to utilise procedurally slow, technical and bureaucratic channels to obtain foreign evidence to bring a prosecution. The obtaining of such evidence depends on the existence of treaties between the UK and the third-party jurisdiction, the effectiveness of international Letters of Request and, of course, political and diplomatic willingness.
The UK is taking measures to promote the global exchange of information in relation to anti-corruption measures, through events such as the international summit hosted by the Prime Minister on 12 May 2016. However, expediting the evidence gathering process through slow and unresponsive bureaucratic channels will not take place overnight and, indeed, commitments made between politicians at an international level do not always easily translate to the practical reality on the ground.
Even if the SFO is able to gather sufficient foreign evidence to bring a prosecution, it would be criticised if it only targeted companies. The public demands accountability for criminal acts, presenting the SFO with another dilemma—how do they bring foreign-based individuals into an English courtroom?
The answer is an extradition process that is frequently long and drawn out. As with MLA, the ability to extradite a person depends on the diplomatic relationship between the UK and the third-party country. Even in respect of the current European Arrest Warrant system, where the process for extradition is supposed to be streamlined, the process can be fraught with procedural pitfalls. By way of example, a number of European jurisdictions, such as Spain and Greece, refuse to extradite their own nationals, whilst others, such as Germany, impose time limits as a bar to extradition.
Both extradition and MLA are an expensive drain on the limited resources of an agency that is consciously aware of its need to benefit from high-profile successes.
The solution: The self-report
The SFO relies upon the threat of prosecution for offences of bribery and corruption in order to place pressure upon companies to provide the SFO with a self-report setting out the findings of any wrong-doing within that organisation. The self-report has the dual benefit of additionally providing the SFO with an evidential platform from which to mount a prosecution. It also resolves many of the obstacles the SFO would otherwise face in investigating international conduct.
A self-reporting company will often provide the SFO with the results of internal investigations: evidence (no need for technical MLA requests to foreign jurisdictions that are left unanswered) and witness testimony (no need for Section 2 interviews which carry no weight in respect of persons based outside the UK). The SFO may also use a self-report to push at the door of privilege, and to gain access to international evidence (such as bank accounts, payment data and witness testimony) which could otherwise only be obtained by lengthy MLA requests.
The SFO has removed from its website the guidance that historically confirmed that self-reporting companies would not be prosecuted. Accordingly, the SFO's current policy appears to demand a self-report but, following its receipt, to still consider charges against both the company and individual directors. This policy places the company at considerable risk; it faces the risk of prosecution despite the provision of a self-report which may have strengthened the SFO's position and provide the SFO with a prosecution on a plate, thus arming the SFO with substantive material regarding international conduct. The company, of course, will almost certainly be forced into an admission of liability either by way of guilty plea or DPA, and this, as with Sweett Group, will ensure that the SFO can proceed against individual directors without the need to evidence the foreign bribe itself through complicated MLA powers.
All of the above is achieved without a huge drain on the resources of the agency and guarantees the SFO's public success—at the very least a guilty plea by a company. Certainly a 'win-win' for an international offence investigated without the SFO having to leave their offices at Canada House, let alone the UK.
However, it does leave open the question: what is the real incentive for a company to still self-report?
Read other chapters in this report:
The Bribery Act: The changing face of corporate liability
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© 2016 White & Case LLP