06 November 2020 - Post by:
On 23 October 2020, the SFO published another chapter of its gradually evolving Operational Handbook (the Handbook), this time covering the invariably attention-grabbing topic of Deferred Prosecution Agreements (DPAs).
This newest addition to the Handbook, which follows and complements last year’s chapter on corporate co-operation, may not present those who are familiar with the SFO’s existing DPA Code of Practice (the Code) and Corporate Prosecutions Guidance with much surprise. However, the chapter serves as a helpful reminder of the SFO’s current priorities for practitioners who advise on DPAs, given that the agency has entered into a number of such agreements with corporates since it first published the Code. In Ms Osofsky’s words, the SFO expects the guidance to “provide further transparency on what we expect from companies looking to co-operate with us.”
Core considerations around self-reporting, internal investigations and disclosure
As set out below, the SFO’s recent experience with DPAs has evidently led to a renewed focus on core considerations around self-reporting, internal investigations and disclosure. We summarise the crux of the SFO’s messaging in this regard below, in the form of three ‘commandments’.
Beyond these headline topics, the Handbook also contains useful practical pointers covering the whole lifespan of the DPA process – from the invitation to enter into DPA negotiations, the scope of those negotiations, confidentiality considerations and standard terms, to how penalties are calculated. Furthermore, the Handbook clarifies the SFO’s stance on anonymising individuals named in relation to DPAs (permissible under certain circumstances, including when the individual’s basic human rights would be otherwise infringed), and it reiterates the SFO’s commitment to working in parallel with foreign regulators (with an emphasis on early communication and de-confliction).
As well as studying this guidance in detail, corporates and their advisors contemplating a DPA would be well-advised to look beyond the Handbook to other relevant legislation and guidance (helpfully listed at the beginning of the DPA chapter), as well as examining recent judgments authorising DPAs. These documents will provide further pointers as to the circumstances under which a DPA will be considered to be in the public interest, as well as to it being fair, reasonable and proportionate.
Three DPA commandments
Our three DPA commandments are as follows:
I. Thou shalt voluntarily self-report (but not all is lost if you don’t): As expected, co-operation is at the heart of the Handbook, which sets out that: “Voluntary self-reporting suspected wrongdoing within a reasonable time of those suspicions coming to light is an important aspect of co-operation.” However, the Handbook also clarifies that a corporate’s failure to self-report is not a bar to entering DPA negotiations per se. This is perhaps not particularly surprising given that over the past few years the SFO has entered into DPAs where the wrongdoing only came to light due to a third-party whistle-blower. At the same time, the Handbook explicitly states that a lack of self-reporting will be a factor when conducting the public interest test. Importantly, the Handbook also emphasises that the information brought to the SFO’s attention through self-reporting must be otherwise unknown to the prosecutor and must have been disclosed truly voluntarily (ie without the threat of disclosure by another party).
II. Thou shalt be allowed to conduct your own investigation (to an extent): The Handbook acknowledges that corporates will often have conducted their own internal investigation prior to self-reporting, and it confirms that this is permissible within certain parameters. This is in line with the sentiment often expressed by Lisa Osofsky since the start of her tenure (and in stark contrast with the approach of her predecessors). The SFO appears to encourage early internal probes as they are directly linked to the agency’s ability to uncover wrongdoing through self-reporting. The Handbook does not define how much investigation exactly a company should (or could) undertake before the expectation to self-report arises; however, reporting must take place within a reasonable timeframe, as noted above. The Handbook also sets out that the company’s co-operation will be evaluated through the lens of whether it is able to provide a report in respect of any internal investigation including source documents (among other matters).
III. Thou shalt benefit from (some) disclosure: It is a well-established SFO expectation (reaffirmed in the Handbook) that a factor in assessing co-operation will be whether the company has waived privilege over any LPP material (although the Handbook also acknowledges that companies can neither be compelled to waive privilege nor penalised for not having done so). So what level of disclosure can corporates expect from the SFO in return, before deciding whether to agree to a DPA? As referred to above, the SFO wants companies to give the agency information that it does not already have – and the Handbook makes it clear that it is willing to give something in return. While the usual rules on disclosure in criminal proceedings do not apply to DPA negotiations (as they take place pre-charge), the Handbook sets out that the SFO must provide sufficient information to ensure that the company knows enough “to play an informed part in the negotiations” and that it is not misled as to the strength of the SFO’s case. However, the burden on the SFO is somewhat watered down in cases where an internal investigation has taken place: where a company has “played a leading role in obtaining and reviewing its own material (…) it should have sufficient knowledge of the strength of that case”, in the SFO’s view. Last but not at least, it may also be of interest to note that the SFO will explicitly consider disclosing evidence to corporates that it has already served on individuals charged with criminal offences.
 Per the relevant statutory test under the Crime and Courts Act 2013