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09 Oct 2012

SFO clarifies self-reporting rules – the start of a new era?

Today the SFO finally broke its silence over self-reporting and issued a statement to explain its position.  The previous guidance issued by the SFO was withdrawn earlier this year and many were wondering what the SFO was going to say about this important aspect of domestic and cross border criminal practice.

The SFO announcement http://www.sfo.gov.uk/bribery–corruption/self-reporting-corruption.aspx underlines new Director David Green’s key message that he wants to see a return to prosecuting big fraud cases, a message that echoes the comments by Lord Justice Thomas in the Innospec case to the effect that fraud and corporate wrongdoing ought normally to be prosecuted and cosy plea deals or civil settlements should not be permitted.

The new stance taken by the SFO stresses the reliance on existing guidance focusing on evidential sufficiency and public interest, notably the Guidance on Corporate Prosecutions, the Code for Crown Prosecutors and the Joint Prosecution Guidance of the SFO/CPS on the Bribery Act 2010 where it is relevant.  In that sense there is nothing new in this statement and it certainly does not mark a new era of self-reporting leniency for corporate fraud and corruption.

The Guidance on Corporate Prosecutions, which has been in place for some years now, places a heavy burden on any self-reporting company to demonstrate that it took “a genuinely proactive approach” when the offending was discovered.  The message is that companies are unlikely to escape prosecution, in cases where there is sufficient evidence, if they fail to demonstrate that they have fully investigated the matter and in many cases provided active co-operation to the authorities.  Poor compliance history and inadequate compliance procedures will both make prosecution more likely.

The Guidance on Corporate Prosecution warns against prosecuting a company as a substitute for proceeding against culpable individuals.  Where the risk of a company being prosecuted is high, there will be an even greater tension between the interests of the individual and the company.  In some cases individuals will be looking to make use of whistleblower protection and criminal immunity provisions to make their own reports to prosecutors before companies report themselves.

Whether this is a new approach or not, self-reporting remains an option and civil recovery is still available for the SFO to use in the right cases. Will the SFO’s announcement today encourage more self-reporting?  This seems unlikely until some big names are prosecuted.

Corker Binning is a law firm specialising in fraud, regulatory and general criminal work of all types. For more information about our corruption and bribery practice and how we can help you, visit our website or call us on 0207 353 6000.      

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