Out-Law / Your Daily Need-To-Know

One third discounts on penalties not enough incentive to report bribery and corruption, says SFO

19 Sep 2016, 10:11 am

Deferred Prosecution Agreements (DPAs) are a useful tool in encouraging companies to report offenses to the Serious Fraud Office (SFO) but the penalty discount may have to be raised, Ben Morgan, the organisation's joint head of bribery and corruption has said.

DPAs are designed to encourage businesses to self-report wrongdoing in the hope of more lenient treatment, including a reduction in the penalty they have to pay. Prosecutors in the UK have had the power to put DPAs in place with corporate offenders since February 2014.

The SFO's first DPA was concluded late last year with ICBC Standard Bank after it was found that the company had failed to prevent bribery during a period in 2012/13. The bank was given a 33% discount on its penalty. In a second DPA in July this year, an unnamed SME benefited from a 50% discount to its penalty for admitting its involvement in corrupt practices.

These demonstrate "in real life one of the policy reasons that caused DPAs to be introduced; namely striking the balance on how to deal with good corporate citizens who detect but are willing to resolve problems in their organisations," Morgan told the Global Investigations Review this week.

"It is vital that adequate sanction takes place – to remove illegal benefit; to administer an appropriate additional financial penalty to deter others; and wherever it is possibly to identify them, to compensate victims. But equally if DPAs are to regularly unearth wrongdoing that might otherwise go undetected, there does have to be an incentive for people to come forward," he said.

Companies are usually given a 33% discount for pleading guilty to corruption charges at the earliest possible stage.

"It has long been said that the one third discount on a penalty, being equivalent to the maximum available on a guilty plea, is not sufficiently attractive," Morgan said.

"As it happens, at the SFO we can see the force in that argument. If taken together with the other benefits of a DPA, these have the effect of more companies coming forward, then that can only be a good thing in the overall interests of justice," he said.

Anti-corruption law expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com said that even a 50% discount is not enough.

"That only represents a 17% discount on what they might receive for pleading guilty at the first opportunity," he said.

"In order to create a real incentive, it should be double the discount for a guilty plea, at something like 75%," Vitou said.