After many months of speculation, it was announced today that ICBC Standard Bank Plc has become the first entity in the UK to enter into a Deferred Prosecution Agreement with the SFO.
After many months of speculation, it was announced today that ICBC Standard Bank Plc ("Standard Bank") has become the first entity in the UK to enter into a Deferred Prosecution Agreement (DPA) with the Serious Fraud Office (SFO). Standard Bank was the subject of an indictment alleging failure to prevent bribery by two executives at Stanbic Bank Tanzania Ltd., a former sister company of Standard Bank, contrary to section 7 of the Bribery Act 2010.
Lord Justice Leveson at Southwark Crown Court approved the DPA, in his judgment today, noting the fact that Standard Bank self-reported within days of identifying the wrongdoing and cooperated fully with the SFO as his first reason for doing so. The terms of the DPA suspend the charges for a period of 3 years and require that Standard Bank pay compensation of US$7m to the Government of Tanzania, financial orders payable to HM Treasury totalling US$25.2m, consisting of a financial penalty of US$16.8m and disgorgement of profits of US$8.4m, in addition to the SFO's costs of £330,000 in relation to the investigation and subsequent resolution of the DPA.
Standard Bank has also agreed to continue to cooperate fully with the SFO and to be subject to an independent review of its existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. It is required to implement recommendations of the independent reviewer, Price Waterhouse Coopers LLP.
• This decision marks the end of a long wait for the SFO to strike a plea deal with a company, and follows many months of rumours about potential candidates. For the SFO, the introduction of DPAs in Schedule 17 of the Crime and Courts Act 2013 (which became available for use on 24 February 2014 after the publication of the Code of Practice) heralded a new dawn. The DPA process is designed to provide commercial organisations with an alternative avenue to investigation and prosecution. Essentially, if a company self-reports and satisfies the SFO that it will provide sufficient information to enable it to establish a realistic prospect of conviction, the SFO proffers a carrot in return which is a chance for the company to hold its hands up to the wrong, comply with specified steps imposed by the SFO and approved by the court, pay a fine and, potentially, walk away without a conviction.
• Today's judgment provides the first guidance on how a DPA works in practice. It is unsurprising that today's DPA involves a section 7 offence as it is the only corporate offence not requiring satisfaction of the identification principle. The identification principle determines whether the offender was a directing mind and will of the company, a notoriously hard test for a prosecutor to prove, and often a practical bar to corporate convictions. A section 7 offence (of failing to prevent bribery) dispenses with this requirement and therefore provides a more attractive avenue by which to achieve a realistic prospect of conviction in accordance with the full code test for prosecutions as set out in the DPA Code of Practice.
• It is also worth noting that the London-based Standard Bank is currently 60 percent-owned by Industrial and Commercial Bank of China (ICBC) and 40 percent-owned by South Africa's Standard Bank Group. Today's DPA demonstrates the Bribery Act's reach when pursuing non-UK companies that maintain a presence in the UK. Standard Bank's failure to prevent its sister company at that time, Stanbic Bank Tanzania Ltd., and the two named executives in that subsidiary from committing bribery in circumstances in which they intended to obtain or retain business or an advantage in the conduct of business for Standard Bank formed the basis of the offence and opened Standard Bank up to being prosecuted by the SFO. The SFO's reach does not go as far as prosecuting the two executives, Bashir Awale or Shoes Sinare, however, as neither are UK citizens nor are they based in the UK. Instead the Prevention and Combatting of Corruption Bureau (PCCB) in Tanzania will commence an investigation.
• When approving the DPA, Lord Justice Leveson emphasised the fact that Standard Bank self-reported within days of identifying the wrongdoing and cooperated fully with the SFO. This reiterates what is stated in the DPA Code of Practice that cooperation is a key factor that the prosecutor may take into account when deciding whether to enter into a DPA. Going forward it is clear that the court will attach serious weight to a corporate's conduct upon uncovering a possible offence when deciding whether or not to approve a DPA. The level of cooperation by Standard Bank was also stated as factor when considering the reduction in the financial penalty imposed by Lord Justice Leveson. The fact that Standard Bank promptly reported its own conduct and cooperated with the SFO's subsequent investigation meant that a full reduction of one third was justified and appropriate in the circumstances (US$25.2m to US$16.8m).
• After many months of talking with little to show by way of action, the SFO has been under increasing pressure to demonstrate that DPAs are a viable and attractive option and that the detractors are without merit. The success of this case will be pivotal in the SFO establishing an environment akin to the U.S where the DPA becomes the predictable outcome for a corporate considering whether it should self-report. The SFO will therefore be keenly aware that this decision will form the foundation of the future success of DPAs and the initial impressions are that, for suitable cases, if a corporate cooperates early and in full then a DPA may well be the best route to limit its exposure.