US-style Deferred Prosecution Agreements (DPAs) are set to be offered to UK companies being investigated by the Serious Fraud Office and Crown Prosecution Service in early 2014 following a recent response to a consultation paper by The Ministry of Justice.
This represents a significant sea-change in the way in which economic or “white collar” crimes such as fraud, money laundering, bribery and corruption will be dealt with by investigating and prosecuting authorities in the UK.
A Deferred Prosecution Agreement is an agreement between the authorities and a company under investigation, to defer or postpone a full-scale criminal prosecution providing that specific conditions are satisfied, for example the payment of a penalty or fine, reparation to victims, undertakings and regular audits to prevent repetition.
The directors of the SFO and CPS are expected to publish a Code for Prosecutors in relation to Deferred Prosecution Agreements and the Sentencing Guidelines Council are likely to produce guidelines on the size of financial penalties imposed as a condition under such agreements.
Because DPAs are likely to apply to the most serious and often complex of criminal offences, a Judge, at a private hearing away from the public glare, will decide whether the Deferred Prosecution Agreement is in the interests of justice and whether it is a fair and proportionate method of dealing with a particular crime based on the individual circumstances of each case. The final terms of any DPA will then be published to ensure public scrutiny.
When the agreement ends the prosecutor will report on the extent to which the company has complied with it and breaches will be publicised, punished and capable of being contested if a company disagrees with the alleged breach.
Stephensons recently published details of the changes to the SFO’s guidance on self-reporting which can be found here. It is hoped that self-reporting will still be encouraged but in the current climate of public spending cutbacks there is, inevitably, a limit to the number of investigations and prosecutions the SFO and CPS are able to bring.
It is hoped that the introduction of DPAs will enable the SFO and CPS to get tough on more companies involved in these type of offences, as they have promised to, with the imposition of substantial penalties without the authorities having to find funds from their limited budgets to pursue full-scale criminal prosecutions as these are often contested and sometimes result in alleged offenders being acquitted or even exonerated following lengthy investigations.
Defending a serious criminal investigation or prosecution can also be expensive for the companies involved. However, unlike the US system, companies in the UK will not be required to make admissions of guilt and, for companies facing such investigations the early offer of a Deferred Prosecution Agreement may be an attractive method to limit costs exposure, whether or not the company accept the full extent of any allegations.
Companies should also be aware that another important difference to the US model is that they will not be required to waiver legal privilege as part of the terms of the DPA and, as such, should always take advice from a specialist fraud solicitor at the first sign of an investigation to ensure their position is protected and any potential financial and reputational damage is mitigated.
Stephensons Solicitors’ Fraud and Regulatory team specialise in advising and defending businesses and business people accused of economic crime throughout the UK.
By regulatory solicitor and partner, Sean Joyce