Compliance update - deferred prosecution agreements finally come to Canada
The Canadian federal government released Bill C-74 on March 27, 2018. Bill C-74 (a 500-page plus document) proposes amendments to several statutes to give effect to a number of changes announced in the government’s recently published budget document. Tucked at the end of this bill are amendments to Canada’s Criminal Code relating to deferred prosecution agreements.
The proposed amendments to the Criminal Code come in the wake of a recently completed public consultation run by the Canadian government from September 25 to December 8, 2017. The public consultation sought input on the Canadian deferred prosecution agreement (DPA) regime (the consultation also sought input on Canada’s integrity regime relating to government suppliers). The feedback received as part of this consultation was largely supportive of DPAs. (We have previously written about this issue and have advocated for the introduction of this and other tools: Results of consultation, Multilateral enforcement and Government seeks input).
The proposed amendments to the Criminal Code are largely consistent with the findings from this consultation process and provide the prosecutors with a useful tool to address offences committed by organizations. The proposed amendments also underscore the importance of robust compliance programs in mitigating the risk of criminal convictions for organizations.
In summary, the proposed amendments provide for the following:
- Deferred prosecution agreement regime: The amendments will establish the DPA regime. This regime’s stated objectives include: (a) to denounce an organization’s wrongdoing and the harm caused by it; (b) to hold the organization accountable for its wrongdoing; (c) to contribute to respect for the law by imposing an obligation on the organization to put in place corrective measures and promote a compliance culture; (d) to encourage voluntary disclosure of the wrongdoing; (e) to provide reparations for harm done to victims or to the community; and (f) to reduce the negative consequences of the wrongdoing for persons (e.g., employees, customers, pensioners and others) who did not engage in the wrongdoing, while holding responsible those individuals who did engage in that wrongdoing.
- Conditions for deferred prosecution agreements: The amendments propose a number of conditions for the prosecutor to meet before entering into negotiations for a DPA, including that the offence does not relate to bodily harm or related to a criminal organization, the prosecutor is of the opinion that negotiating the agreement is in the public interest and appropriate in the circumstances, and that the Attorney General has consented to the negotiation of the agreement.
- Offences covered: A DPA may be entered into in respect of certain specified offences. These offences generally relate to white-collar crimes and include the following offences: prohibited insider trading; gaming in stocks or merchandise; fraudulent disposal of goods on which money advanced; fraudulent receipts under Bank Act; disposal of property to defraud creditors; books and documents; false prospectus; secret commissions; fraud; fraudulent manipulation of stock exchange transactions.
- Factors for consideration: In determining whether a DPA is in the public interest, the prosecutor must consider several factors, including: (a) the circumstances in which the act or omission that forms the basis of the offence was brought to the attention of investigative authorities; (b) the nature and gravity of the act or omission and its impact on any victim; (c) the degree of involvement of senior officers of the organization in the act or omission; (d) whether the organization has taken disciplinary action, including termination of employment, against any person who was involved in the act or omission; (e) whether the organization has made reparations or taken other measures to remedy the harm caused by the act or omission and to prevent the commission of similar acts or omissions; (f) whether the organization has identified or expressed a willingness to identify any person involved in wrongdoing related to the act or omission; (g) whether the organization — or any of its representatives — was convicted of an offence or sanctioned by a regulatory body, or whether it entered into a previous remediation agreement or other settlement, in Canada or elsewhere, for similar acts or omissions; (h) whether the organization — or any of its representatives — is alleged to have committed any other offences; and (i) any other factor that the prosecutor considers relevant.
- Mandatory contents of agreement: The DPA will be required to comply with the mandatory content requirements in the Criminal Code, including a statement of facts related to the offence and admission of responsibility for the offence. The DPA will be subject to court approval.
- Other provisions: The proposed amendments also touch on several other related points (e.g., duty to inform victims, publication of DPA, admissibility of evidence, etc.).
Importance of a robust compliance program
A robust compliance program is critical for organizations to significantly reduce the risk of legal violations and criminal convictions. The proposed DPA regime underscores the importance for organizations to have such compliance programs. Although Canada has not in the past been seen as a fierce pursuer of white collar criminal convictions, it is coming under increasing international pressure to ramp up its enforcement, especially in the context of offences relating to bribery, corruption, anti-money laundering and sanctions restrictions. As noted above, the factors that must be considered by the prosecutor to negotiate a DPA include whether the offence was self-reported (encouraging voluntary disclosure of the wrongdoing is one of the stated objectives of the DPA regime), the level of involvement of senior officers, disciplinary action taken by the organization and the measures taken by the organization to remedy the harm and prevent the commission of similar acts or omission.
Directors, officers, compliance and legal personnel in all organizations, small and large (regardless of the nature of their business) should carefully assess their compliance programs (or put in place compliance programs if none exist) to ensure that they have taken all reasonable steps to reduce the risk of legal violations and criminal convictions.