U.K. Approves First DPA in Standard Bank Case
In a development that should be watched carefully by enforcement officials in Canada, on November 30th the Royal Courts of Justice in the United Kingdom approved a deferred prosecution agreement (“DPA”), marking the first time such an agreement has been approved in the U.K. The DPA was entered into between the U.K.’s Serious Fraud Office (“SFO”) and ICBC Standard Bank (“Standard Bank”) in relation to charges laid under section 7 of the U.K. Bribery Act 2010. Standard Bank was accused of having failed to prevent bribery by an associated person following the payment of USD $6 million by a former sister organization of the company to a local partner in Tanzania, where a shareholder of the local partner also acted as Commissioner of the Tanzanian Revenue Authority.
Pursuant to the DPA, Standard Bank will pay USD $25.2 million in financial penalties ($8.4 million in profit disgorgement and a penalty of $16.8 million), $7 million in compensation to the Government of Tanzania, and £330,000 in costs for the SFO’s investigation and subsequent resolution of the DPA. Standard Bank will also pay $4.2 million to the U.S. Securities and Exchange Commission (“SEC”), with whom the SFO closely worked during the investigation.
DPAs – agreements between regulatory enforcement authorities and accused suspending prosecution in exchange for payment of fines, the undertaking of remediation and ongoing cooperation – have been common in the U.S. for some time, but are currently not authorized in Canada and were only authorized by U.K. legislation in February 2014.
Both U.S. and U.K. enforcement agencies have recently stressed that, in order to be eligible for DPAs or non-prosecution agreements (“NPAs”), companies must be forthright in self-reporting potential wrongdoing before being approached by authorities. Ben Morgan, the joint head of the bribery and corruption unit at the SFO, stated in October at the Annual Anti-Bribery and Corruption Forum in London:
We expect early engagement. We don’t want to hear from you every five minutes, and we accept that you need enough time and space to have an initial look at an allegation that comes to your attention. But nor do we want the first time we hear from you to be at the end of a major internal investigation, months if not years after the conduct in question has surfaced, and in particular after multiple witnesses have been interviewed and re-interviewed extensively.
This reflects similar comments from Andrew Ceresney, Director, Division of Enforcement for the SEC, who stressed at the ACI’s FCPA Conference in November that companies must self-report misconduct in order to be eligible for a DPA or NPA. Ceresney stated that he hoped this would “further incentivize firms to promptly report FCPA misconduct to the SEC and further emphasize the benefits that come with self-reporting and cooperation.”
DPAs and NPAs represent an important tool for enforcement authorities in encouraging companies to investigate and self-report allegations of potential compliance violations. As such, the inability of Canadian authorities to enter into DPAs and NPAs robs them of a tool to encourage self-reporting and identify non-compliance so as to enforce applicable legislation. The potential availability of a DPA or NPA can be a powerful incentive in encouraging corporation to self-report. Canada has previously been criticised for lax enforcement of the Corruption of Foreign Public Officials Act (“CFPOA”), leading to amendments and a ramp-up in CFPOA enforcement beginning in 2013. Making DPAs and NPAs available as a tool to authorities would likely assist Canadian regulators in more robust enforcement.