Corporate Crime: Reaping the Benefits of Self-Reporting

Aziz Rahman

Aziz Rahman

Recently disclosed statistics show that only a small number of companies are prosecuted after self-reporting bribery and corruption. Aziz Rahman observes that such a course of action demands careful consideration.

There’s a widely-accepted view that, when it comes to corporate crime, self-reporting your wrongdoing can help you gain more lenient treatment than if you’re caught doing wrong by the powers that be.

It’s a view that has been reinforced by some high-profile cases and some recently obtained figures. After Rahman Ravelli made a Freedom of Information request, it was disclosed that in the last ten years only two companies that have self-reported bribery or corruption concerns to the Serious Fraud Office (SFO) have been formally prosecuted.

What amounts to one prosecution of a company self-reporting bribery every five years has to be classed as an infrequent occurrence. For those two companies it must have been galling to be open and honest about their problems and be shown little or no leniency for doing so. For the rest of the business world, those two cases have to be seen as a warning about the importance of going about self-reporting in the right way.

The right way

What is the right way? First and foremost, a company has to know the full extent of the wrongdoing and how it was able to be committed. This requires a carefully planned and conducted internal investigation into all aspects of the company’s working. Only then can a company consider self-reporting.

Doing so without knowing the full picture can be damaging if the SFO then carries out its own investigations and uncovers more wrongdoing that the company had not reported to it.

Self-reporting can be a good idea, but if the internal investigation is not carried out properly, if its findings are not handled carefully or if reporting those findings is done in the wrong way or at the wrong time then a company can be heaping trouble on itself rather than removing it.

The SFO wants co-operation from those seeking leniency, but some of the SFO’s senior figures have been openly dismissive of companies trying to appear co-operative in order to secure a favourable outcome, such as a deferred prosecution agreement (DPA). The SFO’s 2019 document ‘Corporate Co-operation Guidance’ emphasises that even full and robust co-operation is no guarantee that a company will obtain the conclusion to an investigation that it desires. The SFO is not an organisation that’s easily satisfied.

Starting with a clean slate

Looking to start again with a clean slate is not, therefore, a magic cure for the company that finds itself mired in bribery. Co-operation can play its part, but quite often more needs to be done. Which is where reform comes in. If the SFO is considering whether to take a lenient approach to those it’s investigating, it’s more likely to ‘go easy’ if that company is already in the process of taking steps to put right the wrongs.

Standard Bank obtained the UK’s first DPA after immediately reporting its wrongdoing – failure to prevent bribery under Section 7 of the Bribery Act 2010 – but also showed a desire to put right its problems as quickly as possible.

Such activity is, it could be argued, to be expected of any company that has been found to have acted illegally, regardless of whether or not it self-reported its wrongdoing. Taking such action is not just valuable in preventing a repetition of the problems. It can also go some way towards convincing the SFO that a company is genuine in wanting to resolve its difficulties. That can bring rewards in the shape of an offer from the SFO that’s less painful than the cost, reputational damage and conviction that can stem from a decision to prosecute.

Yet it should be made clear that, in some cases at least, all manner of diligent self-reporting and action to improve workplace practices can count for little if the company isn’t then capable of holding its nerve when dealing with the SFO.

DPA with Guralp Systems Ltd

By way of an example, in the most recent DPA (ie that between the SFO and seismic equipment company Guralp Systems Ltd), Guralp Systems Ltd latter agreed to disgorge profit of £2,069,861, keep co-operating with the SFO and review its compliance procedures. The business accepted that it had been involved in conspiracy to make corrupt payments and had failed to prevent bribery in relation to its dealings in South Korea. Yet before the DPA could be formally announced, all three senior company figures who were charged with conspiracy to make corrupt payments in relation to the alleged wrongdoing were cleared by a Jury at Southwark Crown Court.

It’s understandable that Guralp Systems Ltd was attracted when a DPA was offered after the company had self-reported, but with all three individuals being acquitted of the alleged wrongdoing it would be surprising if there are not some in the company now wondering about the wisdom of taking the DPA.

Guralp Systems Ltd isn’t the only company that has taken a DPA only for the prosecution of individuals to fail.

Self-reporting cannot be seen as a cure-all. If it’s backed up by real co-operation and reform then it can help to secure a more agreeable outcome than prosecution, but each and every step must be approached with care.

Aziz Rahman is Senior Partner and Head of the Corporate Crime Group at Rahman Ravelli Solicitors

References

https://www.sfo.gov.uk/download/evaluating-a-compliance-programme/

https://www.theguardian.com/business/2015/nov/30/standard-bank-fine-defer-prosecution-tanzania-bribery-scandal

https://www.sfo.gov.uk/2019/12/20/three-individuals-acquitted-as-sfo-confirms-dpa-with-guralp-systems-ltd/

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014 and as Editor of The Paper (Pro-Activ Publications' dedicated business newspaper for security professionals) in September 2015. Brian was appointed Editor of Risk Xtra at Pro-Activ Publications in May 2018.

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