U.K.’s SFO lays out expectations in new DPA guidance

In the past six years since DPAs came into being, just eight have been entered into. A ninth was agreed to (in principle) with Airline Services on Oct. 21.

SFO Director Lisa Osofsky said publishing the guidance from the agency’s operational handbook “will provide further transparency on what we expect from companies looking to cooperate with us.”

Lawyers say this approach is in sharp contrast to Osofsky’s predecessor, Sir David Green, who believed companies should simply self-report criminal behavior rather than be instructed how to do so.

A DPA is a court-approved agreement between a company and a prosecutor at the SFO or Crown Prosecution Service. The agreement allows prosecution to be suspended for a defined period—provided the organization meets certain specified conditions.

DPAs require the company to “admit to the misconduct, pay a financial penalty, and agree to adhere to conditions set out by the prosecutor to ensure future cooperation and compliance,” the SFO states. This could include requiring a company to tweak its compliance program or create one from scratch (possibly with the SFO’s oversight).

“There does not appear to be anything new and substantial enough in the guidance that would change advice lawyers may give their corporate clients. If a company is suspected, rather than immediately approaching the SFO, lawyers are almost always likely to advise that an internal investigation is undertaken before disclosure is made to the agency.”

Iskander Fernandez, Partner, BLM

Cooperation with the agency is at the heart of being considered for leniency. This includes the early reporting of suspected wrongdoing, preserving evidence (including internal investigations) and sharing it with prosecutors, sharing witness accounts and making witnesses available for interview, and waiving privilege over any material protected by legal professional privilege (though companies are not compelled to do so and cannot be penalized if they do not).

Other factors that can be considered in a company’s favor include: a lack of prior convictions or regulatory sanctions for similar, criminal behavior; evidence of a proactive compliance program (even though it may need improvement); or evidence the offense represents “isolated actions” by individuals, for example by a rogue director, or did not take place recently and was committed under a different management team or in a market the company no longer operates in.

The fact negotiations are taking place must remain confidential.

As with the last set of guidance the SFO released in August 2019, the agency makes it clear it is in charge of offering DPAs—companies cannot ask for one, even if they self-report. “An invitation to enter negotiations is no guarantee that a DPA will be offered; a decision may still be made to prosecute should negotiations fail,” says the SFO.

The SFO also makes it clear it will not go soft on fines if a company agrees to a DPA. “The amount of any financial penalty must be broadly comparable to the fine that a court would have imposed on conviction for the alleged offending following a guilty plea,” it says.

Lawyers broadly welcome the SFO’s attempt to be transparent, but they are hesitant to say the effort will be successful.

Iskander Fernandez, partner and white-collar crime specialist at law firm BLM, does not believe the approach set out in the guidance will be compelling enough for companies to spill the beans on any criminal activity.

“There does not appear to be anything new and substantial enough in the guidance that would change advice lawyers may give their corporate clients,” he says. “If a company is suspected, rather than immediately approaching the SFO, lawyers are almost always likely to advise that an internal investigation is undertaken before disclosure is made to the agency.”

Michael Ruck, partner at U.K. law firm TLT, says the guidance “will almost inevitably provide companies and their legal representatives with a framework with which to challenge the SFO on its use of DPAs and whether they are in accordance with the published guidance.”

Ruck also raises a belief among several corporate lawyers that the SFO needs to encourage self-reporting and cooperation because its own track record of prosecuting companies—and especially individuals—for corporate crimes is so poor.

“The outstanding challenge for the SFO is to secure criminal convictions of relevant individuals responsible for the controlling mind of the company entering into the misconduct,” says Ruck. “To date, while corporates have been willing to enter into DPAs, the SFO has not fared well in the related criminal prosecutions of related senior individuals.”