One of the key issues for any company which uncovers evidence of criminal wrongdoing in the business will be whether or not to report the matter to the authorities voluntarily.  Subject to a few exceptions (eg companies working in the financial sector) there is no obligation to do so and so the question is whether to report and run the risk of prosecution (of either individuals and/or the company) or whether to say nothing and hope that the whole thing blows over.  In an attempt to encourage the former course of action, the Serious Fraud Office (SFO) has recently published new guidance which suggests that self reporting will ordinarily result in a Deferred Prosecution Agreement (DPA), rather than prosecution.  This article considers that issue in greater depth and examines also the extent to which this policy development is consistent with new legislation facilitating the prosecution of corporate bodies.

By Christopher Coltart KC, Head of the Business Crime Team at 2 Hare Court

The Deferred Prosecution Agreement (DPA) is a tool which has gained rapid popularity with the SFO since its inception into UK law in 2014.  In short, it enables a company to stave off prosecution if it admits the wrongdoing undertaken by its employees (eg bribery or fraud), pays a fine and agrees to a monitored programme of remediation.  The attraction of this from the SFO’s perspective is that it avoids the complexities of securing criminal convictions against corporate entities (as to which, see below), whilst securing the payment of fines, some of which are eye watering in size.  In 2020, for example, Airbus paid £991 million following its DPA with the SFO.

Until now, however, there has been a lack of clarity as to the circumstances in which the SFO will agree to a DPA rather than prosecute.  The recently published guidance is an attempt to remedy that, and to persuade more companies to come forward with evidence of criminality.  With that in mind, the guidance states that if a company self reports promptly to the SFO and co-operates fully with the investigation, it will be invited to negotiate a DPA rather than be prosecuted, unless exceptional circumstances apply.

A number of issues arise however in relation to this seemingly straightforward proposition.  The first is whether the carrot on offer is simultaneously undermined by the observation (paragraph 3 of the guidance) that a company which does not self report may be offered a DPA in any event.  This will happen if the company provides an ‘exemplary’ level of co-operation in any investigation instigated by the SFO itself.   What constitutes ‘exemplary’ will be fact specific in every case but the examples given include:

• Proactively preserving all relevant digital and hard copy material
• Collating and providing to the SFO all such relevant material or pinpointing its location
• Identifying all relevant individuals (internally and externally) who are suspected of wrongdoing
• Liaising with the SFO over any internal investigation and waiving legal professional privilege in relation to it
• Calculating for the SFO any financial benefit to the company from the offending

Once the SFO has begun an investigation, however, there is little incentive for a company not to provide this information anyway.  The SFO has extensive powers to compel the production of documents and to interview those thought to be involved and so if the company does not co-operate, it is likely that the evidence will be extracted from it in any event.  In those circumstances, the temptation not to self report will subsist – the company may get away with whatever has gone on and if it does not, the prospect of a DPA will endure nonetheless through voluntary co-operation.

The other matter which potentially undermines the effectiveness of the guidance is its failure to identify the ‘exceptional circumstances’ in which a company might self report and still be prosecuted.  Of course, it would be impossible to produce a definitive list of such circumstances, as every case will turn on its own facts but some broad parameters might at least have been given.  In their absence, some companies will rightly be concerned that they will end up in the worst of all worlds, namely self reporting and yet still being subject to prosecution.  Some clarity from the SFO in relation to this issue would be welcome.

Overall, the guidance is nonetheless a welcome step forward in terms of clarifying the self reporting process.  It must simultaneously be said, however, that the timing of it is curious, given recent legislative developments which have very much been made at the behest of the SFO and other prosecuting agencies.  For many years, the SFO (in particular) complained about the inherent legal difficulties in prosecuting corporate bodies in this country.  Such cases were governed by the so-called ‘directing mind and will’ principle such that a company could only be held criminally liable for wrongdoing in the business if the requisite mental element for the offence could be attributed to its directors.  Proving this was difficult, especially in a large organisation where the directors would inevitably claim (often with some justification) that they were unaware of improper acts being perpetrated at a more junior level.

In order to remedy this defect in the law, Parliament recently enacted two specific measures.  The first widens the scope for corporate criminal liability by rendering the company liable for any economic crimes committed by a ‘senior manager’ of the business (s.196 Economic Crime and Corporate Transparency Act 2025 (‘ECCTA’).  In other words, it will not only be directors of the company who are able to bind it in this way.  The second measure (s.197 ECCTA) provides that large companies will commit an offence if, without having taken reasonable preventative measures, someone associated with the business (usually an employee) commits a fraud designed to benefit the company or one of its clients.  This creates criminal corporate liability therefore for wrongful acts committed further down the food chain.

Having battled for so long to secure these changes to the law, it seems odd that the SFO would simultaneously make it easier for companies to avoid prosecution through the medium of self reporting.  The SFO would no doubt argue that they now have the best of both worlds, in that criminal wrongdoing is more likely to be brought voluntarily to their attention but if it is not and it is uncovered nonetheless, prosecutions will be easier to bring.  Still, one wonders about the extent to which this is genuinely the product of joined up thinking.

One final thought is whether any of this will assuage the public desire for retribution in relation to the senior executives of a company which engages in criminal activity.   Many people won’t care about the size of the fine paid by a large corporate body or may even view such payments as the senior executives seeking to buy their way out of prosecution.  In an attempt to buck this perception, the SFO has tried to prosecute various directors on the back of DPAs entered into by their companies but so far without success.  The prospects of improving on that record appear bleak, especially in light of the difficulties caused by the explosion in digital data in every case.  Notwithstanding the admirable review recently undertaken by Jonathan Fisher KC, there is no silver bullet on the horizon as far as that is concerned.  Some further thinking is therefore required on this complex issue.

Christopher Coltart KC is Head of the Business Crime Team at 2 Hare Court