The changing landscape of anti-corruption prosecution

Lisa Osofsky, Director of the Serious Fraud Office (SFO) opened GoodCorporation’s latest debate on anti-corruption by emphasising a determination to build on the trajectory of robust prosecution already established by a committed team at the SFO. Appropriate cases will continue to be brought forward, reinforcing the goal of fostering a climate that is inhospitable to those seeking to bribe or engage in corrupt activities.

To tackle corruption effectively it is necessary to understand and respond to the way technology is being deployed by those engaging in corrupt practices. First, it has ‘shrunk the world’ making it possible to perpetrate a fraud, virtually invisibly, in nanoseconds. Second, digital tools can be economically and socially disruptive, creating volatility and opportunity to enable corruption.

Prosecutors and those in law enforcement need to respond in three ways; to work at pace, to work more closely with each other and to understand the differences between the systems.

Working at pace: Prosecutors cannot work at analogue speeds when corruption can occur in seconds. The effective tools given to the SFO by the UK Parliament, such as Unexplained Wealth Orders, will be deployed. However, there is also a determination to move things forward at a faster pace.

The SFO is therefore considering some of the more pro-active techniques in use in its jurisdiction and others that could be adapted to the work of the SFO. Basic investigative methods have changed, so a strong intelligence function with digital forensic capability will be a priority. This will enhance the agency’s investigative capacity and strengthen its ability to trace fraud and corruption across borders and on the web.

The SFO would like to see vicarious liability applied to all economic crimes but would settle for an extension of failure to prevent legislation which would also strengthen their hand.

Co-operation: Working collaboratively across jurisdictions, agencies and sectors will be key to building successful cases. Meetings with the Department of Justice, Federal Bureau of Investigation and other partners and colleagues are already underway to improve information sharing and collaboration across the different agencies.

Understanding the differences: Prosecutors in different countries operate to different rules and these rules can affect how investigations are conducted. As more cross-border investigations are undertaken it will be essential to understand how the same investigation may be handled very differently in each jurisdiction. For example, a subpoena can be used to get information quickly in the States, but not in Europe. The use of monitorships and Deferred Prosecution Agreements (DPA) will also vary from country to country, and this needs to be understood by companies and their advisers.

The SFO recognises that companies have made significant progress and are ready to listen to those willing to talk.

So to the debate, is the corruption landscape clear and are businesses confident they know what is adequate?

The Prosecution landscape: Most felt that the law is clear, particularly anti-corruption legislation which is categoric about what is and is not acceptable. Other white-collar legislation, such as anti-money laundering, was felt to be excessively complex. For anti-corruption, challenge lies not understanding the law, but in implementation.

Where advice would be welcomed is on the prosecution landscape in different jurisdictions. Indeed, some felt that greater international harmony would be the most helpful. Navigating a clear path across borders is not easy, so greater legislative and prosecutorial consensus would help businesses tackle corruption and implement adequate procedures more effectively.

Implementation: In the more challenging parts of the world there are practical difficulties in ensuring that the correct systems and procedures are properly implemented. This makes it hard for many global companies to have the necessary assurances that their anti-corruption policies are effective. Simply getting the right messages across can be a challenge. This is not helped by the small number of prosecutions which can make it hard to evidence the consequences of failing to understand and abide by the requirements of the law.

What is adequate? Adequacy continues to cause concern. Companies would still like to know what the SFO deems adequate. Ideally this would include guidance on proportionality, so companies could feel confident that their deployment of resources would be deemed acceptable by prosecutors.

This may not be possible however, as adequacy is likely to vary over time as systems mature and procedures become more embedded. What was might have been considered adequate immediately after legislation was passed, may no longer be deemed adequate ten years later. The lack of clarity on defining adequate procedures could be considered a virtue. If companies simply follow a set of rules, this leads to a tick-box approach rather than a focus on doing the right thing.

Culture: For some, one of the most effective means of preventing corruption is to build a strong, ethical culture. This should be enshrined in the values of the organisation which are then used to drive the right behaviours. Training and a focus on ethics should underpin the anti-corruption programme.

Co-operation: It is felt that the various law enforcement agencies have different views on what is considered co-operative and what would be found obstructive, with the result that companies are unsure about what to do in different jurisdictions as outcomes could be very different. Even in the UK, more direction on what it means to co-operate would be welcomed.

DPAs:  DPAs are a good example of how the prosecution landscape varies from country to country, with the bar set high in the UK. Their availability here is seen as positive, as they encourage companies to consider self-reporting or using a monitor. Nonetheless a reluctance to self-report continues, due to the lack of certainty that a DPA would be granted. Others feel that this lack of certainty is positive, arguing that it focuses efforts on doing the right thing, rather than ticking boxes to obtain a particular outcome. The SFO is keen to make sure that DPAs are effective and that companies feel able to self-report, indicating that it is considering drafting guidance to help companies understand what ‘cooperation’ means to the SFO.

The GoodCorporation view: It seems clear that from both a legislative and a prosecutorial perspective, the landscape for companies is likely to get tougher. Understanding the international picture, assessing risk carefully and making judgements around adequate procedures is likely to remain a duty of businesses and their advisers. From our work, we know that many companies are establishing effective systems and processes. Even in the more challenging sectors and locations, this can be achieved, but it is hard. We have worked with companies facing prosecution, often alongside the monitor, to help assess and measure the effectiveness of their procedures. We offer a range of services that can help companies to design, build and embed their antic-corruption programme.