Transparency International UK notes the forthcoming deferred prosecution agreement (DPA) - the first of its kind in the UK - between the Serious Fraud Office (SFO) and ICBC Standard Bank.

Robert Barrington, TI-UK Executive Director said:

“This will be the UK’s first ever Deferred Prosecution Agreement, and should be a milestone in punishing and deterring corporate corruption.  But there is also the danger that DPAs will become a soft option for companies that should be prosecuted for serious crimes.  A DPA should not allow companies and individuals to buy their way out of punishments. It should include clear admittance of wrongdoing on behalf of the company, coupled with prosecution of those individuals responsible.”

“DPA’s must act as a serious deterrent against companies and include serious penalties that will prevent any future wrongdoing. A good DPA is one that is in the public interest and doesn’t allow companies to evade justice.”

“We wait for the details of this agreement and hope that the process is sufficiently transparent to allow an assessment of whether justice has been served.”

TI has identified five tests by which Monday’s DPA can be assessed:

1. The punishment should fit the crime – noting that corruption is highly damaging to individuals, public institutions and economic development, and that the benefit to companies of a corrupt act is not simply the marginal profit on transactions but also all areas of pecuniary advantage

2. There should be a commitment to prosecute individuals, including directors and senior managers, if they have been active or complicit in the corruption

3. The company should admit wrongdoing – and not simply to secondary offences such as poor record keeping

4. The crime and the settlement are transparent so it is possible to assess whether the public interest has been served and justice has been done

5. There needs to be a clear rationale for why a DPA was selected rather than a prosecution.

Pecuniary advantage – key considerations:

• The share price impact of the commercial advantage and enhanced enterprise value;
• The ‘gateway’ value of a contract secured through bribery for facilitating a broader commercial relationship, such as additional contracts won off the back of the initial bribery;
• Provision of working capital or lower cost of capital associated with contracts or relationships secured through bribe-paying;
• Capital secured that may have allowed for market dominance, including through R&D investment or from mergers & acquisition; and
• Any other advantages derived from free cash flow associated to the bribery gains.

Further information:

1. Our joint letter to David Green QC, Director of the SFO in June 2015.
2. “Companies paying to escape prosecution for alleged corruption is not right - they must be properly punished” Robert Barrington, The Independent, 24/07/15
3. TI-UK Submission to MOJ Consultation on DPAs– August 2012

Contact:

Dominic Kavakeb

[email protected]

020 3096 7696

079 6456 0340