In a judgment published on 30 November, Lord Justice Leveson approved the first Deferred Prosecution Agreement in the UK, which was negotiated between the Serious Fraud Office and ICBC Standard Bank plc. The importance for organisations subject to UK anti-bribery legislation and their advisors is that this is the first time that a judge has reviewed the factors required for the court’s approval of a DPA and their application to published facts. In doing so, the judge emphasised the importance of compliance procedures, early self-reporting and full co-operation.
The indictment against Standard Bank, suspended under the terms of the DPA, identified an offence of failing to prevent bribery under s7 Bribery Act in respect of a payment of $6m made by a sister company, Stanbic Bank Tanzania Limited, in furtherance of a sovereign note private placement for Tanzania in which Standard Bank and Stanbic were the joint lead managers. The recipient of the $6m was a “local partner” whose chairman and one of three shareholders and directors was a serving member of the Tanzanian government; and its managing director had been the CEO of the Tanzanian Capital Markets and Securities Authority until 2011. The SFO concluded that Standard Bank did not have a realistic prospect of raising the statutory defence of having adequate procedures designed to prevent the conduct taking place.
The test for a DPA
A judge must be satisfied first that a DPA is in the interests of justice; and secondly, that the terms of the proposed DPA are fair, reasonable and proportionate.
The interests of justice
The factors taken into account by Leveson LJ in concluding that it was in the interests of justice to approve the DPA were:
- The relevant criminality was not one of substantive bribery, but of failing to prevent bribery by senior officers of a sister company as a result of inadequacy in compliance and a failure to recognise the risks.
- Standard Bank immediately reported itself to the UK authorities: the relevant transaction completed in March 2012; staff at Stanbic raised concerns on 26 March that the $6m had been withdrawn in cash; this was referred to Standard Bank’s head office in South Africa on 2 April; and on 18 April Standard Bank reported itself to the Serious and Organised Crime Agency and on 24 April to the SFO. The reports were made to the UK authorities before any investigation was carried out by Standard Bank. The matter was unlikely to have come to the attention of the authorities without the self-report.
- Standard Bank co-operated with the SFO. Amongst other things:
- it conducted an investigation by independent lawyers sanctioned by the SFO and made its findings available to the SFO
- it made available summaries of first interviews and documents shown to the witnesses and co-operated in making employees available to the SFO for it to interview
- it responded completely and in a timely manner to SFO requests for information
- it made its document review platform available to the SFO
- Standard Bank had no previous convictions for bribery or corruption and had not been investigated by the SFO previously. It had been the subject of enforcement action by the Financial Conduct Authority in 2011 in respect of failures in its anti money laundering procedures, but the judge concluded that this was sufficiently separate not to be taken into account.
- Leveson LJ considered the weight to be attached to the corporate compliance programme at the time of the offence, at the time of the report and any subsequent improvements. A report commissioned by the FCA in 2014 had concluded that there had been significant improvements since 2011 in Standard Bank’s compliance policies and procedures.
- Standard Bank had become a significantly different entity since the commission of the offence, since ICBC acquired a 60% majority shareholding in the bank in February 2015 and a new board had subsequently been appointed.
Fair, reasonable and proportionate terms
The terms essentially comprise:
- Compensation to Tanzania of $6m plus interest of $1.2m
- Disgorgement of the profit by Standard Bank and Stanbic of $8.4m
- Penalty of $16.8m
- Co-operation with the SFO
- Independent review of anti-bribery and corruption controls, policies and procedures for compliance with the Bribery Act and other relevant anti-corruption laws
- SFO costs
The penalty was calculated on the basis that Standard Bank’s culpability was on the medium scale of the Sentencing Council Guidelines, adjusted higher as a result of the harm multiplier, resulting in an initial multiplication of 300% of the profit of $8.4m. This figure of $25.2m took into account mitigating factors, being essentially those factors taken into account on the interests of justice assessment together with the fact that the compliance failures were not widespread in the bank.
The figure was then reduced when the judge carried out the final steps in compliance with the Sentencing Council Guidelines of stepping back to consider the overall effect of the sentence and taking into account the early reporting and indication of guilt. Leveson LJ took into account the fact that the US Department of Justice had indicated that the penalty was comparable with the penalty that it would have imposed and that if the penalty were approved in the UK then it would close its inquiry. Citing the bank’s early reporting and indication of guilt and co-operation, Leveson LJ reduced the penalty to $16.8m.
The Court’s conclusion
Leveson LJ concluded first, that it was obviously in the interests of justice that the SFO investigate a UK registered bank’s acquiescence in an arrangement that had many hallmarks of bribery on a large scale that could and should have been prevented; and secondly that it was in the interests of Standard Bank’s shareholders, customers, employees and those with whom it deals that it demonstrated, as it had, its recognition of its failings and determination in the future to adhere to the highest standards of banking.