The Serious Fraud Office’s (SFO) first application for a Deferred Prosecution Agreement (DPA) was approved by the court this week. It was also the first use by a prosecutor of the Corporate Offence - section 7 of the Bribery Act.

In February 2014 prosecutors were given the ability to agree DPAs with corporate offenders of the Bribery Act, provided it is in the public interest to do so. DPAs are designed to encourage organisations to self-report in return for the possibility of avoiding prosecution and more lenient sanctions.

Standard Bank Plc (now known as ICBC Standard Bank Plc) will avoid prosecution if it complies with the provisions of a DPA which has a term of 3 years and includes financial penalties in excess of US$30 million.

The Facts

A former sister company of Standard Bank, Stanbic Bank Tanzania Limited (Stanbic), made a payment of US$6 million in March 2013 to a local partner in Tanzania, Enterprise Growth Market Advisors Limited (EGMA), whose directors included a serving member of the Tanzanian Government. The SFO alleges that the payment was intended to induce members of the Tanzanian Government to show favour to Stanbic and Standard Bank’s proposal for a US$600 million private placement to be carried out on behalf of the Government of Tanzania.

Stanbic and Standard Bank received the mandate to raise the funds and received US$8.4 million between them in addition to the US6 million which was paid by Stanbic to EGMA. Standard Bank relied upon Stanbic to conduct due diligence in relation to EGMA and made no enquiries of its own.

Suspicions were raised as there was no evidence that EGMA provided any services in return for the fee. The fee was paid into a new bank account for EGMA and was almost entirely withdrawn via four cash withdrawals within 10 days. The proceeds have not been traced.

The Corporate Offence

Standard Bank self-reported to the SFO and instructed a firm of solicitors to undertake an internal investigation. The SFO reviewed the solicitors’ report and conducted its own interviews. It considered that Standard Bank was guilty under section 7 of the Bribery Act of failing to prevent bribery. This is the offence commonly known as the “corporate offence”.

It is a defence to the corporate offence for a commercial organisation to have in place adequate procedures designed to prevent persons associated with the commercial organisation from committing bribery. The SFO considered that Standard Bank’s procedures were not adequate. It had in place a number of committees, policies and procedures intended to address bribery and corruption but the applicable policy was unclear, not reinforced through communication and/or training and provided insufficient guidance to deal with the situation concerned.

The DPA

Standard Bank will avoid prosecution provided that it complies with the provisions of the DPA which has a term of 3 years. Standard Bank must pay a fine of US$16.8 million, disgorgement of profits of US$8.4 million, compensation to the Government of Tanzania of US$7 million and the SFO’s costs of £330,000.

Standard Bank must also cooperate fully with the SFO and be subject to an independent review of its anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act and other applicable anti-corruption laws. It is required to implement recommendations of the independent reviewed (PWC).

And finally…

The SFO have confirmed that this DPA will act as a template for future agreements.

It has also applauded Standard Bank for its frankness and early engagement with the SFO. Standard Bank’s approach of self-reporting, open and early engagement along with its agreement to the DPA meant that its financial penalties were reduced by one third.

It is worth reiterating that Standard Bank had policies and procedures in place but these were found to be deficient, both in terms of content and a lack of communication and training of staff. Would your anti-corruption policies and procedures stand up to scrutiny? It is important not only to have policies and procedures in place but to review those policies regularly and in view of particular transactions/changing circumstances. For example, if you engage a new supplier located in a high risk country then you should review your policies and procedures to consider whether they need updating in light of your change of circumstances.

Ortolan can provide assistance in advising you about the Bribery Act, drafting policies and procedures for you and providing customized training to you and your staff.