The UK Serious Fraud Office ("SFO") has released its long awaited Corporate Co-operation Guidance. It is a must read for any in-house counsel who conducts internal investigations with a UK nexus or corporates that may wish to seek leniency from the SFO.
The five-page document seeks to provide, for the first time, transparency around what the SFO expects in terms of co-operation if a corporate seeks leniency from the SFO.
Co-operation with the SFO will be taken into consideration as a public interest factor against prosecution of the corporate and, potentially, in favour of a Deferred Prosecution Agreement ("DPA"). However, the SFO's expectations around co-operation have been difficult to pin down. Broad guidance is contained in the Guidance on Corporate Prosecutions. Further broad guidance is contained in the DPA Code of Practice. However, missing from both documents was the detail of the SFO's expectations around co-operation. It is that gap which the latest guidance is designed to fill.
Overview of the Guidance
The guidance provides a roadmap for those seeking co-operation credit from the SFO. Some of the guidance confirms recent practice or public statements made by the SFO. Other aspects appear to reflect a fresh perspective from the SFO.
The guidance is broken down into a number of sections, but starts with guidance on general good practice for corporates seeking to co-operate, including: providing material in a structured way; providing material that is held abroad where it is in the possession or under the control of the organisation and promptly providing a schedule of documents withheld on the basis of privilege.
Turning to digital, hard copy evidence and financial records, the guidance provides that corporates should: provide digital material in a format that will enable it to be ingested onto the SFO's document review platform; create and maintain an audit trail of handling digital material, hard copy material and financial records and identify a person to provide a witness statement covering continuity. Corporates are also encouraged to preserve and provide passwords, recovery keys, decryption keys and to provide financial records that show relevant money flows, including bank records, invoices and money transfers.
It is on the issue of interviewing witnesses and notes of those interviews that the guidance arguably turns more controversial. The guidance provides that, to avoid prejudicing the SFO's investigation, corporates should consult in a timely way with the SFO before interviewing potential witnesses or suspects, taking personnel/HR actions or taking other overt action.
The guidance then goes on to tackle, head on, one of the most controversial aspects of the SFO's work in the last few years: claims to privilege over notes of witness interviews. The guidance notes that refusing to waive privilege may undermine a request for a DPA, but will not otherwise be "punished" by the SFO.
In addition, again somewhat controversially, where a corporate claims privilege over documents, it will be expected to provide to the SFO a certification by independent counsel that the material in question is privileged.
Issues raised by the new guidance
While the guidance is helpful, it raises certain questions and leave others unanswered.
First, it remains unclear from the guidance what amount of internal investigation should be conducted before a corporate should first disclose potential wrongdoing to the SFO. Clearly some amount of review will be necessary, but it remains unclear where the line is drawn. As a result, corporates will still need to carefully balance the need to check the veracity of allegations made against the need to avoid delay, which may potentially jeopardise co-operation credit. The guidance does little to help with that assessment.
Second (and on a related note), it seems difficult to envisage how the guidance around seeking input from the SFO before interviewing witnesses will operate in practice. In most cases in which bribery or fraud is suspected within a business, initial interviews will be required to (at the very least) provide further context/background. The guidance suggests that such preliminary interviews cannot take place before a self report is made, which presents practical issues for the corporate. Again, a careful balance will need to be struck by the corporate in each case to ensure the correct balance between proper investigative process and obtaining co-operation credit.
Third, the guidance appears to suggest procedures that will add to the already significant time and cost burden of an internal investigation. The requirement that corporates "promptly" provide a schedule of documents withheld on the basis of privilege suggests an additional level of document review to sort and schedule privileged material. Likewise, the requirement that, if the organisation claims privilege, it will be expected to provide certification by independent counsel, suggests the need to engage additional counsel to review a (potentially significant) additional pool of documents.
Finally, privilege in interview notes remains a contentious issue. Although clarification that the SFO will not seek to "punish" a corporate that seeks to protect from disclosure its privileged documents, the underlying message is clear: refusing to waive privilege in interview notes will count against a corporate when the prospect of a DPA is considered. Given the status of privilege as a fundamental right under English law, this remains a controversial position for the SFO to take.
What does the new guidance mean for you?
Given the broad jurisdictional nexus of the legislation on which the SFO relies to prosecute corporates e.g. the UK Bribery Act 2010, all corporates that have a nexus with the UK (wherever they are located) should carefully review the guidance and check that their record keeping and investigative processes would meet the SFO's requirements for co-operation. This should help ensure that, if required, the corporate could move quickly to secure maximum co-operation credit.
Helpfully, much of the guidance reflects our practical experience of what would be expected by way of co-operation by prosecutors and regulators in other jurisdictions e.g. the DOJ and SEC in the US. However, there remains a crucial divergence in the approach to privilege and interview notes. In the US, claims to privilege over such notes are easier to make out and there is no expectation that the company will waive privilege in exchange for co-operation credit. As a result of such differences across jurisdictions, corporates involved in investigating cross border compliance issues should ensure they obtain holistic and joined up advice from all potentially relevant jurisdictions before engaging in any co-operation discussions with any authorities.
If you would like to hear more about the guidance and other global ABC enforcement trends, please do join us for our four-day compliance conference in London between 23-26 September 2019. If you would like to receive an invite please contact Kate Bullard.