Companies need certainty before they will self-report, says expert

Companies need a "binding framework" and guarantees about what action will be taken before they self-report in significant numbers, said Claire Shaw, a litigation specialist at Pinsent Masons, the law firm behind OUT-LAW.COM.

Insurance broker Aon was fined £5.25 million by regulator the Financial Services Authority (FSA) as a result of a bribery and corruption investigation that identified suspicious payments made by the company in its efforts to secure business. The company's fine was reduced by 30% from £7.5m because it co-operated with the investigation.

Shaw said that before other companies followed suit they needed assurances about their treatment.

"There must be a clearly defined system for approaching a prosecutor or regulator; companies need to know the risks and likely outcomes, including the extent to which the information they provide may be shared with other regulators or even overseas prosecutors," she said. "To what risks is a company exposing itself by self reporting and how can it be expected to deal with those risks?"

"A binding framework, relevant to all regulators may be what is required. This is what is available in the USA - where prosecutors routinely offer Non Prosecution Agreements in return for information," said Shaw. "UK prosecutors have historically been reluctant to provide the comfort that 'corporate whistleblowing' requires, and until they do so, the decision as to when and in what manner to self report remains a complex, difficult and risky process for business."

Aon was fined for not putting in place controls to stop payments being made to people who helped it to win business overseas.

"Between 14 January 2005 and 30 September 2007, Aon Ltd failed to properly assess the risks involved in its dealings with overseas firms and individuals who helped it win business and failed to implement effective controls to mitigate those risks," said an SFA statement. "As a result of Aon Ltd’s weak control environment, the firm made various suspicious payments, amounting to approximately US$7 million, to a number of overseas firms and individuals."

The FSA said that Aon cooperated fully with its investigation from an early stage and so was entitled to a 30% reduction in the fine imposed.

"The FSA considers that the pro-active determination of Aon Ltd’s current senior management to identify past issues and improve the firm’s systems and controls in this area is a model of best practice that other firms may wish to adopt," said the FSA.

"Self-reporting should be seen by companies as an opportunity to avoid the costly and damaging prospect of prosecution," said Shaw. "This is what Aon has achieved and the result has also met the regulator's requirements."

"The message from all regulators is clear - come forward at an early opportunity and you are likely to avoid prosecution as a corporate defendant," said Shaw. "What business requires in order to take up this 'invitation' is clarity."