Corruption self-reporters not disadvantaged by own investigative restrictions, SFO says

Out-Law News | 24 Jan 2012 | 4:59 pm | 1 min. read

The Serious Fraud Office (SFO) may formally investigate alleged corruption at firms that self-report the activity but will be mindful not to harm the company's reputation, the head of the organisation has said.

The SFO encourages companies to inform it if they uncover allegations of overseas corruption within their firm in return for it taking a more lenient approach to the issue.

Guidance the SFO has issued on self-referrals states that firms that own up to potential corrupt practices are responsible for investigating their own matters "where possible".  Companies that do not self-report are more likely to be subject to the SFO's own criminal investigation, according to the guidance.

SFO Director Richard Alderman said that organisations that have genuinely tried to uncover information as part of their investigations will not be deemed to have been uncooperative if they failed to do so. The SFO could open its own formal investigation and use its powers to uncover the information, but would discuss ways to minimise the impact this might have on a company's reputation, Alderman said in comments posted on anti-corruption blog thebriberyact.com.

The SFO has the power to investigate and prosecute individuals for corrupt or fraudulent activity in England, Wales and Northern Ireland.  Under the Criminal Justice Act the SFO's Director or another designated staff member can require an individual or organisation to hand over information for the purpose of an investigation providing there is reasonable grounds to suspect an offence of serious or complex fraud or corruption has been committed.

"The SFO would be concerned about the impact on the company’s reputation if a formal investigation were commenced and would want to discuss this with the company before doing so," Alderman said. "The SFO would also want to discuss with the corporate wherever possible any timing issues as they arise (such as public statements and court proceedings). Provided that the material was genuinely unavailable to the company, the SFO would continue to give full credit to the company in those circumstances."

"This scenario has not arisen in a particular case yet but the SFO has been considering it," said Alderman. "The SFO is interested in views from corporates and advisers on whether this could happen and if so how the reputational issues for the corporate could be handled. It might be that further paragraphs might need to be added to the SFO guide on self reporting."

"The news that the SFO is considering updating the self referral guidance is welcome as much water has passed under the bridge since the first edition," said Barry Vitou, an expert in anti-corruption laws at Pinsent Masons, the law firm behind Out-Law.com, and joint publisher of thebriberyact.com.

"On the question relating to formal investigation following self referral - this is something which requires careful thought especially in light of the reputational damage which can result from publicity surrounding investigations. The SFO are right to canvas the views of interested parties," Vitou said.