According to an article in the Financial Times on 14 January 2013, the number of companies voluntarily admitting wrong doing to the Serious Fraud Office, otherwise known as self-reporting, has nearly doubled in the past fiscal year.  The FT suggests that this indicates that the new anti-bribery legislation, the Bribery Act 2010, is proving to be a deterrent.

The article goes on to report that 12 companies had “confessed to the SFO that they had issues in the year ending March 31st compared with seven during the two preceding years, according to data from a Freedom of Information request”.

The article suggests that one reason for the increase in self-reporting could be the introduction of the Bribery Act in July 2011, which enables the SFO to prosecute people for corruption no matter where in the world it takes place, as long as there is a link to the United Kingdom.

However, in our view this is only part of the story.  The stiffer penalties and more far reaching legislation, including the global extra territorial reach of the Bribery Act, are an important factor, but other factors are the increased political and prosecutorial interest in the enforcement of anti-corruption laws.  In addition, the encouragement in civil settlements by the SFO over the past three or four years, under the previous Director, Richard Alderman, and the promised introduction of Deferred Prosecution Agreements by the government in the near future, is changing the way that defendants and their lawyers behave when considering possible actions, following discovery of an offence having been committed.  The commercial desire to dispose of a problem as quickly as possible, and as cheaply as possible, where there would be less damage to a company’s brand image and products than defending the case through a trial is likely to be a very significant driver in deciding whether to report corruption issues to the Serious Fraud Office.  Coming clean about embarrassing issues does not come naturally to many corporations, nor hitherto to their defence lawyers, but the threat of unlimited fines, combined with the possibility of public procurement debarment orders, the damage to reputation, and the likelihood of the withdrawal of some of your business partners from relationships with you, are  important  factors to consider when weighing the alternatives to self reporting.

The fact that there were only twelve companies self-reporting to the SFO in the year ending 31 March 2012, however, is still in our view pitifully low and we think that this is likely to be the tip of the iceberg in terms of the number of corporations who are now under the jurisdiction of the British Courts under the Bribery Act and who have reportable issues.  We would expect this figure to grow and grow, particularly when the SFO starts to prosecute high profile corporations.  The reader may recall that the new director of the SFO, David Green QC, has indicated that whilst he will still consider settling with companies that self-report in the appropriate circumstances, there will be cases where even though a company has self-reported, due to the seriousness of the crime it may be in the public interest to prosecute in any event.  As the FT article itself states, Mr Green’s new stance “…could result in fewer companies coming forward, however”.