29 May, 2018
On 6 December 2017 the government introduced a Bill to give effect to a Deferred Prosecution Agreement (DPA) scheme in Australia. A DPA is a voluntary, negotiated settlement between a prosecutor and defendant. The Senate Legal and Constitutional Affairs Legislation Committee endorsed the Bill in April 2018.
The purpose of DPA schemes is to encourage self-reporting and thereby help detect and pursue crimes and compensate victims, while reducing the cost and delay of investigation and prosecution.
This in turn increases the focus on the rigour of due diligence, compliance procedures and internal investigations in areas such as bribery, money laundering, market manipulation and insider trading. There will now be increased incentives to detect and report relevant conduct.
The introduction of DPAs in Australia is in line with global trends. DPAs have been used in the United States for decades. DPAs were introduced in the United Kingdom in February 2014 and in Singapore in March 2018, and there are currently proposed legislative changes in Canada to introduce DPAs.
Who can use a DPA?
The Director of Public Prosecutions (DPP) will have the power to enter into a DPA with a company for various offences relevant to banking and financial services. The Bill does not allow agreements with individuals and limits DPAs to specified offences, thereby following the UK legislation and departing from the US practice.
The DPA Scheme only provides for agreements with the Commonwealth DPP in relation to prosecution for specified offences under Commonwealth legislation, and therefore does not apply to State prosecutors or State offences.
What crimes do DPAs apply to?
DPAs will be available for offences under five Acts covering corporations, the criminal code, anti-money laundering and international sanctions.
The Corporations Act offences covered by the DPA scheme are, in essence, market manipulation and related conduct, false trading, market rigging, false or misleading statements in relation to financial products, dishonest conduct in relation to a financial product or service, insider trading and falsification of books.
The Criminal Code offences covered are, in broad terms, bribery, theft, obtaining property or financial advantage by deception, forgery, fraud, money laundering, financial information offences, false accounting and related offences.
What about individuals who want to come forward?
Individuals are not covered by the proposed Australian DPA scheme. In Australia, individuals can engage in plea negotiation, but the High Court held in 2014 that prosecutors could not make submissions on the appropriate sentencing range in a criminal matter.
On 7 December 2017 the Australian government also introduced a separate Bill to strengthen Commonwealth whistleblower protections.1 Whistleblower policies with defined features will be mandatory for public and large proprietary companies. Unlike DPAs, the whistleblower scheme is designed to provide specific protections to individuals. In addition to internal reports by whistle- blowers, the scheme covers reports to ASIC, APRA and prescribed authorities by officers and employees in relation to offences or contraventions under legislation covering corporations, banking, insurance, consumer credit and superannuation.
What will a DPA say?
The main features of a DPA provided for in the Bill are:
- a statement of agreed facts
- when it will be in force
- requirements to be fulfilled
- the financial penalty
- when it will be ineffective if contravened or based on satisfactory information
- terms providing for compensation, donation to charity, forfeiting of benefits
- mandatory compliance programs
- cooperation in investigation or prosecution
- costs.
What oversight is there?
In the US, DPAs are filed with the court and required to be approved by a judge. In the UK, by contrast, DPAs are subject to ongoing judicial scrutiny through two judicial hearings to determine whether the DPA is in the interests of justice and its terms are fair, reasonable and proportionate.
In Australia, the DPP will be required to give a proposed DPA to a retired judge for approval. The DPP will need to be satisfied that there are reasonable grounds to believe that an offence specified in the DPA has been committed and that entering into the DPA is in the public interest. The approving officer must review the DPA and either approve or disapprove it on the assumption that the information set out in it is true and correct.
On approval, a DPA must be published online, but parts of it may be redacted to avoid prejudice to public safety, an ongoing investigation or a fair trial, or where there is a court order.
How are negotiations protected?
The Bill provides that in civil or criminal proceedings against a person who is or was party to a DPA or to negotiations for a DPA, any record of the negotiations is not admissible unless the person has given evidence inconsistent with the documents.
However, information obtained during the negotiation of a DPA may be used by Commonwealth entities to assist with performing their functions. In addition, both Commonwealth and State or Territory authorities will be able to use information obtained during the negotiation of a DPA for law enforcement.
What is the likely impact of DPAs?
While DPAs will only apply to certain Commonwealth criminal offences, the potential to negotiate a DPA will be a significant incentive to self-report relevant misconduct when discovered by Australian companies. When combined with other developments such the enhancement of the whistle- blower protection regime and international cooperation in the investigation of corporate misconduct, the introduction of DPAs may well increase the number and size of penalties and compensation payments.
More immediately, the likely introduction and commencement of a DPA regime in Australia provides an incentive for companies to review and strengthen their compliance procedures and the quality of internal investigations, as these are likely to be scrutinised and taken into account in determining the consequences imposed under future DPAs.
1. Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
For further information, please contact:
Andrew Carter, Partner, Ashurst
andrew.carter@ashurst.com
