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LLM in Fraud and Financial Crime Assignment Sample

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LLM in Fraud and Financial Crime Assignment

Introduction - Fraud and Financial Crime Assignment

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Discussing corruption and fraud in the context of multinational companies (MNCs), bribery is considered one of the most serious crimes. There has been reportedly committed high profile scams and scandals which has led to the formation of an anti-corruption and anti-bribery regime so that the basic policy of fair corporate behaviour is strengthened. The acts of foreign officials have led to the enactment of various legislations which shall shape and control the unlawful conduct of these officials. Hence, the Bribery Act 2010 is considered the toughest legislation on bribery which has served as a tool for the enforcement of other anti-bribery laws at the national level. The United Kingdom has for this purpose enacted the use of the Deferred Prosecution Agreement (DPAs) which has been started keeping in mind two main aims. Firstly, it is started to reduce the effect of criminal liability over corporations and the second li has been started to save the judicial resources and time. The deferred prosecution agreements were started under the Crime and Court Act 2013 and implemented in February 2014. The power and authority to enter into the deferred prosecution agreements are conferred over the Serious Fraud Office (SFO) and the Director of Public Prosecution (DPP). But the entering of these agreements depends on the approval of the court. These agreements have served as a good weapon in dealing with corporate crimes of fraudulent activities and charges of bribery.[1]

The use of deferred prosecution agreements is done between the prosecution party and the defendant party where the defendant is accused with the charges of bribery. The agreement works by discharging the defendant from criminal liability for a limited period and in return, the defendant has to fulfil certain conditions put forward by the prosecution. Moreover, the prosecution makes the court aware that the defendant has fulfilled the conditions and thus, the suspended proceedings are permanently discontinued. But if the defendant fails to fulfil the conditions of the prosecution, the prosecution may approach the court to start the criminal proceedings again. Hence, the presented submission provides an insight that whether the enactment of deferred prosecution agreements has proved to be an effective tool in dealing with the acts of bribery and fraud.[2]

The submission firstly outlines the effective role of deferred prosecution agreements in reshaping the anti-bribery regime of the United Kingdom. The submission also provides for the meaning of deferred prosecution agreements and how it deals with the economic crimes of corporations. Further, the submission also provides for the significant role of courts along with its controversies in looking at the deferred prosecution agreements. The submission is lastly concluded with recommendations and a conclusion based on the analysis.

Collateral results of prosecution regarding deferred prosecution agreements

It has been observed that criminal proceedings are not the only solution available to punish the wrongdoers and collateral consequences sometimes tend to injure the innocent party. This also affects the reputation and brand name of the corporation and ultimately leads to a downgrade of credits and financial losses. Hence, deferred prosecution agreements make the corporation stand effectively in avoiding these effects it is thus important for the corporation to look for the alternatives it can adopt to punish the wrongdoers and at the same time, protect the brand image and reputation. The purpose behind the legislation is to legitimately avoid the risks of organisations and also the circumstances of trials.[3]

The prosecution party is concerned with the circumstances arising from the court proceeding against the charge of bribery. Hence, the multinational companies may face a collapse or in other words the sentence to death for the corporation. But this consequence may also be harmful to the innocent parties and the workers of the corporation. The deferred prosecution agreements are thus, designed to protect the corporations from loss and to protect those who are not involved in the wrongful act of the corporation. Another purpose of these agreements is to enforce the same amount of punitive penalty and fine but reduced the number of adverse consequences.

It has thus, been noticed that there are two collateral consequences of the prosecution proceeding being commenced in the court of law against the corporation for the unlawful acts and these consequences are the death sentence for the corporation and the loss of the innocent party. The starting of the prosecution proceeding in the court may lead to the demand of the prosecutor for the winding up of the company and the collapse of the entire corporation. Secondly, the innocent party of the corporation is also affected by the adverse effects of the criminal proceeding against the corporation. It has been observed that corporate criminal liability also punishes and embarrasses the innocent party along with the guilty party. The innocent party includes the stakeholders, the shareholders, workers and employees. But a weighting of the gains and losses of the deferred prosecution agreements is worth examining as these agreements are a valuable alternativethat settles to avoid simply the cost and results of a criminal proceeding. The court also examines the gains and losses a corporation may face in opting for deferred prosecution agreements. An example of Walmart in October 2017 can be taken into consideration where the owner of the corporation refused for deferred prosecution agreement and pay $600 million and suffered a loss of $840 million due to the court proceedings and prosecution. Hence, the role played by deferred prosecution agreements in the system of the United Kingdom is worth examining.[4]

It can be analysed from the above statements that deferred prosecution agreements are meant to enable the innocent parties from getting affected by the wrongful acts of the corporation and at the same time punish only the responsible officers and parties for the wrongful act whether it be bribery or fraud.

Effective role of DPAs in the United Kingdom corporate system

It has already been discussed earlier that the deferred prosecution agreements not only protect the corporation from financial failures and damage to the reputation but it has the same effect and consequences of deterrent effect and punitive measures as the plea of a guilty. The Serious Fraud Office reach out to corporations to make settlement and suspend the criminal proceedings but for that, the corporation has to fulfil certain conditions. The condition shall require the defendant to pay all the charges, fines and fees and also to plead guilty in return for concession or complete suspension of sentence. But there is another condition underlining this agreement which is the discretion whether to enter the agreement or not shall lie with the director of the office and the director of the public prosecutor.[5]

Deferred prosecution agreements make the corporation establish programmes of compliance that serves as a shield for them to be protected from criminal liability. There is a sword of punishment over the head of the corporation and thus, deferred prosecution agreements serve as a balance between deterrence and restitution and avoid all the collateral consequences. This also makes the corporations resolve their high scale claims of bribery and also avoid rigorous consequences. Apart from this, the deferred prosecution agreements also help in avoiding long procedures of the court and lengthy procedures and thus, saving time and resources. The saved resources can be thus, optimally used for another purpose in the corporation. The deferred prosecution agreements also lighten the financial burden of the court proceeding where the prosecutor may demand a heavy penalty. But the pleading guilty technique shall make the prosecutor go for justified penalty and fines as the wrongdoer has accepted the wrongdoing and hence, can be paid sympathy by the prosecution.[6] Deferred prosecution agreementsincrease self-disclosure which saves the resources of the court and the investigating agencies as a lot of time is consumed in investigating high profile bribery matters thus, requiring funds and resources. The increase in the investigating procedures by the concerned agencies also increase corporate accountability and hampers the freedom of work of innocent corporations and workers. Moreover, deferred prosecution agreements not only stand beneficial for the defendant party as it lowers the collateral consequences, but it is also beneficial for the prosecution party as it avoids the uncertainties which the prosecution may go through in the proceeding of the court while proving the wrongdoing. The prosecution has to face every possible aspect which the defence lawyers may raise and a lot of effort is required along with complete focus and analysis of evidence to prove a single point. But in deferred prosecution agreements, the pleading of guilty solves half of the case and only the number of punitive fines and charges are to be calculated and the time for proving points and evidence collection is saved.[7]

But apart from benefits, it has also been analysed that on the other side of the coin, there are also some associated risks with deferred prosecution agreements. The first risk associated with these agreements is the risk to the shareholders if the company agrees to pay a heavy fine in return for the criminal proceeding under this agreement. It has been argued by various judges that these agreements make the company pay the fine being a separate legal entity but it is the person who commits the wrongful act and is responsible. As the company bear the losses, there are many others along with the company who has to suffer financial loss. Hence, at some point, these agreements lack individual prosecution every time and make the company responsible forever act.[8]

Secondly, there is not proven guarantee that the self-disclosure made by the person shall always lead to no prosecution. This is because the judicial system of the United Kingdom is seen to be stricter as compared to the judicial system of the United States in giving consent for the implementation of deferred prosecution agreements. It is also a mandatory requirement in the United Kingdom that self-disclosure and acceptance of liability are to be made public which gives rise to a third problem. If the multinational companies and owners accept and plead publicly for the wrongdoing, it shall expose the company to be tried and sued in multiple jurisdictions.

Hence, the ultimate effectiveness of deferred prosecution agreements shall depend on how willingly the companies are adopting to get into the agreement and how effectively this tool is being used by the prosecutors. The prosecutions have tremendous power during the ongoing deferred prosecution agreements because the criminal proceeding has an adverse effect. Hence, this tool shall not prove effective in the United Kingdom unless there is an extreme threat of prosecution. If the amount to be paid in return shall be less, the companies shall not be interested in getting into the agreement.[9] The only way to make the company accept its wrongdoing is to threaten it with the adverse effects it may face on the commencement of the prosecution. The tool of deferred prosecution agreements helps reduce the crime of bribery among the corporation but only to the extent that the corporation is capable of credibly threaten to accept the measures of compliance. Hence, though deferred prosecution agreements have proved to be a long way effective tool in the United Kingdom, yet there are certain amendments and modifications required in this system for more effectiveness.

Judicial interpretation of deferred prosecution agreements

Although deferred prosecution agreements have already become an effective tool in the United States and the enforcement authorities, it is not too far to reach success in the United Kingdom. It is also to note that the judicial involvement in the United Kingdom in the matter of deferred prosecution agreements adopts a different model as compared to the United States.

The process of deferred prosecution agreements started in the United Kingdom after the passing of the UK Crime and Court Act which received the assent of the queen in April 2013. The Act under the provision of Schedule 17 provides that the prosecution may adopt the process of reducing the effect of corporate crimes. The provisions provide for the landmark in the law relating to bribery where the legislature, judicial body and the prosecutors have shown scepticism regarding the effectiveness of the US model which could be transplanted in the United Kingdom. Hence, it was the first time when the UK legislative body provided for the law under which the corporate offenders could be punished without harm to the corporation and the innocent party associated with the corporation.[10]Hence, the interpretation of the legislative provision has also been done by the judicial body to show involvement in the encouragement of the legislation.[11]

It has been stated by multinational companies that the Bribery Act of 2010 has been the toughest legislation against bribery in the world and any entity which is involved in the act of bribery shall make the person associated with it be subjected to criminal liability. The Act is also considered as the toughest as it does not require the element of mens rea to be proven for the crime and the person may be punished even if he had no intention. The Act also provide for significant penalties which could be an unlimited fine and imprisonment of up to 10 years. But the difference between the model of both the UK and the US is that in the United Kingdom the prosecutor is required to get the approval of the court before the negotiation. Further, the court shall not approve the process if the process is not in the interest of the public. Hence, the prosecutor needs to ensure the court shall his process shall not hamper the interest of the public and it shall not abuse the rights of the public at large. The rationale behind this approval is that the court shall ensure that the terms and conditions are fair from the perspective of the public and shall be in the interest of justice. The decision of the judicial body in approving the process is thus, an evaluation done rigorously.[12]

It can be thus, analysed that so far, the deferred prosecution agreements have been a matter of strict interpretation in the United Kingdom which has served to be in a more efficient manner in dealing with the corporate criminals and at the same time protecting the interest of the society. The effectiveness of these agreements can be seen in the manner in which the judicial body interprets the legislature for anti-bribery. Reference of the case GSK & Rolls-Royce can be considered where the court held that deferred prosecution agreements are an effective tool to achieve transparent and consistent decision against corporate crimes. The company Rolls Royce paid an amount of £497.25 million to the Serious Fraud Office in 2017 and entered into deferred prosecution agreements to settle the allegation it had for the wrongdoing. Moreover, the company GlaxoSmithKline (GSK) also paid an amount of $20 million to settle the violations it had done in the year 2016. Despite the agreement of the parties to pay for the wrongdoing, the court ordered an investigation to look that the agreement is not violative of the public interest and shall not violate justice. As a result, the Serious Fraud Office dropped its proceedings and investigation in 2019.[13]

Another case considered for deferred prosecution agreements is that of the ICBC Standard Bank Plc where the court opined that the multinational company having the allegation of wrongdoing shall cooperate with the Serious Fraud Office at a very initial stage as this shall further give a chance to the company to settle the claim without harming the reputation. In the above-mentioned case, the charges from the bank were suspended for 3 years and till then the bank was given a chance to fulfil the terms and conditions provided under deferred prosecution agreements. Hence, the company agreed to pay $32 million.

It has also been stated in the context of the United Kingdom that the forming of a deferred prosecution agreement, a preliminary hearing is required to be done before the judge and the final hearing shall be done before the judge in an open court and the final judgment shall be published before the public. In case the judge is playing a fiduciary role, he shall make sure that the deferred prosecution agreement is not abusive of justice and the agreement shall not be misused.[14]

DPAs: Viable in international playing?

It has been observed that multinational companies have to face immense hardships when they are tried by two or more jurisdictions for the same offence. Hence, it becomes difficult for the company to rely on any defence when more jurisdictions are involved. The case of Siemens can be considered where the corporation faced huge economic and financial losses as it was tried in Germany as well as the US. Hence, the MNCs shall be in a healthier position if it compromises to get their issues resolved through a global settlement attracting relevant measures. This shall also facilitate negotiation for the company and it shall prevent the company from getting subjected to multiple anti-bribery laws and regime. It is thus, recommended that there shall be the enactment of an international framework where the company shall be required to enter into a joint settlement with both the US and the UK and these two models shall serve as a map for worldwide settlement of the bribery offences.[15]

Conclusion

It can be thus, concluded that deferred prosecution agreements are framed to settle the bribery crimes effectively committed by corporations as these agreements reduce the collateral effects of the criminal proceedings. Further, the agreement is also seen to be vital for the saving of judicial resource and the protection of the innocent parties of the corporation who are not involved in the wrongdoing and offences. As per the case laws and the strict interpretation of the judicial body regarding the bribery legislation, it can be said that so far deferred prosecution agreements have proved to be an effective tool in the United Kingdom but with the change in time, it shall require certain amendments in the future.

References

Alldridge P, ‘Civil Recovery in England and Wales: An Appraisal’ (2018) In the Palgrave Handbook of Criminal and Terrorism Financing Law

Arlen J, 'The Potential Promise and Perils of Introducing Deferred Prosecution Agreements Outside the U.S.' [2019] SSRN Electronic Journal

Bronitt S, and D'Amico A, 'Fighting Cartels and Corporate Corruption - Public Versus Private Enforcement Models' (2020) 37 The University of Queensland Law Journal

Cross M, 'Strategising International Prosecutions: How Might the Work of The Kosovo Specialist Prosecutor’S Office Come to Be Judged?' (2020) 20 International Criminal Law Review

Garrett BL, ‘International corporate prosecutions’ (2018) Chapter in Comparative Criminal Procedure, Darryl Brown, Jenia Turner, and Bettina Weisse, eds., Oxford U. Press

Helm R, 'Conviction by Consent? Vulnerability, Autonomy and Conviction by Guilty Plea' (2019) 83 The Journal of Criminal Law

Hock B, 'Policing Corporate Bribery: Negotiated Settlements and Bundling' [2020] Policing and Society

Jimenez, 'Corporate Criminal Liability: Toward A Compliance-Orientated Approach' (2019) 26 Indiana Journal of Global Legal Studies

Kisekka N, 'Plea Bargaining as A Human Rights Question' (2020) 6 Cogent Social Sciences

Kruglyak V, 'The Regulatory Criminal Law inthe UK: Analyzing Dissenting Factors of The Deferred Prosecution Agreements' [2020] SSRN Electronic Journal

Lord N, and Levi M, ‘In pursuit of the proceeds of transnational corporate bribery: The UK Experience to Date’ (2018) In the Palgrave Handbook of Criminal and Terrorism Financing Law 

Paciocco P, 'Seeking Justice by Plea: The Prosecutor’S Ethical Obligations During Plea Bargaining' (2018) 63 McGill Law Journal

Perez M, 'The Rise and Globalization of Negotiated Settlements: How an American Procedure, The Deferred Prosecution Agreement (DPA), Became A Transnational Key Tool to Fight Transnational Corporate Crimes' (2020) 2020 Rule of Law and Anti-Corruption Centre Journal

Rahman K, ‘Consideration of victims in the enforcement of the FCPA and the UKBA’ (2020) Transparency International

Shiner R, and Ho H, 'Deferred Prosecution Agreements and The Presumption of Innocence' (2018) 12 Criminal Law and Philosophy

[1]Michel A Perez, 'The Rise and Globalization of Negotiated Settlements: How an American Procedure, The Deferred Prosecution Agreement (DPA), Became A Transnational Key Tool to Fight Transnational Corporate Crimes' (2020) 2020 Rule of Law and Anti-Corruption Center Journal.

[2]Matthew E. Cross, 'Strategising International Prosecutions: How Might the Work of The Kosovo Specialist Prosecutor’S Office Come to Be Judged?' (2020) 20 International Criminal Law Review.

[3]Vladimir Kruglyak, 'The Regulatory Criminal Law inthe UK: Analyzing Dissenting Factors of The Deferred Prosecution Agreements' [2020] SSRN Electronic Journal.

[4]Jennifer Arlen, 'The Potential Promise and Perils of Introducing Deferred Prosecution Agreements Outside the U.S.' [2019] SSRN Electronic Journal.

[5]Nakibuule Gladys Kisekka, 'Plea Bargaining as A Human Rights Question' (2020) 6 Cogent Social Sciences.

[6]Roger A. Shiner and Henry Ho, 'Deferred Prosecution Agreements and The Presumption of Innocence' (2018) 12 Criminal Law and Philosophy.

[7]Lord N, and Levi M, ‘In pursuit of the proceeds of transnational corporate bribery: The UK Experience to Date’ (2018) In the Palgrave Handbook of Criminal and Terrorism Financing Law 

[8]Palma Paciocco, 'Seeking Justice by Plea: The Prosecutor’S Ethical Obligations During Plea Bargaining' (2018) 63 McGill Law Journal.

[9]Branislav Hock, 'Policing Corporate Bribery: Negotiated Settlements and Bundling' [2020] Policing and Society.

[10]Alldridge P, ‘Civil Recovery in England and Wales: An Appraisal’ (2018) In the Palgrave Handbook of Criminal and Terrorism Financing Law

[11]Garrett BL, ‘International corporate prosecutions’ (2018) Chapter in Comparative Criminal Procedure, Darryl Brown, Jenia Turner, and Bettina Weisse, eds., Oxford U. Press

[12]Jimenez, 'Corporate Criminal Liability: Toward A Compliance-Orientated Approach' (2019) 26 Indiana Journal of Global Legal Studies.

[13]Rahman K, ‘Consideration of victims in the enforcement of the FCPA and the UKBA’ (2020) Transparency International

[14]Rebecca K Helm, 'Conviction by Consent? Vulnerability, Autonomy and Conviction by Guilty Plea' (2019) 83 The Journal of Criminal Law.

[15]Simon Bronitt and Alessia D'Amico, 'Fighting Cartels and Corporate Corruption - Public Versus Private Enforcement Models' (2020) 37 The University of Queensland Law Journal.

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