The virtues of self-reporting have long been debated. Although the idea of coming clean to the relevant authorities upon learning of a compliance violation can seem intimidating, companies stand to receive tangible benefits if they respond appropriately, cooperate fully, and make prompt remediation efforts to enhance their compliance programmes.
There are many reasons why some companies do not self-report when they discover corruption or other compliance violations within their organisations. Usually it is because they fear receiving a fine, sometimes it is the risk of reputational damage (which can potentially cause more long-term financial damage than a fine), and sometimes it is that individuals may also face criminal charges and prison sentences.
Enforcement agencies in the United States and the United Kingdom have in the past made clear that self-reporting compliance failures will not make a company immune from prosecution. However, those that do self-report as soon as they become aware of a breach could potentially see more benefits in regards to decisions on charges and penalties.
This should be remembered in light of the news that the United Kingdom’s Serious Fraud Office (SFO) has opened a criminal investigation into allegations of fraud, bribery and corruption in the civil aviation business of Airbus Group relating to irregularities concerning third party consultants.
Airbus first revealed that it was in discussions with the SFO on 1 April after it self-reported the fact that it had failed to notify authorities about its use of third party agents in various transactions where it was seeking United Kingdom government support with financing guarantees. “Airbus Group has informed relevant UK authorities of its findings concerning certain inaccuracies relating to applications for export credit financing for Airbus customers,” it said at the time.
The company discovered the errors during an internal review of compliance, according to the Financial Times. The United Kingdom’s export credit agency and its counterparts in France and Germany immediately suspended financing after the disclosure and are currently seeking assurances about Airbus’s current compliance practices in relation to overseas agents.
In a statement, Airbus Group has said it will continue to cooperate with the SFO on the matter.
Building a company-wide remediation strategy within your compliance framework is fundamental to guaranteeing your organisation’s protection in the event that regulators conduct an investigation on possible violations. An effective remediation strategy should also be viewed as a key component of building your company’s defence under the United Kingdom Bribery Act provision of a corporation’s requirement to have adequate measures and procedures in place to prevent bribery.
There is no doubt that companies that self-report are typically given more lenient treatment by the relevant enforcement agencies. If a company ultimately decides to self-report after discovering a compliance issue, the report needs to be made swiftly. A company should also cooperate with any investigations by making relevant documents available or offering interviews with persons involved.
Furthermore, given the potential of intermediaries to create vulnerability in the securing of contracts and in business operational risk, compliance officers are encouraged to conduct thorough due diligence on third parties. It is imperative that officers ensure that third party associates are fully aligned with their company’s policies and ethical standards in order to prevent misconduct. If compliance standards are felt to be lacking, then third party training should be considered.