stanbic bank tanzania
The UK’s Corruption Watch has also criticised the DPA and Serious Fraud Office (SFO) for not charging Standard Bank officials involved in the lucrative fundraising deal from the government.
So far no legal action has also been taken against the local wheeler-dealers of the US$600 million private bond placement and officials of Stanbic Bank behind the whole bribery scam.
“If DPAs are to act as a serious deterrent to bribery and economic crime, and to garner public confidence, they cannot be a means for individuals to be let off accountability for their actions or for companies to escape the full harm of their wrongdoing,” the British anti-corruption watchdog said in a statement.
It called on Serious Fraud Office and the judiciary to consider seriously if the precedents set in this DPA will genuinely deter wrongdoing and let the real victims of corruption, in this case the Tanzanian people, see justice.
“Relatively low financial penalties that do not reflect adequate compensation or disgorgement of profits, Standard Bank agreed to pay $6 million compensation to Tanzania based on the calculated harm to the country. But compensation may have been well over ten times higher, possibly as high as $80 million - if the full harm to Tanzania had been taken into account,” Corruption Watch argued.
The activist organisation further argued that the DPA did also not address the issue of profits to be disgorged by the Bank which were set at $8.4 million did not take into account revenue streams made by the Bank on the transaction (which could have been up to $10 million) nor the market advantage achieved by the Bank as a result of the wrongdoing.
DPAs were introduced in the US to give the most vulnerable in society a second chance by allowing them to prove good behaviour rather than be prosecuted. They have been increasingly used in the US over the past decade to give that second chance to the most powerful in society: corporations.
It is for this latter purpose that they have been introduced into the UK.
Given that they represent a form of justice reserved for society’s most powerful actors and the potential for public perception that corporations are as a result above the law, accountability in how DPAs are used is essential.
The UK’s first DPA is likely to set the tone both of future DPAs and for how enforcement of the UK’s Bribery Act will develop over the next few years.
“While the Serious Fraud Office (SFO) clearly sought to allay some of the criticisms of DPAs, namely by ensuring there is no tax deductibility for the financial penalties, no immunity from prosecution clauses, and by providing extensive detail of the alleged wrongdoing, the UK’s first DPA has set some worryingly low standards in many key areas.
The anti-corruption watchdog further noted that at individual accountability level, the ruling means that no single individual in the UK has been held to account either by Standard Bank or the SFO for their failure to prevent the alleged bribery.
“This is particularly surprising given the high level of control and approval by UK individuals for the transaction. These individuals still operate at senior levels within the financial industry. At the very least, those UK individuals involved in the failing to prevent the alleged wrongdoing should be investigated by the Financial Conduct Authority with a view to removing their ‘approved person’ status,” Corruption Watch argued.
The UK watchdog also noted that reliance on a company’s internal investigation as the ruling states and almost complete reliance on the internal investigation of the company by the SFO means that neither the court nor the public will ever truly know whether the full extent of the wrongdoing was unearthed, or whether there were systemic problems within the Bank rather than this being an isolated incident.
The UK Serious Fraud Office’s first DPA with Standard Bank PLC was approved by Lord Justice Leveson on 30th November, 2015. The agreement was also the first enforcement action that the SFO has taken under Section 7 ‘failure to prevent’ offence of the Bribery Act.
The DPA relates to charges, now suspended, that Standard Bank failed to prevent its Tanzanian subsidiary, Stanbic Tanzania and its top executives from paying bribes to senior government officials to secure the Tanzanian government’s mandate to raise $600 million of sovereign debt financing in the form of a bond.
The bribes consisted of a $6 million fee paid by Stanbic to a local agent, Enterprise Growth Market Advisors Ltd (EGMA), paid out of international investors’ money raised by Standard Bank for the Tanzanian government.
EGMA, according to the agreed facts, provided no real services in return for its $6 million fee. Its chairman at the time, Harry Kitillya, was Commissioner of the Tanzania Revenue Authority, which was responsible for advising the government on financing needs. Standard Bank was required to pay £21.3 million in financial penalties (including £3.9 million compensation to Tanzania). A key factor behind Standard’s eligibility for a DPA was the fact that it self-reported the alleged misconduct within days of being alerted by Stanbic Tanzania employees, and cooperated with the SFO.
The SFO approached the Tanzanian anti-corruption authorities, the Prevention of Crime and Corruption Bureau (PCCB) to check whether it had any objections to the SFO going ahead with resolving the investigation into Standard Bank with a DPA before the final approval hearing.
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