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Deferred prosecution agreements to be introduced in Canada

July 2018  |  SPECIAL REPORT: WHITE-COLLAR CRIME

Financier Worldwide Magazine

July 2018 Issue


The fight against corruption, money laundering, fraud and other white-collar crimes has been stepped up in recent years by governments in all corners of the globe. Consistent with this goal, regulatory authorities and law enforcement agencies have been adopting more effective tools to investigate and resolve allegations of improper wrongdoing. In Canada, with some pressure from the corporate sector, the federal government initiated a process of consultations on whether it should adopt a mechanism for resolution of wrongdoing that would allow for the use of deferred prosecution agreements (DPAs) to avoid proceedings that could end with a trial and conviction.

Canada held public consultations related to DPAs late last year. DPAs are voluntary agreements negotiated between an accused and the government that require full cooperation with the relevant law enforcement authority and usually include an admission of guilt, fines, governance reform including adoption of compliance procedures, and other conditions. DPAs have been regarded by some governments that have adopted this mechanism as a flexible tool for combating white-collar crime and improving corporate best practices.

The US has used DPAs since the 1990s to fight corporate crimes implicating individuals and corporations (particularly offences under its Foreign Corrupt Practices Act). DPAs are governed by policy and practice rather than binding regulations. Prosecutors may offer a DPA in respect of any federal offence (with some exceptions).

The UK’s DPA regime, which was introduced in 2014, has a more limited scope. Although DPAs are available in respect of many similar crimes, they may only be offered to corporations, not individuals. Additionally, the UK differs in that the domestic courts play a critical role in approving and overseeing DPAs, the DPA regime is set out in statutes and regulations, and the terms of any DPA must be made public.

Canada’s proposed DPA regime

On 22 February 2018, the Canadian government released the results of its public consultation and announced its intention to introduce a DPA regime in Canada that will be governed by legislation. Having received feedback from hundreds of Canadians, industry associations, businesses, non-governmental organisations, and others, and reviewing 75 written submissions, the government reported that a majority of Canadian stakeholders supported introducing DPAs using the UK regime as a model. Specifically, there was widespread support for DPAs which: (i) apply to a narrow scope of serious economic offences such as fraud, bribery and money laundering; (ii) are offered at the discretion of the prosecution, applying aggravating and mitigating factors as specifically outlined in legislation; (iii) are concluded under the supervision of a judge who must determine that the DPA is in the “interests of justice” and its terms are “fair, reasonable, and proportionate”; and (iv) are transparent and public, including a mandatory publication of DPAs.

One of the most widely supported themes in the responses to the consultation was the need for transparency. The vast majority of stakeholders reported that transparency could be achieved through clear practice guidelines, a strong and highly involved judiciary, and the mandatory publication of DPAs. Similarly, the majority view was that the more transparent and predictable the regime, the greater the likelihood of self-reporting.

Many of these positions, including the desire for transparency, are reflected in the government’s new proposed legislative amendments which would allow DPAs. On 27 March 2018, the government tabled Bill C-74, amending the Criminal Code to permit the introduction and use of DPAs in Canada. The proposed amendments are largely consistent with the findings from the government consultation. One of the stated objectives of the new regime is to encourage voluntary disclosure of the wrongdoing, as well as to ensure corporate accountability for wrongdoing by, among other things, putting in place corrective measures and promoting a compliance culture.

Under the proposed amendments, a number of conditions must be met in order for prosecutors in Canada to use a DPA. The offence cannot relate to bodily harm or involve a criminal organisation. Generally, the prosecutor must determine that using a DPA is in the public interest, which would involve consideration of a number of factors including the nature and gravity of the act or commissions, the degree of involvement of company personnel, any mitigating or disciplinary action by the company, and any reparation or other measures the company committed to remedy the harm, among others. The attorney general must also consent to the negotiation of the DPA. In any case, the DPA must include an admission of facts surrounding the offence, along with an admission of guilt. The DPA would also be subject to court approval, and once approved, must be made public. The proposed regime would only allow DPAs to be used in respect of certain specified offences, mainly relating to white-collar crime. This includes prohibited insider trading, gaming in stocks or merchandise, fraudulent disposal of goods on which money advance, fraudulent receipts under the Bank Act, false prospectus, secret commissions, fraud, and stock market manipulation, among others.

The government proposal has received widespread support from corporations and regulators alike.

Conclusion

This development in Canada is part of the international trend toward enhancing investigative and resolution tools to increase the effectiveness of enforcement activity to combat white-collar crime. Like Canada, France and Australia are also currently considering introducing DPA regimes of their own.

Understanding and working within the proposed DPA framework in Canada will be an important risk management tool for companies, allowing wrongdoing to be addressed to the satisfaction of law enforcement agencies, while mitigating potentially damaging reputation and other effects of a long and costly trial and potential conviction. The introduction of DPAs will have significant implications for how businesses assess risk and approach litigation, investigations and enforcement.

 

Riyaz Dattu and Larry Ritchie are partners, and Sonja Pavic is an associate, at Osler, Hoskin & Harcourt LLP. Mr Dattu can be contacted on +1 (416) 862 6569 or by email: rdattu@osler.com. Mr Ritchie can be contacted on +1 (416) 862 6608 or by email: lritchie@osler.com. Ms Pavic can be contacted on +1 (416) 862 5661 or by email: spavic@osler.com.

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