New report warns DPAs should not be seen as ‘a cost of doing business’

The use of deferred prosecution agreements (DPAs) doesn’t stop corporate fraud, and may be actively encouraging it, according to new paper by the Institute of Economic Affairs (IEA).

DPAs are court-approved agreements made by a prosecutor with organisations in the cases of fraud, bribery and other economic crimes, under specified conditions.

They are available for the Crown Prosecution Services (CPS) and Serious Fraud Office (SFO).

However, Dr Alison Cronin argues in a new IEA paper “that large corporations should not be effectively guaranteed DPAs to address the crimes they commit”.

She states that the agreements “fail to act as a deterrent” and “may serve to actively promote fraud”.

A high profile DPA made the headlines last December when the CPS entered into such an arrangement with gambling giant Entain to settle the HMRC investigation into the group. The London-listed firm agreed to pay £615m in recompense, including charitable donations and HMRC’s legal costs.

Cronin says that DPAs allow authorities access to difficult evidence, while companies avoid lengthy and expensive trials. But she warns that they “are not a deterrent but are simply seen as a cost of doing business”

She argues that a credible threat of invoking the full force of the criminal law is required to deter corporate criminality and that a successful market economy relies on effective laws that minimise fraud, which makes up 41 per cent of all crimes across England and Wales.

As a result, fraud incurs high economic costs as it erodes public trust and deters economic activity, distorting competition, misallocating resources and reducing tax revenue.

In exchange for using DPAs, she suggests that the UK should incentivise corporate whistleblowers noting that in the US whistleblowers’ payments totalled $9bn which resulted in sanctions imposed of over $75bn between 1989 and 2023.

She notes in her paper that as we await the outcome of the UK government’s review of the whistleblower framework, the director of the SFO, Nick Ephgrave, has already expressed his support for a whistleblowing incentivisation regime.

Cronin, author of the IEA’s report and principal academic in law at Bournemouth University said: “Companies that stay in business because of criminal behaviour are parasitic, they do not increase the economic pie but merely redistribute it in a non-efficient way.”

“This is not to suggest that there is no place for DPAs in the fight against corporate crime, simply that they should not play the exclusive role that has come to be expected for corporations considered ‘too large to fail’,” she added.

While Simon Fell, former UK government anti-fraud champion noted that “fraud is at epidemic levels and the system wide response must change to counter it.”

“Cronin’s central argument that DPAs are all too often seen as a cost of doing business is spot on. Improving and enhancing whistleblowing and providing a credible threat of criminal conviction would be a powerful means to achieve this,” Fell added.