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Categorized | Banks, Financial

Standard Bank to pay $25m in bribery case

Posted on November 30, 2015

The headquarters of the Serious Fraud Office in Westminster.©Charlie Bibby

The British arm of South Africa’s Standard Bank will pay a $25.2m fine to settle accusations of bribery as part of the Serious Fraud Office’s first deferred prosecution agreement.

Sir Brian Leveson, sitting at the High Court, said he would approve the agreement involving Standard Bank which had failed to prevent bribery in a Tanzanian subsidiary between June 2012 and March 2013. The case is also the first prosecution for the SFO of a company under the 2010 Bribery Act.

    As well as the fine, the bank will pay $6m to the Tanzanian government, plus interest of just over $1m, and £330,000 in costs to the SFO.

    The deal marks a UK milestone: it is the first of its kind to strike a new form of plea deal in order to avoid prosecution, a tool that is commonly used in the US. A DPA is a court-approved deal where a company admits wrongdoing, pays a fine and agrees to various other compliance measures. The tool was introduced to the UK last year.

    Jonny Cotton, a partner at law firm Slaughter and May, said: “This provides a much needed real world precedent, in a major case, that should assist corporates in assessing whether to self-report and to co-operate with the SFO.”

    The High Court heard that Stanbic Bank Tanzania Limited (ST) was the lead manager in a $600m private placement to raise funds for the Tanzanian government so it could invest in infrastructure.

    The court was told that by the end of August 2012, the structure of the deal had changed and two executives from ST Bank brought on board a local partner — EGMA — that had close connections with the government of the African state.

    The bank raised fees on the deal mandate by 1 per cent to 2.4 per cent with 1 per cent going to EGMA, a Tanzanian company, even though Harry Kitilya, its chairman, was then head of the Tanzanian tax authority.

    Sir Edward Garnier QC, representing the SFO which was requesting the DPA, said there was no record of any detailed inquiry being made inside the bank about EGMA under the “know your customer” rules.

    He singled out Bashir Awale, former chief executive of ST, and Shose Sinare, former head of investment banking who brought in EGMA. Mr Awale was later fired and Ms Sinare resigned from the bank in 2013.

    Sir Edward said if the two had been based in this country they would have been liable for the offence of bribery itself. However the bank was being fined for its failure to prevent these individuals committing bribery.

    In a statement Standard Bank said it took the issue of corruption “very seriously” and “deeply regrets that this issue arose on a transaction with which it was involved”. It noted the SFO does not allege that anyone in the bank knew of the intentions of the two ST employees.

    Sir Edward said the bank had co-operated and conducted its own internal investigation using Jones Day, the law firm. Four of ST’s own staff had flagged suspicious payments to EGMA in 2013 when the private placement was completed.

    The Tanzanian anti-corruption agency is now investigating the EGMA deal and the US Securities and Exchange Commission will also announce a resolution soon, taking into account the SFO’s findings, Sir Edward said.

    Standard Bank’s UK division is now controlled by Industrial and Commercial Bank of China, although the alleged wrongdoing predates ICBC’s acquisition.