Self-investigation and self-reporting fraud and corruption

Self-investigation and self-reporting

When there are signs of fraud or corruption, a company can conduct investigations (or have them conducted) to determine what actually happened. This investigation can be done by a company itself, but also, for example, by accountants and lawyers. If fraud or corruption is actually found during the self-investigation or if there are very strong suspicions, this can be self-reported to the Public Prosecutor's Office.

Benefits of self-reporting

Conducting self-investigations into signals of fraud and corruption promotes the integrity of Dutch companies, even in the absence of a self-report. Because - according to the Minister of Justice and Security - if companies take appropriate measures in response to a self-investigation, this contributes to the self-cleansing ability of Dutch companies, even if this is not reported to the Public Prosecutor’s Office.

The Public Prosecutor’s Office has indicated to the minister that self-reporting of fraud and corruption is a valuable tool for gaining more insight into financial-economic crime, both at the level of individual cases and in signalling certain phenomena. An important advantage here could be that in this way the limited capacity at the Public Prosecutor's Office and the investigation services can be dealt with efficiently if a company has already conducted or commissioned its own investigation.

Need for rules

Although the practice of self-investigations as internal investigations and the self-reporting of the results of those investigations is not new in itself, there is still no regulatory framework in the Netherlands (yet) on how to deal with self-reporting and the use of self-investigations. The WODC survey shows that most experts support further regulation of self-investigation and self-reporting of fraud and corruption.[1] The minister endorses the need for clear frameworks on the use of self-investigation and self-reporting in practice.

The legal certainty for companies is the main reason for a regulatory framework.[2] A regulatory framework gives companies an understanding of the conditions that a self- investigation must meet in order to be included by the public prosecutor in the investigation.

Regulation of self-investigation by 'Instruction'

In the WODC study, it became clear that the further regulations should be mainly outlined so that there would be room for customisation. As far as the minister is concerned, it is in general up to the company itself to decide how the self- investigation is done. But requirements can be imposed on a self-investigation so that the results are reliable and usable in a criminal investigation.

When asked, the Public Prosecutor's Office indicated that a so-called 'Instruction' would allow for appropriate and limited rules. At the moment, it is not yet clear whether there will be one Instruction that will contain both the rules for self-investigation and the rules for self-reporting, or whether the two subjects will each get their own Instruction.

It is already clear that the ‘Public Prosecutors Office Instruction’ on self-reporting will only cover financial-economic crime. In her February 2024 letter, the minister indicated what topics could be considered for the ‘Self-Reporting Instructions’. For example, the Public Prosecutor's Office intends to describe discount rates for fines and cooperation in criminal investigations. This could also include defining the conditions that must be met to qualify for certain discount, such as the timeliness and completeness of the report and the degree of cooperation in the criminal investigation.

In addition, the Public Prosecutor’s Office also wants to formulate requirements that a self-investigation must meet in order to be included in the case file. The minister's letter describes the following issues in this regard:

• The research brief/research letter
• The independence and expertise of the researcher
• Data research
• Interviews
• The report
• The filing with the Public Prosecutor’s Office
• Verification

With this Instuction approaching, the minister sees no need for additional legislation. The minister's letter also addresses some other issues raised by the WODC study on self-investigation. These topics will be briefly explained hereafter.

Legal protection of individuals

Legal protection for individuals in a self-investigation is a difficult subject. After all, to what extent can or must cooperation be expected from individuals in a self-investigation? The WODC report and the minister's letter indicate that the position of individuals in a self-investigation is not straightforward, but the minister does not directly indicate that further regulations can be expected on this point. This is a particular issue with individuals who would potentially incriminate themselves during a self-investigation.

Position of victim

The WODC study shows that the legal position of victims in the countries studied has been underexposed, but that there is no need to include rules on this in the Instructions of the Public Prosecutor’s Office on self-investigation and self-reporting as part of the criminal law approach to financial-economic crime. The minister argues - in short - that the Dutch criminal law system offers enough possibilities for the position of the victim.

Class justice 

Another problem mentioned in this context is the perception of class justice. The minister - rightly - points here to the fact that both companies and individuals are free to cooperate in finding the truth without prior self-reporting or self-investigation. In addition, the minister expects that regulation can contribute to transparency about the handling of self-investigations and self-reports and thus contribute to the acceptance of self-investigations and self-reporting.

Legal privilege

With regard to the role of lawyers in conducting self- investigation, the minister believes that lawyers are capable of conducting self-investigation sufficiently independently and impartially, being bound by professional and conduct rules and the disciplinary framework applicable to lawyers. According to the minister, invoking the right to privilege need not be an obstacle to a thorough self- investigation. Under circumstances, however, this may mean that if certain information would not be shared, due to an invocation of the right to privilege, the public prosecutor will take this into account when assessing the completeness of the investigation.

Summer 2024

The Minister of Justice and Security sees self-investigation and self-reporting by companies in cases of fraud and corruption as a valuable opportunity to combat financial-economic crime, provided it is done within the ground rules of the Instructions to be drawn up by the Public Prosecutor’s Office. The minister has indicated that the Instruction is expected to be submitted for consultation in the summer of 2024.

Fraud or corruption, now what?

The practice of self-investigation and self-reporting has existed for some time. So there is certainly no need to wait until the Public Prosecutor's Office Instruction is in place. Do you want to know more about how to deal with a signal of fraud or corruption? Or would you like to know more about the practice of self-investigations? Then contact h.vanaardenne@ploum.nl