Today the Sentencing Council has announced the start of a consultation period in respect of proposed changes to the fraud sentencing guidelines. These are intended to replace the existing guidelines published in 2009.
The proposals are designed to try and give guidelines to Judges and Magistrates to an area that has been notoriously difficult to sentence in the past due to the wide range of offences that come within the fraud bracket. This can cover sophisticated multi-million VAT frauds, bribery and even a so called ‘cowboy’ builder ripping off a vulnerable victim by overcharging for work. The declaration from the Sentencing Council is that an overarching issue to address is economic crime.
A priority in these guidelines appears to be that the Courts will be required to assess the impact upon the victim of the crime and to assess the harm. The idea behind that is to ensure that sentences aren’t just about the value of the fraud. If the victim of the fraud has very little money then the impact and harm to that victim may be far greater than to a public body or corporate organisation.
The important issue for businesses and limited companies are the suggested proposals to include guidelines for the sentencing of corporate bodies. These don’t exist at the moment and this leads to a lack of consistency in fines for corporate bodies throughout England and Wales.
This shouldn’t strike fear into the hearts of directors and managers as the consistent approach can only lead to better financial planning should the company find themselves in the unfortunate position of being fined. What will be difficult for companies and their officers is the ease in which they could be placed into a bracket dictating higher culpability.
Only one of a number of factors will place them into that bracket and the company itself may be suffering from the criminal conduct of only 1 to 2 officers. Factors that could place the company in the higher bracket are if there is a substantial harm to the integrity of the markets or if the conduct was carried out in a number of different countries.
Of course there will be little public sympathy given the recent issues with the fixing of the LIBOR rate. Indeed Lord Justice Leveson has indicated that the harshness of the fines could lead some to go out of business but in his view that may well be ‘acceptable consequences’. The corporate fines could be in a range of between 250% and 400% of the ‘harm’ caused.
These suggestions will bring England and Wales more in line with punishments in the USA and if they are implemented will make this country one of the toughest on fraud sentences in the world. This will however help the new legislation being brought in to encourage Deferred Prosecution Agreements (DPAs) which could be used as early as next February. These agreements allow companies to suspend any criminal prosecution on a number of strict conditions. These could include large fines, undertakings to ensure future compliance amongst others suggestions. If the company does not comply then they will be prosecuted regardless.
The suggested sentencing guidelines will make it easier to advise companies on whether they would benefit from self-reporting matters to the Serious Fraud Office (SFO) as the issues relating to sentence will have more clarity and a more consistent approach.
Bribery is specifically targeted in these suggested guidelines and this has been a subject close to the SFO’s heart over the last few years since the introduction of the Bribery Act 2010. Bribery is discussed at the beginning of the proposals in the overarching issues of the proposals. It is stressed that bribery is not a victimless crime and quotes that some of the negative effects of this crime include undermining democracy; distorting markets leading to higher prices and substandard goods or services and even encouraging organised crime and terrorism.
In respect of all of these corporate offences, be warned that in large organisations you will need to have very rigorous procedures in place to prevent succumbing to allegations of fraud and bribery.
The individuals committing these offences may not be you but those around you. If you cannot show that your systems are adequate to prevent this happening then you may fall foul of the laws. If that happens, you need specialist advice from a specialist in business crime to discuss your best way forward.
By fraud and regulatory Partner, Rachel Adamson
We have a team of specialists here at Stephensons and if you have any concerns whatsoever contact us on a completely confidential basis. Email Rachel Adamson on firstname.lastname@example.org.