In November 2013 the Commons Select Committee on Justice, in its role as a statutory consultee, reported on the Sentencing Council's draft sentencing guidelines for fraud-related offences (the committee's ninth report of Session 2013-14, entitled "Fraud, Bribery and Money Laundering Offences Guideline: Consultation", examines proposed new sentencing guidelines on fraud-related offences published by the Sentencing Council). The draft guidelines contain separate sentencing guidelines for:
- possessing, making or supplying articles for use in fraud;
- revenue fraud;
- benefit fraud;
- money laundering;
- bribery; and
- corporate offenders.
They represent the first set of guidelines for the sentencing of organisations convicted of financial crime and for individuals convicted of bribery and money laundering.(1)
The position of the victim has been given greater importance in the criminal justice system over the past few years and this continues to gather pace in the field of financial crime. The new draft guidelines place greater emphasis on the effect of the offence on the victim, rather than solely focusing on the financial loss, which may be difficult to calculate in some circumstances – particularly where there has been market manipulation or misinformation given to the financial markets, or in instances of widespread fraud where only a few cases go to trial. This focus on the victim is also important where the pure financial loss may be relatively small but, due to the victim's circumstances, may have resulted in significant financial and/or psychological harm to that individual. It was recognised that further work may need to be done to identify the levels of detriment suffered by an individual victim in order for it to be properly factored into the appropriate level of sentence.
The justice committee held the view that large commercial organisations that knowingly perpetrate fraud on the public should face tough penalties. In making such penalties more meaningful, the committee proposes that fines for corporate offenders should be primarily calculated on a percentage of turnover (or other indication of financial value), while also factoring into the fine the harm done to the victims. This could help to prevent fines from being too lenient for large, wealthy corporations. No specific percentage was recommended, but it was suggested that it should be sufficiently high to act as a deterrent.
The committee also recommended that incentives be built into the guidelines for offenders to make early voluntary reparation, thereby improving the chances of victim compensation. The mechanics of these two principal recommendations have yet to be worked out and the calculation of appropriate fines may prove difficult for corporations that are based overseas, where the availability of financial information about the organisation may be limited.
For further information on this topic please contact Kathleen Harris at Arnold & Porter LLP by telephone (+44 20 7786 6100), fax (+44 20 7786 6299) or email (firstname.lastname@example.org). The Arnold & Porter website can be accessed at www.arnoldporter.com.
(1) See the attorney general's 2013 guidelines on disclosure for investigators, prosecutors and defence practitioners, available at www.gov.uk/government/publications/attorney-generals-guidelines-on-disclosure-2013.