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Higher potential penalties and more emphasis of impact on victims in new sentencing guideline for financial crimes

Out-Law News | 27 May 2014 | 10:39 am | 2 min. read

Companies convicted of fraud, bribery or money laundering offences in England and Wales could face fines of up to 400% of their profits from the crime according to a finalised guideline published by the Sentencing Council.

The Sentencing Council's definitive guideline (58-page / 334KB PDF), which incorporates the guidline for offenses committed by corporate offenders, published in January 2014, will be used by judges when sentencing companies and individuals found guilty of these crimes on or after 1 October 2014, regardless of the date of the offence. The guideline will replace existing guidance on the sentencing of fraud, and will also set guidance for the sentencing of money laundering and bribery offences for the first time.

"The sentencing guidelines ratchet up potential penalties for fraud in line with the increasing focus on criminal law enforcement in white collar crime," said corporate crime expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com. "Businesses should ensure anti-fraud systems and controls are effective."

The new guidelines will apply to courts in England and Wales when prosecuting fraud, money laundering and bribery. They are designed to encourage a consistent approach to the sentencing of these offences, while putting the impact on the victim and his or her vulnerability at the centre of the process. Guidelines must be followed by courts unless they are "satisfied that it would be contrary to the interests of justice to do so".

"Fraudsters are in it to make money, but for their victims it can mean much more than losing money," said Lord Justice Treacy, chair of the Sentencing Council. "Our research with victims showed the great impact it can have on them, so the guideline puts this impact at the centre of considerations of what sentence the offender should get."

The document gives judges a range of penalties to consider and lists aggravating and mitigating circumstances. The "non-exhaustive" list of aggravating factors for corporate offenders includes previous convictions, causing substantial harm to the integrity of the markets or local or national governments, and cross-border offences. Targeting vulnerable or a large number of victims will also affect a sentence, in line with the guideline's new approach to the sentencing of individual offenders, which places harm to the victim at the centre of the sentencing process.

Courts will be able to consider the company's co-operation with an investigation, including whether it voluntarily reported the offence, as a mitigating factor. They may also consider whether the offence took place under previous management, whether the company has no previous history of offending or enforcement action and if the company received "little or no actual financial gain" from the offence.

According to the guidelines, any fine imposed on a company must be "substantial enough to have a real economic impact which will bring home to both management and shareholders the need to operate within the law". Courts may consider whether the proposed fine would put the offender out of business, but the guidance states that this will be "an acceptable consequence" in "some bad cases". They should also consider whether the level of fine would cause "unacceptable harm" to third parties, for example by reducing the amount available to pay compensation to victims. The payment of compensation should take priority over the payment of any fine, it said.