Warnings of "US-style penalties" for corporate economic crimes as new sentencing guidelines come into force

Out-Law News | 07 Oct 2014 | 11:23 am | 2 min. read

Firms operating in England and Wales should be prepared for tougher penalties in cases of fraud, bribery and money laundering now that new sentencing guidelines have come into force, an expert has said.

The Sentencing Council's definitive guideline (58-page / 330KB PDF), which incorporates the guideline for offences committed by corporate offenders, 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 document gives judges guidance on the sentencing of bribery and money laundering offences for the first time, and supports the introduction from this February of new US-style deferred prosecution agreements (DPAs).

"The context for the new corporate sentencing guidelines is the objective of imposing US-style penalties in UK cases," said anti-corruption law expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com.

"The combination of more regulation, public sentiment to see so-called corporate fat cats held to account for perceived wrongdoing and the power to order big fines and jail terms adds up to a potent mix. Businesses should sit up and take note," he said.

The new guidelines will apply to courts at all levels 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".

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.

DPAs became available to prosecutors in England and Wales in certain circumstances at the end of February. They are designed to encourage businesses to self-report wrongdoing in the hope of more lenient treatment, including the possibility of avoiding a criminal investigation and potential prosecution if strict conditions set by a judge are met. These conditions could include payment of substantial penalties, the need to compensate victims and submitting to regular reviews and monitoring. If the conditions set out in a DPA are not met, then the offender could still be prosecuted.