Corporate offenders: fraud, bribery and money laundering

Fraud
Conspiracy to defraud, common law
Cheat the public revenue, common law
Triable only on indictment

Fraud Act 2006 (sections 1, 6 and 7)
Theft Act 1968 (section 17)
Value Added Tax Act 1994 (section 72)
Customs and Excise Management Act 1979 (section 170)
Triable either way

Bribery
Bribery Act 2010 (sections 1, 2 and 6)
Triable either way

Bribery Act 2010 (section 7)
Triable only on indictment

Money laundering
Proceeds of Crime Act 2002 (sections 327, 328 and 329)
Triable either way

Maximum: Unlimited fine

Most cases of corporate offending in this area are likely to merit allocation for trial to the Crown Court.

Committal for sentence is mandatory if confiscation (see step two) is to be considered. (Proceeds of Crime Act 2002 section 70).

User guide for this offence

Guideline users should be aware that the Equal Treatment Bench Book covers important aspects of fair treatment and disparity of outcomes for different groups in the criminal justice system. It provides guidance which sentencers are encouraged to take into account wherever applicable, to ensure that there is fairness for all involved in court proceedings.

Applicability

In accordance with section 120 of the Coroners and Justice Act 2009, the Sentencing Council issues this definitive guideline. It applies to organisations who are sentenced on or after 1 October 2014, regardless of the date of the offence.

Section 59(1) of the Sentencing Code provides that:

“Every court –

must, in sentencing an offender, follow any sentencing guidelines which are relevant to the offender’s case, and

must, in exercising any other function relating to the sentencing of offenders, follow any sentencing guidelines which are relevant to the exercise of the function,

unless the court is satisfied that it would be contrary to the interests of justice to do so.”

Structure, ranges and starting points

For the purposes of section 60 of the Sentencing Code, the guideline specifies offence ranges – the range of sentences appropriate for each type of offence. Within each offence, the Council has specified a number of categories which reflect varying degrees of seriousness. The offence range is split into category ranges – sentences appropriate for each level of seriousness. The Council has also identified a starting point within each category.

Starting points define the position within a category range from which to start calculating the provisional sentence. The court should consider further features of the offence or the offender that warrant adjustment of the sentence within the range, including the aggravating and mitigating factors set out at step four and the further set of factors that may require a final adjustment to the sentence at step five. Starting points and ranges apply to all offenders, whether they have pleaded guilty or been convicted after trial. Credit for a guilty plea is taken into consideration only at step seven after the appropriate sentence has been identified.

Step 1 – Compensation

The court must consider making a compensation order requiring the offender to pay compensation for any personal injury, loss or damage resulting from the offence in such an amount as the court considers appropriate, having regard to the evidence and to the means of the offender.

Where the means of the offender are limited, priority should be given to the payment of compensation over payment of any other financial penalty.

Reasons should be given if a compensation order is not made. (See sections 55 and 133-135 of the Sentencing Code)

Step 2 – Confiscation

Confiscation orders under the Proceeds of Crime Act 2002 may only be made by the Crown Court. The Crown Court must proceed with a view to making a confiscation order if it is asked to do so by the prosecutor or if the Crown Court believes it is appropriate for it to do so.

Where, following conviction in a magistrates’ court, the prosecutor applies for the offender to be committed to the Crown Court with a view to a confiscation order being considered, the magistrates’ court must commit the offender to the Crown Court to be sentenced there (section 70 of the Proceeds of Crime Act 2002). This applies to summary only and either-way offences.

Where, but for the prosecutor’s application under s.70, the magistrates’ court would have committed the offender for sentence to the Crown Court anyway it must say so. Otherwise the powers of sentence of the Crown Court will be limited to those of the magistrates’ court.

Confiscation must be dealt with before, and taken into account when assessing, any other fine or financial order (except compensation).

(See Proceeds of Crime Act 2002 sections 6 and 13)

Step 3 – Determining the offence category

The court should determine the offence category with reference to culpability and harm.

Culpability

The sentencer should weigh up all the factors of the case to determine culpability. Where there are characteristics present which fall under different categories, the court should balance these characteristics to reach a fair assessment of the offender’s culpability.

Culpability demonstrated by the offending corporation’s role and motivation

May be demonstrated by one or more of the following non-exhaustive characteristics.

A – High culpability

Corporation plays a leading role in organised, planned unlawful activity (whether acting alone or with others)
Wilful obstruction of detection (for example destruction of evidence, misleading investigators, suborning employees)
Involving others through pressure or coercion (for example employees or suppliers)
Targeting of vulnerable victims or a large number of victims
Corruption of local or national government officials or ministers
Corruption of officials performing a law enforcement role
Abuse of dominant market position or position of trust or responsibility
Offending committed over a sustained period of time
Culture of wilful disregard of commission of offences by employees or agents with no effort to put effective systems in place (section 7 Bribery Act only)

B – Medium culpability

Corporation plays a significant role in unlawful activity organised by others
Activity not unlawful from the outset
Corporation reckless in making false statement (section 72 VAT Act 1994)
Other cases that fall between categories A or C because:
- Factors are present in A and C which balance each other out and/or
- The offending corporation’s culpability falls between the factors as described in A and C

C – Lesser culpability

Corporation plays a minor, peripheral role in unlawful activity organised by others
Some effort made to put bribery prevention measures in place but insufficient to amount to a defence (section 7 Bribery Act only)
Involvement through coercion, intimidation or exploitation

Harm

Harm is represented by a financial sum calculated by reference to the table below

Amount obtained or intended to be obtained (or loss avoided or intended to be avoided)

Fraud

For offences of fraud, conspiracy to defraud, cheating the Revenue and fraudulent evasion of duty or VAT, harm will normally be the actual or intended gross gain to the offender.

Bribery

For offences under the Bribery Act the appropriate figure will normally be the gross profit from the contract obtained, retained or sought as a result of the offending. An alternative measure for offences under section 7 may be the likely cost avoided by failing to put in place appropriate measures to prevent bribery.

Money laundering

For offences of money laundering the appropriate figure will normally be the amount laundered or, alternatively, the likely cost avoided by failing to put in place an effective anti-money laundering programme if this is higher.

General

Where the actual or intended gain cannot be established, the appropriate measure will be the amount that the court considers was likely to be achieved in all the circumstances. In the absence of sufficient evidence of the amount that was likely to be obtained, 10–20 per cent of the relevant revenue (for instance between 10 and 20 per cent of the worldwide revenue derived from the product or business area to which the offence relates for the period of the offending) may be an appropriate measure. There may be large cases of fraud or bribery in which the true harm is to commerce or markets generally. That may justify adopting a harm figure beyond the normal measures here set out.

Step 4 – Starting point and category range

Having determined the culpability level at step three, the court should use the table below to determine the starting point within the category range below. The starting point applies to all offenders irrespective of plea or previous convictions.

The harm figure at step three is multiplied by the relevant percentage figure representing culpability.

	Culpability Level
	A	B	C
Harm figure multiplier	Starting point 300%	Starting point 200%	Starting point 100%
Harm figure multiplier	Category range 250% to 400%	Category range 100% to 300%	Category range 20% to 150%

Having determined the appropriate starting point, the court should then consider adjustment within the category range for aggravating or mitigating features. In some cases, having considered these factors, it may be appropriate to move outside the identified category range. (See below for a non-exhaustive list of aggravating and mitigating factors.)

Factors increasing seriousness

Previous relevant convictions or subject to previous relevant civil or regulatory enforcement action
Effective from: 01 April 2023

Care should be taken to avoid double counting factors including those already taken into account in assessing culpability or harm or those inherent in the offence

Guidance on the use of previous convictions

The following guidance should be considered when seeking to determine the degree to which previous convictions should aggravate sentence:
1. Previous convictions are considered only after the starting point for the sentence has been reached.
2. The primary significance of previous convictions (including convictions in other jurisdictions) is the extent to which they indicate trends in offending behaviour and possibly the offender’s response to earlier sentences.
3. For sentencing purposes, previous convictions are normally relevant to the current offence when they are of a similar type.
4. Previous convictions of a type different from the current offence may be relevant where they are an indication of persistent offending or escalation and/or a failure to comply with previous court orders.
5. Where information is available on the context of previous offending this may assist the court in assessing the relevance of that prior offending to the current offence.
6. When considering the number and frequency of previous convictions it may be relevant to consider the size of the offending organisation. For example, a large organisation with multiple sites may be more likely to have previous convictions than a smaller organisation with only one site.
7. The aggravating effect of relevant previous convictions reduces with the passage of time; older convictions are less relevant to the offender’s culpability for the current offence and less likely to be predictive of future offending.
8. Where the previous offence is particularly old it will normally have little relevance for the current sentencing exercise.
9. The court should consider the time gap since the previous conviction and the reason for it. Where there has been a significant gap between previous and current convictions or a reduction in the frequency of offending this may indicate that the offender has made attempts to desist from offending in which case the aggravating effect of the previous offending will diminish.
10. Where the current offence is significantly less serious than the previous conviction (suggesting a decline in the gravity of offending), the previous conviction may carry less weight.
11. When considering the totality of previous offending a court should take a rounded view of the previous crimes and not simply aggregate the individual offences.
Corporation or subsidiary set up to commit fraudulent activity
Fraudulent activity endemic within corporation
Attempts made to conceal misconduct
Effective from: 01 October 2019

Care should be taken to avoid double counting factors including those already taken into account in assessing culpability or harm or those inherent in the offence

The more sophisticated, extensive or persistent the actions after the event, the more likely it is to increase the seriousness of the offence.

When sentencing young adult offenders (typically aged 18-25), consideration should also be given to the guidance on the mitigating factor relating to age and lack of maturity when considering the significance of such conduct.

Where any such actions are the subject of separate charges, this should be taken into account when assessing totality.
Substantial harm (whether financial or otherwise) suffered by victims of offending or by third parties affected by offending
Risk of harm greater than actual or intended harm (for example in banking/credit fraud)
Substantial harm caused to integrity or confidence of markets
Substantial harm caused to integrity of local or national governments
Serious nature of underlying criminal activity (money laundering offences)
Offence committed across borders or jurisdictions

Factors reducing seriousness or reflecting mitigation

No previous relevant convictions or previous relevant civil or regulatory enforcement action
Effective from: 01 October 2019

Care should be taken to avoid double counting factors including those already taken into account in assessing culpability or harm
- First time offenders usually represent a lower risk of reoffending. Reoffending rates for first offenders are significantly lower than rates for repeat offenders. In addition, first offenders are normally regarded as less blameworthy than offenders who have committed the same crime several times already. For these reasons first offenders receive a mitigated sentence.
- Where there are previous offences but these are old and /or are for offending of a different nature, the sentence will normally be reduced to reflect that the new offence is not part of a pattern of offending and there is therefore a lower likelihood of reoffending.
- When assessing whether a previous conviction is ‘recent’ the court should consider the time gap since the previous conviction and the reason for it.
- Previous convictions are likely to be ‘relevant’ when they share characteristics with the current offence (examples of such characteristics include, but are not limited to: dishonesty, violence, abuse of position or trust, use or possession of weapons, disobedience of court orders). In general the more serious the previous offending the longer it will retain relevance.
Victims voluntarily reimbursed/compensated
No actual loss to victims
Corporation co-operated with investigation, made early admissions and/or voluntarily reported offending
Effective from: 01 October 2019

Care should be taken to avoid double counting factors including those already taken into account in assessing culpability or harm

Assisting or cooperating with the investigation and /or making pre-court admissions may ease the effect on victims and witnesses and save valuable police time justifying a reduction in sentence (separate from any guilty plea reduction).
Offending committed under previous director(s)/manager(s)
Little or no actual gain to corporation from offending

General principles to follow in setting a fine The court should determine the appropriate level of fine in accordance with section 125 of the Sentencing Code, which requires that the fine must reflect the seriousness of the offence and requires the court to take into account the financial circumstances of the offender.

Obtaining financial information

Companies and bodies delivering public or charitable services

Where the offender is a company or a body which delivers a public or charitable service, it is expected to provide comprehensive accounts for the last three years, to enable the court to make an accurate assessment of its financial status. In the absence of such disclosure, or where the court is not satisfied that it has been given sufficient reliable information, the court will be entitled to draw reasonable inferences as to the offender’s means from evidence it has heard and from all the circumstances of the case.

For companies: annual accounts. Particular attention should be paid to turnover; profit before tax; directors’ remuneration, loan accounts and pension provision; and assets as disclosed by the balance sheet. Most companies are required to file audited accounts at Companies House. Failure to produce relevant recent accounts on request may properly lead to the conclusion that the company can pay any appropriate fine.

For partnerships: annual accounts. Particular attention should be paid to turnover; profit before tax; partners’ drawings, loan accounts and pension provision; assets as above. Limited liability partnerships (LLPs) may be required to file audited accounts with Companies House. If adequate accounts are not produced on request, see paragraph 1.

For local authorities, fire authorities and similar public bodies: the Annual Revenue Budget (“ARB”) is the equivalent of turnover and the best indication of the size of the defendant organisation. It is unlikely to be necessary to analyse specific expenditure or reserves unless inappropriate expenditure is suggested.

For health trusts: the independent regulator of NHS Foundation Trusts is Monitor. It publishes quarterly reports and annual figures for the financial strength and stability of trusts from which the annual income can be seen, available via www.monitor-nhsft.gov.uk. Detailed analysis of expenditure or reserves is unlikely to be called for.

For charities: it will be appropriate to inspect annual audited accounts. Detailed analysis of expenditure or reserves is unlikely to be called for unless there is a suggestion of unusual or unnecessary expenditure.

Step 5 – Adjustment of fine

Having arrived at a fine level, the court should consider whether there are any further factors which indicate an adjustment in the level of the fine. The court should ‘step back’ and consider the overall effect of its orders. The combination of orders made, compensation, confiscation and fine ought to achieve:

the removal of all gain
appropriate additional punishment, and
deterrence

The fine may be adjusted to ensure that these objectives are met in a fair way. The court should consider any further factors relevant to the setting of the level of the fine to ensure that the fine is proportionate, having regard to the size and financial position of the offending organisation and the seriousness of the offence.

The fine 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. Whether the fine will have the effect of putting the offender out of business will be relevant; in some bad cases this may be an acceptable consequence.

In considering the ability of the offending organisation to pay any financial penalty the court can take into account the power to allow time for payment or to order that the amount be paid in instalments.

The court should consider whether the level of fine would otherwise cause unacceptable harm to third parties. In doing so the court should bear in mind that the payment of any compensation determined at step one should take priority over the payment of any fine.

The table below contains a non-exhaustive list of additional factual elements for the court to consider. The Court should identify whether any combination of these, or other relevant factors, should result in a proportionate increase or reduction in the level of fine.

Factors to consider in adjusting the level of fine

Fine fulfils the objectives of punishment, deterrence and removal of gain
The value, worth or available means of the offender
Fine impairs offender’s ability to make restitution to victims
Impact of fine on offender’s ability to implement effective compliance programmes
Impact of fine on employment of staff, service users, customers and local economy (but not shareholders )
Impact of fine on performance of public or charitable function

Step 6 – Consider any factors which would indicate a reduction, such as assistance to the prosecution

The court should take into account section 74 of the Sentencing Code (reduction in sentence for assistance to prosecution) and any other rule of law by virtue of which an offender may receive a discounted sentence in consequence of assistance given (or offered) to the prosecutor or investigator.

Step 7 – Reduction for guilty pleas

The court should take account of any potential reduction for a guilty plea in accordance with section 73 of the Sentencing Code and the Reduction in Sentence for a Guilty Plea guideline.

Step 8 – Ancillary orders

In all cases the court must consider whether to make any ancillary orders.

Step 9 – Totality principle

If sentencing an offender for more than one offence, consider whether the total sentence is just and proportionate to the offending behaviour. See Totality guideline.

Step 10 – Reasons

Section 52 of the Sentencing Code imposes a duty to give reasons for, and explain the effect of, the sentence.

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