New fraud sentencing guidelines to focus on harm.

19 June 2014

Under new guidelines being considered by the Sentencing Council, consideration is being given to a new system to take more account oF the impact on the victims of the offences and whether they were vulnerable. The proposals would apply to offences ranging from fraud, such as basic insurance scams, to money laundering and potentially bribery offences.

The Sentencing Council does not have any legislative power but issues guidelines on a wide range of offences designed to assist the court service in consistency of sentencing across England and Wales.

Michael Caplan QC from the Sentencing Council said that research had demonstrated that fraud offences can have a great impact on victims, even if the amount of the financial loss was comparatively small when compared to some of the very large scale frauds.

The original sentencing guidelines were issued in 2009 but they do not cover offences of money laundering and bribery. Mr Caplan said "fraud is committed for financial gain, but it can be much more than financial loss to the victim. Our research with victims showed the great impact it can have on them. They can suffer panic, stress, self-blame and shame, and some people even become suicidal. the first step  in our proposed guidelines therefore looks at what the victim has been through."

Mr Caplan said "our proposed guidelines therefore direct courts to start the sentencing process by looking at what victims have been through".

The new guideline will also assist prosecutors in relation to the new Deferred Prosecution Agreements (DPA's) which are being introduced in early 2014. A DPA is an agreement between a prosecutor and organisation that a criminal prosecution will not proceed on condition that various terms are complied with including the payment of financial penalties. The guidelines will assist prosecutors in setting out for them indications of potential financial penalties that companies would face following a conviction and therefore give them guidance on the penalties to be imposed under a DPA.

The Sentencing Council said fraud against businesses cost companies £45.5 billion in 2011 through such offences as employees claiming false expenses and suppliers making fraudulent payment claims. Also in 2011 fraud against public funds cost £20.3 billion, fraud against individuals £6.1 billion and fraud against charities £1.1 billion. In the same year, it is understood that 16,000 people were sentenced for offences of fraud of one type or another.

The National Fraud Authority has estimated that the cost to the UK economy in 2012 from offences of fraud was £73 billion which exceeds the national budget for state education.

The Fraud Act 2006 covers offences of fraud ranging from fraud by false representation, fraud by failure to disclose information and fraud by abuse of position and also offences of being in possession of or making and supplying articles for use in fraud, and participating in fraudulent businesses. It also provides the legislation for offences of fraud if a person dishonestly obtains the services of another. It also provides the basis for offences in relation to which officers of companies can be liable for offences committed by the company itself, if those offences are proved to have been committed with the consent or connivance of an officer of the company or other person purporting to act in such a capacity. The Fraud Act covers a very wide range of offences from cowboy builders and insurance scams to complex VAT frauds, boiler room frauds and Ponzi schemes.

Note: This is not legal advice; it is intended to provide information of general interest about current legal issues.