FINANCIAL CRIME: An Introduction to The Regions

Financial Crime: The Regions 

2024 marks the tenth anniversary of the Sentencing Council’s current fraud sentencing guidelines. Sentencing Guidelines for the judiciary were introduced for guidance as early as 2004 and effectively became mandatory in 2010 through the Coroners and Justice Act 2009. Their aim was to provide consistency and transparency in the sentencing process, but they have left the judiciary with very little room for manoeuvre in the sentencing process. The guidelines for the sentencing of fraud are no exception. They were introduced in 2014 with the aim of putting the victim at the heart of the sentencing process. Previous sentencing guidance had victim impact as nothing more than an aggravating feature, and sentences for fraud could have huge variation on a case-by-case basis despite similar facts. However, the current sentences advised are now amongst the most severe in the criminal calendar, with individuals convicted of serious financial crime serving some of the longest sentences in the prison estate at a time when, at the time of writing, the UK’s prison estate has reached capacity.

As the UK struggles through its most significant economic downturn in 15 years, it is no surprise that the most recent Justice Select Committee’s report indicated that fraud accounts for more than 40% of reported offences and was the single most commonly experienced crime in England and Wales.

It seems that in recent years UK governments have prioritised the pursuit of corporate bodies, the outcomes of which have been met largely with success, be it by Deferred Prosecution Agreements (DPAs) with corporate entities or through the successful encouragement of pleas of guilty from the same. The guilty plea in the SFO’s prosecution of Glencore is the prime case in point, resulting in the largest ever financial penalty for an SFO prosecution.

At the time of writing, the Economic Crime and Corporate Transparency Bill is on the verge of Royal Assent and is about to further extend criminal offences for which corporate liability is more likely than that of individuals. The standout reform proposed is, of course, the introduction of the corporate offence of failing to prevent fraud, which is directed at larger organisations. It overcomes the previous hurdle in corporate prosecutions for fraud in that it would no longer have to be proved that the “directing mind” of the company was involved in the fraud. The organisation’s only defence would be one similar to the existing offence of failing to prevent bribery in the Bribery Act 2010 – namely, having the correct compliance procedures in place to prevent the offence.

Attempts to extend the legislation to smaller organisations and to other offences, such as money laundering, have failed. In addition, DPAs will be available in order to resolve any criminal proceedings. All told, however, such corporate prosecution seems at first blush to be unlikely to have a further detrimental impact on the already creaking criminal justice system and its infrastructure.

But what of the individual?  

It is certainly the case that the SFO’s prosecution of individuals has had what can be generously described as a mixed outcome. However, the introduction of the fail to prevent offence coupled with the targeting of the corporate in the first instance and resolving matters by DPAs or pleas of guilty can pave a successful way for the subsequent prosecution of the individuals ultimately responsible. The pleas of guilty were entered by Glencore as long ago as June 2022, with the financial penalty imposed in November of that year. It is only now that individual suspects are having their investigations stepped up.

In September 2023, former assistant commissioner of the Metropolitan Police Nick Ephgrave took over from the controversial Lisa Osofsky, and within weeks the SFO had announced that it is to increase its number of investigators and case workers by a third, with the aim of recruiting investigators, prosecutors, accountants and case workers to bring the full-time headcount to almost 600. Its most recent investigations and charging decisions seem to involve a number of individuals, and they will be confident they have learned from their mistakes in the past.

Outside the sphere of the most serious and complex fraud enquiries, and particularly out in the UK’s regions (a long way from the confines of Southwark Crown Court), perhaps the most significant development for the individual suspected of fraud was the announcement in early summer of the UK government’s Fraud Strategy and, most importantly, how it is to be executed.

At its heart are two key concepts.

First, the establishment of a brand new enforcement agency, The National Fraud Squad, consisting of 400 new specialist investigators, with recruitment hoped to be started with immediate effect and completed by 2026, although it is likely that the majority of such recruits will be drawn from other pre-existing agencies.

Secondly, the introduction of a new national fraud reporting service in a complete overhaul of the existing Action Fraud reporting service. The current national service has often been criticised by victims for the pace at which reports are processed, very often being allocated to under-resourced local police forces with little appetite for pursuing the enquiry. The new reporting scheme seeks to address this and to give what is termed a global reach to enquiries, hopefully with the assistance of foreign jurisdictions.

The government strategy has been criticised as either over-ambitious and complex or not going far enough to be able to compete with the increasing pace of fraud in the UK. However, it does seem that, at the very least, a widely criticised reporting system is to be brought into the modern age, and the government will be happy to reflect on the criticism that was aimed at its attempt to tackle public sector fraud in the wake of the COVID-19 pandemic.

In 2022, the Public Sector Fraud Authority was launched by the then Chancellor and the UK's incumbent Prime Minister, to some degree of ridicule. Much of the ridicule was aimed at the way in which the government had left itself wide open to the abuse of the pandemic bounce-back loan scheme, such that a new agency was required to attempt to compensate for the administration’s negligence. In large part, it also drew its expertise from other agencies. Contrary to a suspicion that its target of recovering GBP180 million in its first year was overly ambitious, it has already recovered GBP311 million, and the associated criminal investigations and prosecutions continue apace.

Whether the government’s ongoing pledge and legislative support to prioritise the prosecution of fraud offences, at both a corporate and an individual level, will meet with such ongoing success is of course unknown, but one cannot help but reflect upon the arena in which this is to take place.

The sentencing guidelines for sentencing an individual are based largely on value: the higher the loss or attempted gain, the higher the sentence. As inflation increases, the guidelines have remained static, with more and more offenders falling into the higher categories.

With a prison estate at capacity and with conditions described as inhumane and current proposed solutions varying from the use of court cells to the renting of prison cells abroad, the judiciary have at the time of writing been advised to delay the sentence of those defendants on bail who are expected to receive custodial sentences. This takes place against a backdrop of a crumbling and under-resourced court estate at the heart of a criminal justice system that was once the envy of the legal world. The backlog of outstanding cases before the Crown Court is at a record high. Cases of financial crime – with the majority of individual defendants being on bail and the length of trials being significantly longer than the norm of general crime – stand at the back of the queue, with both defendants and victims being the subject of pending court proceedings for a matter of years in addition to any investigation, which has likely taken even longer.

In pledging to prosecute fraudsters with far more determination and on the face of it making significant investment in the means to do so, the question for government has to be when are they to be tried and, if convicted, where are they going to go?