Criminal financial penalties

Financial penalties for corporate and individual fraud, bribery and money laundering offences are determined in accordance with relevant legislation and the sentencing guidelines issued by the Sentencing Council.2 For corporates, the relevant guideline is 'Corporate Offenders: fraud, bribery and money laundering' (the Guideline).3 The Guideline applies to corporates sentenced on or after 1 October 2014, regardless of the date of the offence, and must be followed by the court unless it would be contrary to the interests of justice to do so.4

In applying sentencing guidelines to offences prosecuted under legislation that pre-dates them, the court may reflect 'modern attitudes' to historic offences and make allowance for any change in maximum sentence for that particular offence5 (although the court cannot exceed the maximum sentence available at the time of the commission of the offence) to ensure that the sentence passed is in the interests of justice.

The sentencing guidelines set out a step-by-step process for sentencing offenders. The Guideline contains ten steps:

  • compensation;
  • confiscation;
  • determining the offence category;
  • starting point and category range;
  • adjustment of fine;
  • factors that would indicate an adjustment;
  • reduction for guilty pleas;
  • ancillary orders;
  • totality principle;
  • reasons.

The steps are explained in further detail below.

Compensation

The court must first consider ordering a company to pay compensation to a victim of offending for any personal injury, loss or damage resulting from the offence,6 in an amount it considers appropriate. The court will have regard to any evidence and any representations made by the prosecutor or the company7 and must consider the company's ability to pay.8 If a company does not have the means to pay both a fine and a compensation order, a compensation order will take priority.9 Compensation orders are not mandatory, but if the court does not make one it must give reasons for the decision.10

Confiscation

The second step under the Guideline is for the court to consider confiscation. The confiscation regime is governed by the Proceeds of Crime Act 2002. The court must consider confiscation where the prosecutor asks it to proceed or where the court considers it appropriate to do so,11 and confiscation must be dealt with before any other fine or financial order (except compensation).12 The purpose of a confiscation order is to recover a sum of money equal to the benefit obtained from the offence, whether or not it has been retained. The court will consider (1) whether the defendant has benefited from criminal conduct, (2) the value of the benefit obtained and (3) what sum is recoverable from the defendant.

The defendant's criminal benefit is the value of the property obtained as a result of, or in connection with, the criminal conduct, including any pecuniary advantage.13

In calculating the benefit, the court must first consider whether the defendant has a 'criminal lifestyle'.14 Circumstances where a criminal lifestyle will be found include where a defendant is convicted of money laundering offences;15 where the defendant has obtained benefit of at least £5,000, where the offence forms part of a course of criminal activity;16 or where it is committed over six months or more.17 Given that serious economic offences are often committed over lengthy periods, (especially where charged as a conspiracy), the criminal-lifestyle provisions are often engaged. Where a criminal lifestyle is found, the court will decide whether the defendant has benefited from 'general criminal conduct'18 namely, any of his or her criminal conduct, whenever it occurred and regardless of whether there it has ever been prosecuted.19 When calculating the benefit to a defendant with a 'criminal lifestyle', the court may draw certain assumptions about the defendant's property,20 which can be very detrimental to a defendant. For example, it may assume that any property transferred to the defendant in the six years preceding a charge was obtained by criminal conduct. However, the defendant may prove that an assumption is incorrect, and the court may not draw an assumption where it would give rise to a serious risk of injustice.21

If the defendant is not considered to have a criminal lifestyle, the court must consider whether the defendant has benefited from the criminal conduct22 for which he or she is being sentenced and determine the value of that benefit. The court must then decide the recoverable amount and make a confiscation order requiring the defendant to pay,23 unless the defendant can show the available amount is less than the benefit, in which case the recoverable amount will be the available amount, or a nominal amount, if nothing is available.24 The available amount is the aggregate of the value of the defendant's free property and any tainted gifts made by the defendant, less the value of any obligations that take priority.25

A confiscation order is an order to pay a sum of money, but it can be enforced against the defendant's property and any tainted gifts, if the defendant fails to pay.

Before making an order, the court must consider whether a confiscation order is proportionate.26 Case law suggests that it is not proportionate to take the entire value of a corrupt contract as the benefit (where full value is given under the contract), but rather that proportionality dictates that the benefit should be confined to the gross profit, together with any other pecuniary advantage flowing from the corruption.27 The amount of any bribes paid will be added back if they have been deducted as an expense when reaching the gross profit. In a separate case, it has been held that where the defendant can establish that VAT output tax on revenue obtained from criminal conduct has been paid to HM Revenue and Customs, it would be disproportionate to make a confiscation order calculated on the basis that a sum equivalent to that VAT paid has been 'obtained' by the defendant.28

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Footnotes

1 Tom Epps is a partner, and Marie Kavanagh, Andrew Love, Julia Maskell and Benjamin Sharrock are associates, at Cooley LLP. The authors wish to acknowledge the contributions of Kelly Hagedorn, Robert Dalling and Matthew Worby, the authors of the corresponding chapter in the previous edition of this work, on which this chapter is partly based.

2 The Sentencing Council publishes separate guidelines for the magistrates' and Crown courts. Many guidelines are offence-specific, but there are also overarching guidelines on various topics, including a General Guideline with Overarching Principles, effective from 1 October 2019, be used in conjunction with the specific guideline or where no offence-specific guideline is available. Available at: https://www.sentencingcouncil.org.uk/overarching-guides/crown-court/item/ general-guideline-overarching-principles/.

3 Sentencing Council Definitive Guideline, Corporate offenders: fraud, bribery and money laundering, effective from 1 October 2014. Available at: https://www.sentencingcouncil.org.uk/ offences/crown-court/item/corporate-offenders-fraud-bribery-and-money-laundering/.

4 Section 125(1), Coroners and Justice Act 2009.

5 R v. H & Ors [2011] EWCA Crim 2753; R v. Clifford [2014] EWCA Crim 2245.

6 Section 130(1), Powers of Criminal Courts (Sentencing) Act 2000.

7 Section 130(4), Powers of Criminal Courts (Sentencing) Act 2000.

8 Section 130 (11), Powers of Criminal Courts (Sentencing) Act 2000.

9 Section 130(12), Powers of Criminal Courts (Sentencing) Act 2000.

10 Section 130(3), Powers of Criminal Courts (Sentencing) Act 2000.

11 Section 6, Proceeds of Crime Act 2002.

12 Section 13, Proceeds of Crime Act 2002.

13 Section 76(4) and (5), Proceeds of Crime Act 2002.

14 Section 6(4)(a), Proceeds of Crime Act 2002. 'Criminal lifestyle' is defined in section 75, Proceeds of Crime Act 2002.

15 Section 75(2)(a), Proceeds of Crime Act 2002. The section provides for specified lifestyle offences that are set out in Schedule 2, Proceeds of Crime Act.

16 Section 75(2)(b), Proceeds of Crime Act 2002.

17 Section 75(2)(c), Proceeds of Crime Act 2002.

18 Section 6(4)(b), Proceeds of Crime Act 2002.

19 Section 76(2), Proceeds of Crime Act 2002.

20 Section 10, Proceeds of Crime Act 2002.

21 Section 10 (6)(a) and (b), Proceeds of Crime Act 2002.

22 Section 6(4)(c), Proceeds of Crime Act 2002.

23 Section 6(5), Proceeds of Crime Act 2002.

24 Section 7(2), Proceeds of Crime Act 2002.

25 Section 9, Proceeds of Crime Act 2002.

26 R v. Waya [2012] 3WLR 1138; section 6(5), Proceeds of Crime Act 2002.

27 R v. Sale [2013] EWCA Crim 1306.

28 R v. Harvey [2016] 4 All ER 521.

Originally published by The Practitioner's Guide to Global Investigations - Fifth Edition.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.