White collar crime expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said that "big fines" could be on the way for those convicted of economic crimes following the publication of draft guidance by the Sentencing Council. In particular, he noted that companies could be fined by as much as 400% of the amount they gained from the crime.
The SFO and Director of Public Prosecutions (DPP) have also published their draft code of practice on DPAs (21-page / 66KB PDF), which prosecutors will be able to agree with companies that admit to unacceptable corporate behaviour or economic crime from next year. Both draft documents are subject to consultation.
Writing on his website thebriberyact.com, Vitou said that the new regime could lead to "chunky fines and other penalties".
"Numerous surveys and anecdotal evidence point to a wait and see attitude among some businesses who take UK threats of criminal law enforcement in fraud cases with a pinch of salt," he said. "This manifests in a lack of systems and controls to prevent fraud (including bribery) and in some cases a devil may care attitude."
"Against a backdrop of an austerity programme with law enforcement stuck with swinging cuts, a continuing lobby to try to water down the Bribery Act and a lack of any visible enforcement against corporates for Bribery Act violations in the two years since its entry into force, this is understandable – but it is a mistake," he said.
The Sentencing Council's guidelines will apply to courts in England and Wales when prosecuting fraud, money laundering and bribery. They include guidance on the sentencing of money laundering and bribery offences for the first time, along with guidance for sentencing corporate offenders. The guidance 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, particularly where those victims suffer "substantial harm", financial or otherwise. Courts can consider the company's co-operation with an investigation, including whether it voluntarily reported the offence, as a mitigating factor.
According to the draft, 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".
From next year, prosecutors will be able to enter into DPAs to defer prosecution against corporate offenders in appropriate cases, in exchange for a range of stringent conditions. These may include substantial financial penalties, the need to compensate victims and submitting to regular reviews and monitoring, depending on the circumstances of the case. If the prosecutor is satisfied that the company has fulfilled its obligations by the end of the deferral period there will be no prosecution, but if the conditions are not met then the organisation could still be prosecuted.
Under the draft code of conduct, prosecutors must have "at least a reasonable suspicion that the commercial organisation has committed the offence" and that the available evidence and results of further investigation would "be capable of establishing a realistic prospect of conviction". In addition, entering into a DPA instead of prosecution must "properly serve" the public interest.
White collar crime expert Barry Vitou said that the proposed code contained "no real surprises" and was "in line with DPAs becoming a reality early next year".
"Today's publication, coinciding with the publication of the Sentencing Guidelines, underscores the UK's commitment to DPAs and the continued criminalisation of corporate law in the UK," he said.
He noted that the new regime would allow prosecutors to continue to use Civil Recovery Orders in circumstances where there was not enough evidence for a DPA.