28th May 2014
Sentencing guidance on corporate offending, fraud, money laundering and bribery
The Sentencing Guidelines Council (SGC) has just released guidance to assist courts in determining the appropriate punishment for individuals and businesses for offences of fraud, money laundering and bribery and corruption.
Regulatory defence specialist solicitor, Andrew Brammer considers the impact of these guidelines in relation to offences committed by companies.
Companies are just as liable as individuals to be prosecuted for criminal offences, including fraud, money laundering and bribery and corruption. In addition, if the company is proven guilty and there is evidence that the offence occurred as a result of the consent, connivance and neglect of a director, then he or she can be prosecuted personally and could be sent to prison and disqualified from being a director. This is why all companies are strongly encouraged to have policies and procedures in place to eliminate (or at the very least) significantly reduce the risk of fraud and money laundering.
However, in respect of bribery and corruption, all companies are legally required to be able to demonstrate that they have in place adequate measures to prevent bribery and corruption by the company, its employees and any business or person associated with it (section 7, Bribery Act 2010). In simple terms you must have a policy or be able to justify why no policy is required.
One of the hardest tasks faced by courts is deciding how to punish corporate offenders. It is not as if you can send a company to prison. However, the courts are now mandated to send a clear message out to the business world that corporate offending will not be tolerated and there is no such thing as a “slap on the hand”. For this reason, the Sentencing Guidelines Council has set down a framework for courts to assist in determining the appropriate level of penalty. In simple terms the court must determine how serious the offending was, what was the level of involvement (culpability) by the company and finally what level of fine to impose based on, but not limited to, the financial performance of the business.
By example in cases of fraud, the factors to be taken into account are:
- The actual or intended gross gain to the company by its fraudulent activity.
For offences of money laundering:
- The amount laundered; or
- The likely costs avoided by failing to put in place an effective anti-money laundering programme.
For offences of bribery and corruption:
- The gross profit from the contract obtained, retained or sought as a result of the bribe.
- The costs avoided by failing to put in place appropriate measures to prevent bribery.
Significantly, where it is impossible to establish the intended or actual amount gained through the criminal activity, the court is now invited to consider a figure equivalent to 10-20% of the worldwide revenue derived the product or business area to which the offences relate for the period of offending. Depending on the nature and size of the business, this could result in a massive penalty.
Andrew suggests “What this tells us is that corporate offending is being taken just as seriously as individual offending. Companies and directors must be aware of their compliance duties. Chasing the bottom-line without ensuring that proper checks and balances are in place will no longer be tolerated.”