The Sentencing Council for England and Wales has published a new sentencing guideline for corporate fraud, which can be used as a reference for judges as they begin to use deferred prosecution agreements for the first time.

The guideline applies to organizations convicted of fraud, money laundering, and bribery, on or after 1 Oct. 2014. The Sentencing Council approved the guideline following a consultation period with the judiciary and other stakeholders.

The United Kingdom's use of deferred-prosecution agreements is set to begin this month. The Sentencing Council said because DPAs are not criminal convictions, its guidelines would not apply in the same manner. Rather, the council hopes judges can look to the new guideline to help them arrive at appropriate financial penalties to be included in DPAs. Those penalties should be similar to a fine imposed after a guilty plea, the council said.

“The guideline aims to ensure consistent and appropriate sentencing for these crimes, removing any profit made from the offense, and having a real economic impact on the offending organization, including its shareholders,” the Sentencing Council said in a statement accompanying the guideline released late last month.

Under the new guideline for corporate fraud, judges must consider a compensation order for any personal injury, loss, or damage resulting from the offense. If the offender has limited financial means, the compensation order must be paid before other fines. If the court declines to issue a compensation order, it must spell out its reasons for not doing so.

Confiscation must be considered if the Crown requests it or the court deems it appropriate, and be handled before other fines are tacked on, except for orders of compensation.

The guideline includes a detailed chart to help judges determine a company's level of culpability and the harm caused. For culpability, a company would be deemed highly culpable if it played the “leading role” in planning the offense or willfully destroyed evidence. The harm in money laundering cases typically would be the amount laundered or the amount likely avoided by not following AML procedures, whichever is greater. In bribery cases, the harm normally would be the gross profit from the contract obtained, retained, or sought.

Based on the organization's culpability, a multiplier of between 20 to 400 percent would be applied to the harm amount. That figure can be adjusted up or down based on aggravating factors, like prior relevant offenses or damage to financial markets, and mitigating factors like cooperation or if offenses were committed under previous directors or managers. The courts are required to take into account the offender's financial circumstances by reviewing annual accounts, profits, director remuneration, and other data.

The court also is required to review after its deliberations the overall effect of the totality of its orders, ensuring that it removes all gain from a crime, contains appropriate additional punishment beyond the gain, and provides deterrence. The Sentencing Council said whether the punishment would put an offending company out of business could be considered as a relevant factor in setting the penalty. However, the council noted, “in some bad cases this may be an acceptable consequence.”

There are a host of other factors the court may consider, including whether a fine would affect the offender's ability to implement effective compliance procedures. Courts also would have discretion on how quickly fines would need to be paid or whether to allow installment payments.

The corporate fraud guideline is part of a broader look at sentencing guidelines for individuals convicted of fraud. The guidelines applying to individuals are expected to be released this summer following a consultation period.

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