Fraud and the Criminal Justice System – will it ever be fit for purpose?

As our Cifas Fraud Pledges 2024 have laid out, we feel the Government must make the criminal justice response fit for tacking 21st Century fraud. But how might that take shape? Professor Nic Ryder, School of Law and Politics at Cardiff University, writes about the current sentencing landscape and whether it is reflective of the severity of modern-day fraud. 

The Government has changed, but the unprecedented and evolving threat presented by fraud has not. The extent of fraud was 40% of all reported crime in 2023. It has been estimated that the cost of fraud in the UK exceeds £200bn per year, 86% of fraud is unreported and that over 70% of fraud has an international element. Nonetheless, what has remained consistent, is the Fraud Act 2006 and the Sentencing Guidelines. 

If a person is convicted under the Fraud Act, the maximum term of imprisonment is 10 years, which can be contrasted with the United States of America where for securities fraud, mail fraud and wire fraud, the maximum sentence is 20 years imprisonment. Due to the wide spectrum of fraud offences that are prosecuted, there are a wide range of sentences that can be used. However, there has been a steady reduction in the number of cases proceeded against and the sentence distribution. For example, according to the Ministry of Justice, 17,280 cases were instigated in 2014 and by 2022 this had fallen below 4,000. 

The Serious Fraud Office (SFO) deals with the more serious and complex cases. In 2010/11, the SFO took 17 complex fraud cases to trial achieving at least one conviction in every case. This included 31 defendants (both individual and corporate) and amounted to a conviction rate of 84%. An 85% conviction rate was seen (2013/14), with this increasing to 86.7% (2016/17). A sharp decrease in conviction rate was then witnessed, with the rate of 76.9% (2017/2018) and 53% (2018/19). Subsequently, the way in which the conviction rate was presented was changed, with a four-year rate successful outcomes rate presented, rather than an annual one. 

For 2019/20 this was stated to be 62%. Taking the last four years’ conviction rates into account though, this would put the conviction rate of 31.4% (2019/20) – it is little wonder then that the SFO has changed the way in which it has reported this figure. In September 2023, the SFO reported that 288 offenders convicted of an SFO, representing the first increases since 2017/18. 

Where prosecutions have been successful, judicial guidance exists to determine the type and length of sentence. Originally, this was provided in the form of Court of Appeal guideline judgments.[1] Other guideline judgments relevant to fraud include R v Palk and Smith[2] (fraudulent trading); R v Stevens and others[3] (mortgage fraud) and R v Roach[4] (obtaining a money transfer by deception). Since 25 October 2009, sentencing guidelines have also existed and in accordance with R v Tongue (Ross) ‘once guidelines have been issued it should be the exception rather than the rule to cite previous cases’.[5] The original 2009 guidelines were updated in 2014. 

The first and primary consideration when sentencing fraud offences is the seriousness of the offending behaviour, which is referred to as ‘one’. This is measured by looking at both the culpability of the offender and the level of harm caused or risked being caused. Having established the appropriate harm category, the guideline provides starting points and sentencing ranges. Therefore, step two uses these ranges to reach an appropriate sentence. The guideline provides a starting point and range for each harm category and within that category for three levels of culpability. 

To establish where in the category range the most appropriate sentence sits, the court will then look at whether there are any aggravating or mitigating factors. The court must then: 

• Consider any other circumstances such as whether the offender assisted the prosecution, which might reduce the sentence (Step Three) 

• Consider whether a further reduction should be given due to the existence of a guilty plea (Step Four) 

• Consider whether the total sentence for all offences committed is appropriate – known as the totality principle (Step Five) 

• Consider the appropriateness of confiscation, compensation and other ancillary orders (Step Six) 

• Give reasons as to why it is making the decision it is making (Step Seven); and 

• Take into consideration any time which has been served in custody while held on remand (Step Eight). 

What is worth noting is that fraud cases, both by false representation and by abuse of a position of trust, are plentiful. The courts are not shy to consistently sentence people to periods of custody in the five-six-year range, even though they still appear reluctant to use the maxima of 10 years, even in cases where amounts are over £1m, the money is used to fund a lavish lifestyle and the offender is defrauding vulnerable victims. It does beg the question, therefore, how bad the fraud needs to be to attract sentences of over six years. 

The threat presented by fraud continues to undermine confidence in the UK financial services sector, it threatens the national security of the UK and has consistently become the most persistent recorded crime for several years. 

In order to address this threat, the Government needs to reform the Sentencing Guidelines so that they mirror the threat presented by fraud. The Fraud Strategy needs to be revisited – greater emphasis must be placed on providing financial support for the investigation and prosecution of suspected fraudsters, both individuals and companies. Additionally, the Government needs to provide more financial support for law enforcement agencies and prosecutors that was promised by previous Government in the Fraud Strategy. 

The Cifas Fraud Pledges that requests an improvement in the policing response to fraud and to make criminal justice fit for tackling 21st Century fraud have the potential to play an important role in improving efforts to tackle economic crime. 

To join the UK’s fight against fraud, find out more about Cifas, our membership, and range of products and services, here. 

[1] See R v Barrick (1985) 7 Cr. App. Rep. (S) 142; R v Stewart [1987] 2 All E.R. 383; R v Clark [1988] 2 Cr. App. Rep. (S) 95; R v Stevens and others [1993] 14 Cr. App. R. (S) 372; R v Palk and Smith [1997] 2 Cr. App R. (S) 167; R v Feld [1999] 1 Cr. App. R. (S) 1; and, R v Roach [2002] 1 Cr. App. R. (S) 12. 

[2] [1997] 2 Cr. App. R. (S) 167. 

[3] [1993] 14 Cr. App. R. (S) 372. 

[4] [2002] 1 Cr. App. R. (S) 12. 

[5] [2007] EWCA Crim 561.