The Fraud Act 2006: has it had

any impact?
by Ben Summers

The Fraud Act 2006, which represents the most radical change in the law of criminal fraud since
the Theft Act 1968, came into force on January 15, 2007. We are now over a year into the new
law, which seems a reasonable juncture to pose the question: has it had any impact?

INTRODUCTION led prosecutors, wherever possible, to a rely heavily upon

I
t may simply be too early to tell what impact, if any, the
Fraud Act 2006 has had; its provisions do not apply The specific nature of the law invited technical
retrospectively, which means that only conduct which arguments. The prime example of the problem arose in
has taken place entirely since January 15, 2007 can be 1996 when section 15 of the Theft Act 1968 (obtaining
prosecuted under the new provisions. If we factor in the property belonging to another by deception) came under
length of time which investigations and prosecutions judicial scrutiny in the case of Preddy [1996] AC 815. The
typically take, it is obvious that the first major trials are only case concerned good old fashioned mortgage fraud in
likely to be before the courts in the coming months. There which the defendants had obtained mortgages from lenders
is then a further delay, of course, until any cases are heard on the basis of false representations.
in the appeal courts, meaning there is a paucity of reported
The Court of Appeal held that where D dishonestly, and
cases, as well as a significant delay in the publication of any
by deception, procured a transaction whereby V’s bank
useful prosecution and conviction statistics.
account was debited and consequently there was a credit to
I would ask instead, what impact can the Act be D’s account, D had not obtained property belonging to
expected to make? What are the problems and what were another by deception. The debt owed by V’s bank to V had
the solutions, both in theory and in practice, based on been extinguished, and what D obtained was a newly
what little anecdotal evidence there is? I will therefore created debt owed by his bank to him, not property
consider: belonging to another. One chose in action had been
• problems with the “old” law; extinguished and another created; although a chose in
action is capable of being appropriated by another, here
• whether the Act can solve these problems;
there were two separate legal rights, not a single piece of
• that case law under the Act which does already exist;
property. This is fine from a jurisprudential point of view
• prosecutorial attitudes towards the Act; and very neat logical thinking, but a disaster in Magistrates’
• defence perspectives on the Act; and finally and Crown Courts throughout the country.
• other recent measures which may have an impact on
The introduction of the new section 15A to the Theft
fraud.
Act 1968 by the Theft (Amendment) Act 1996 followed
THE OLD LAW very swift consultation on the issue. Fears ran out across
the legal and banking worlds that those “appropriating”
The problems with the old law have been rehearsed
bank balances were now immune from prosecution since
many times before; the Fraud Act was the response to long
no offence in the criminal calendar was able to tackle the
and sustained criticism from the judiciary, practitioners
behaviour. Section 15A, which created a new offence of
and academics.
obtaining a money transfer by deception, was intended to
The overriding criticism of the law as it then stood was close the Preddy loophole, by removing the requirement to
that there were too many specific fraud offences, defined show that property “belonging to another” was obtained,
with reference to different types of consequences and it in that as long as a balance was transferred as a result of the
was not always easy to identify which offence to charge, and deception it did not matter that it was not the same legal
10 often, even less easy to secure a conviction. This in turn property that was obtained.
Amicus Curiae Issue 75 Autumn 2008
 However, even this solution demonstrated the very cannot think and therefore cannot be deceived: Holmes v
problem from which our criminal law suffered, namely that The Governor of Brixton Prison and another [2004] EWHC
piecemeal reform did nothing to tackle its over-technical 2020.
nature and instead exacerbated the problem of too many,
A further problem resulting from the focus on the mind
over-specific offences. For example, the 1968 Act had
of the victim rather than the offender was that, although a
already been amended by the Theft Act 1978 which
failure to disclose may be as harmful and culpable as
created new offences of obtaining services by deception,
making a representation, it was difficult for prosecutors to
evasion of a liability by deception, and making off without
payment. The Theft Act 1968 had itself been an attempt successfully imply a representation from silence. People in
to codify and simplify a complex web of offences created positions of trust do not need to make false
by the Larceny Act 1916. It is almost as if legislators have representations to get what they want. They can simply
a long and distinguished history of over-complication in misuse what they have been entrusted with. A well known
this area. example is that of the manager of a pub who sold his own
beer on his employer’s premises; he was not guilty of theft
There were also difficulties with charging attempts. D and was not guilty of conspiracy to defraud, because he
attempts to get a bank cashier to hand over money from an was acting alone: AG’s Ref (No 1 of 1985) [1986] QB 491.
account; the cashier is suspicious and refuses: D does not However, two employees who sold their sandwiches in
during this stage of the process stipulate how he would like place of British Rail ones were guilty of conspiracy to
the transaction effected. Had the deception worked, and defraud, as they acted together: Cooke [1986] AC 909.
depending upon what D had intended to go on to say, the The law created an anomalous situation in which an act
cashier could have either given cash, a cheque or was capable of prosecution when carried out by more than
transferred money between accounts. There was certainly
one person, but not when carried out by someone acting
an attempt, but of which offence?
alone.
The same could be said for conspiracies, although there
Other problems included the fact that fraud (in the lay
are the authorities to the effect that an agreement to
sense) is not always committed with an obvious view to
commit either one or another crime, although unlikely, is
gain. There was no offence of obtaining services without a
possible: Hussain [2002] 2 Cr App R 26.
deception, so jumping over a turnstile at a football match
All these were certainly issues, but the most acute could not easily be charged. In addition to offences
problem which the Fraud Act 2006 was intended to involving an element of deception or “fraud” in the
remedy was the focus on the mind of the victim, rather everyday sense, the Fraud Act 2006 was also designed to
than the mind of the offender. Under the old law it was deal with other specific lacunae in the existing law such as
necessary to prove that the deception had acted on the these. The offence of going equipped to steal only applied
victim, for example that he/she would not have parted with if the person was found with the necessary equipment
the goods but for the deception. This increasingly created outside their own home, meaning it was legal to have, for
difficulties as technology developed and the use of credit example, skimming devices at home. Fraudulent trading
cards and payment through machines or over the internet needed a corporate entity: there was a potential injustice
became prevalent. where a fraudster sought to give the appearance that he was
If, for example, payment is made by credit card with the trading through a company but did not go through any of
vendor receiving payment immediately from the card the formalities of acquiring one.
issuer, it may be that the vendor does not really care Having noted these elements of the Fraud Act 2006 I am
whether or not the purchaser had authority to use the card afraid I must pass over them when considering whether the
and does not give the matter any thought. Although the
Act as a whole has had any impact of fraud and instead I
House of Lords held that it was possible to infer that the
will focus on fraud in the more everyday sense.
merchant did not wish to be a party to a fraud on the card
issue, and therefore that the deception could be inferred
(Charles [1977] AC 177 and Lambie [1982] AC 449), what
PROBLEMS SOLVED?
would happen if the merchant gave evidence that he did The new Act, which arises out of the Law Commission
not care? This was a tactic defence practitioners often Report of 2002, goes back to the pre-1968 idea that it is
deployed (myself included): cross examination of the not what the result of conduct is, or its effect on the victim,
victim to demonstrate that they gave no thought what so which is important, but rather the intention of the
ever to the question of representations, express or implied, fraudster and what he/she actually did.
and therefore any misrepresentation did not “operate” The Act repeals all the deception offences in the Theft
upon their mind and hence the property was not obtained Acts of 1968 and 1978 and replaces them with a single
as a result of any deception. offence of fraud (s 1), with a maximum sentence of 10
There was also the problem that a machine, such as a years imprisonment, which can be committed in three
ticket machine at a railway station, does not have a “mind”, different ways by: 11
Amicus Curiae Issue 75 Autumn 2008
 • false representation (s 2); gatekeepers? Policemen? Prosecutors? Magistrates?
• failure to disclose information when there is a legal Jurors? Court of Appeal judges?
duty to do so (s 3); or The section 2 offence seems likely to be capable of the
• abuse of position (s 4). most widespread use when charging, precisely because it is
The idea of having one offence of fraud, which can be the broadest, but has it gone too far? For example, under
committed in three ways, seeks to sweep away the section 2(5), a representation can arise before it is released
technicalities which beset the old law by capturing the base from D’s exclusive control, for example if he has typed a
elements of fraud, but in a manner which is deliberately false representation into a computer, intending to send it
not attached to any specific activity. This is intended to later. He will still have an intention to gain, eventually, and
overcome the difficulties as to charging and to “future- so would be guilty of the full offence.
proof ” the law, by avoiding over-specificity and allowing it
Another issue for consideration: unintentional falsity. By
to keep pace with developing technology.
virtue of section 2(2) a statement will be considered false
In each case, the defendant’s conduct must be dishonest if “it is untrue or misleading” and “the person making it
and his intention must be to make a gain, or cause a loss or knows that it is, or might be, untrue or misleading.” The
the risk of a loss to another. That is the sum total of the often-quoted example of the section’s breadth is that of an
evidential requirements. Crucially, no actual gain or loss auction house selling a painting as an original, which later
needs to proved. turns out to be a forgery. The art house genuinely believed
The Act also creates new offences of possession of (s 6), that their attribution was correct, but was nevertheless
and the making or supplying of (s 7), articles for use in aware that there is always a risk of error in such situations.
fraud. By virtue of section 9, the offence of fraudulent Although the auction house would not have been guilty
trading (s 458 of the Companies Act 1985) will now apply under sections 15 or 15A of the Theft Act 1968 of
to sole traders, partnerships and others “carrying on … a obtaining by deception, as it had taken reasonable steps
business.” Obtaining services by deception is replaced by and was therefore not reckless, it would be guilty of the
a new offence of obtaining services dishonestly (s 11). section 1 offence under the new law. Again, the suggestion
is that the requirement of dishonesty will work to sift out
The Act does not abolish the common-law offence of such marginal cases; indeed some say that the fact that
conspiracy to defraud, despite the recommendation from dishonesty is the central battleground may be the most
the Law Commission that it should, on the basis that it was significant brake on the expansion of the offences.
redundant in the light of the new general offences. It was
retained for pragmatic reasons, in that it was considered at Having said that, major worldwide auctioneers are
the time of the Act’s Parliamentary passage that it might concerned about this provision. The attitude that
occasionally prove useful and could be the most effective “dishonesty” is everything gives them little reassurance.
charge where there were multiple defendants. What one art expert regards as dishonest may not
necessarily be the same as another art expert, and even if
The new offence is inchoate in nature, so that what they both agree that a particular description of an article is
would have been an attempt under the old law becomes the not dishonest from their expert point of view, who is to say
complete s1 offence. This removes the problem associated that a jury would agree? How far does the auction house’s
with proving the causal link between the gain and the obligation extend? What if one minority expert expresses
deception. Attempts under the new law are very narrow a view about the authenticity of the particular piece or its
and turn on the particular facts: the offender must have provenance? Does the auction house have to bring this
made a mistake of fact, for example, making a statement single opinion to the attention of potential bidders, in the
believing it to be false, when it is in fact true. It is a face of all other academic opinion? If the auction house is
triumph of intention over endeavour. aware of the opinion, is it dishonest not to refer to it? Is
Having said all that, there are potential problems on the it dishonest to not look for other points of view even when
horizon already given the way in which the Act is drafted. there is consensus elsewhere?
The claim by Vera Baird QC, the Solicitor-General, that the Similarly, in terms of wide drafting, under section 6, it is
Act was “already making a difference ... clarifying as it does merely possession of an “article” for use in fraud which is
for the first time what ‘fraud’ really means” seems criminalised, not an article “made or adapted” for use in
somewhat puzzling, given that the Act does not in fact fraud. This could include possession of Microsoft Word,
provide a definition of fraud and is extremely general in its or even a pen and paper. I suspect that we all have about
terms. Nor does it define the meaning of “falsity.” our person articles which could be “used in connection
There is an argument that the provisions of the Act are with fraud.” When speaking at a seminar organised by
too general, and have the potential to extend criminal barristers’ chambers 3 Red Lion Court with Professor
liability too far, criminalising lying and ignoring moral David Ormerod in 2007, we both voiced concern in
subtleties. There is the potential for trivial disputes to be relation to section 6. “Worry not,” said David Levy,
12 elevated into criminal matters. Who are to be the number two at the Fraud Prosecution Service (a specialist
Amicus Curiae Issue 75 Autumn 2008
team within the CPS), “you can rely on the wisdom and what some see as inconsistency actually flexibility, which
discretion of prosecutors not to prosecute such trivial allows justice to be done in each particular case?
cases.” I for one do not share his optimism, and in any
event should we have offences on the statute book which THE EMERGING CASE LAW
are so absurdly drafted as to criminalise anyone carrying a For the reasons I outlined earlier, only two reported
pencil in their pocket? cases have been decided under the Act, each of which turns
Generally, there is a fear that there is too much pressure on very specific facts. If the design of the Act is achieved,
on the concept of dishonesty, which is not defined in the this may well remain the case; the simplicity is intended to
Act and is intended to follow the use of the Ghosh [1982] move the law away from the technicalities and arguments
QB 1053 test in theft offences. Yet, in making its which have dogged the old offences. Somehow, I doubt it
recommendations before the Bill was published, the Law will succeed.
Commission criticised the offence of theft as being almost The first reported case is Kensington International Limited
entirely reliant on dishonesty as a concept. In that context, v Republic of Congo and others [2007] EWCA Civ 1128, a
the introduction of more offences with exactly the same decision in the Civil Division of the Court of Appeal, given
problem may seem odd. on November 7, 2007, which gives guidance on the scope
The Ghosh test has faced sustained academic criticism, of section 13 of the Act. The claimant had judgments in
with an argument that it lacks legal certainty and is the Commercial Court for over US$110 million against the
effectively retrospective, because it is left to the jury to Republic of Congo, but was unable to enforce them
consider the defendant’s behaviour with the benefit of because Congo does not maintain substantial assets abroad.
objective hindsight. Some say the approach is potentially Instead the claimant obtained various orders enabling it to
contrary to Article 7 of the European Convention of intercept monies due to be paid by UK companies (joined
Human Rights, although the Fraud Act has been confirmed as defendants to the proceedings: companies in the Vitol
as ECHR compliant by both the Home Secretary and the group) to Congo on contracts to purchase and export
Attorney-General. crude oil.

The concept of dishonesty has not previously been the The UK companies sought to rely on the privilege
subject of focused consideration in the context of fraud. It against self-incrimination in the proceedings, arguing that
in giving evidence to the court to overturn the orders they
is likely that the test will require some judicial
and their principals would be exposed to prosecution for
interpretation within the framework of the new offence.
offences of bribery (the common law offence, the Public
Given the scope of the new offences I wonder whether we
Bodies Corrupt Practices Act 1889 and the Prevention of
will see a return to the pre-Ghosh authorities which
Corruption Act 1906). However, section 13(1) of the
required some sort of moral obloquy to underpin the
Fraud Act 2006 provides that:
“dishonesty.” In the case law pre-Feely [1973] QB 530 the
argument had succeeded that the absence of moral obloquy “A person is not to be excused from –
entitled the defendant to an acquittal. Feely put pay to that (a) answering any questions put to him in proceedings
suggestion, but given the structure of the offences, will the relating to property, or
Ghosh test survive unrevised? Is there a danger that the
retrospective nature of the Ghosh test is capable of causing (b) complying with any order made in proceedings relating
injustice in cases of particular practices/industries? Will to property, on the ground that doing so may
the appeal courts have to intervene to exclude from the incriminate him or his spouse or civil partner of an
offences’ reach behaviour which “everyday standards” offence under this Act or a related offence.”
might stigmatise as “dishonest”, but which in the particular Sub-section 2 goes on to provide that any answers shall
circumstances of the case are not morally culpable? not be admissible in evidence in criminal proceedings
Consider an over-zealous sales puff which nobody takes against the maker and sub-section 4 provides that “related
seriously: it might be Ghosh “dishonest” but should it really offence” means conspiracy to defraud (the common law
amount to fraud? offence which remains good law notwithstanding the new
Not all comment is in the direction that the Ghosh test is offences) and “any other offence involving any form of
flawed. Some argue that such an approach allows for the fraudulent conduct or purpose.”
flexibility necessary in a jury system: it allows for us to be The UK companies mounted various arguments,
judged by our peers. If, according to their everyday including the contention that corruption offences were not
standards, a jury considers certain behaviour to be “related offences” since they did not involve “any
dishonest (and in those circumstances, in the absence of fraudulent conduct or purpose” and that therefore they
some particular factor affecting the cognitive functioning of were not afforded this statutory protection and instead
the defendant, it is hard to see why he/she should not also could rely upon the general privilege against self-
know that), then is that not jury trial par excellence? Is incrimination. 13
Amicus Curiae Issue 75 Autumn 2008
 The court rejected that argument and decided that fraud offences have several practical trial advantages,
corruption was a “related offence” in that, although the making them easier, and quicker (cheaper), to investigate
case law demonstrated that dishonesty “as such” did not and prosecute successfully, and ultimately lessening the
need to be proved, the word “corruptly” signifies that the chances of a successful appeal. If few major trials have yet
circumstances in which the gift was given were such that it to come to court, it does appear that the new law is being
had a tendency to corrupt, that is, “to suborn the agent to used routinely in the Magistrates’ and Crown Courts for
disregard his duty and act contrary to the interests of his small-scale offending. According to the Solicitor-General,
principal, thereby causing him harm.” Therefore, the the Act has also been welcomed by the police, who are
court concluded, “offering a bribe with the intention that “reporting that the new offences are easy to understand
it be accepted and acted upon involves a form of fraudulent and more closely reflect real fraud activity.”
conduct, or at any rate of fraudulent purpose.”
Unofficial figures from the CPS indicate that there has
The court took an expansive view of the meaning of been a 40 per cent increase in fraud related prosecutions,
“fraudulent” and was prepared to include bribery offences a 10 per cent increase in the conviction rate and there are
within this definition, notwithstanding long settled case law more guilty pleas in “volume fraud” (small scale but
that provided that bribery offences do not involve an repeated offending rather than large scale fraud). At the
element of dishonesty. Although confined on its facts to the higher end of the scale the SFO reports that it has only one
ambit of section 13 of the Act, the case demonstrates that active case which may involve Fraud Act offences.
the court was prepared to re-visit well established
principles in the light of the new framework. This of However, there is a sense among prosecutors that the
course has the potential to lead to inconsistent decisions in reality may not be entirely living up to the theory. As there
that this case seems to establish that, although the new do not need to be any consequences from the conduct for
fraud offence requires dishonesty to be proved, you do not the new offences to be made out, it will often not
need to be dishonest to be fraudulent! technically be necessary to call evidence from a victim.
This obviously has the potential to simplify the job of the
The only other reported case I have been able to identify
prosecutor and shorten the length of a trial. However, the
is Attorney General’s Reference (No 6 of 2008) [2008] EWCA
Crim 677. This is the first sentencing appeal to arise from feeling seems to be that this approach may cause
the Act and involved conjoined cases of the possession of presentational difficulties with a jury, who will expect to
false identity documents. In one of the appeals, a failed hear from someone who has suffered as a result of the
Zimbabwean asylum seeker, who could not be deported crime; the concept of dishonesty in the absence of a loser
due to political pressure on the government, but was may be a hard one to “sell” to the jury. It is also at odds,
unable to work in the UK and was unaware of his right to it might be noted, with the government’s drive to persuade
claim subsistence vouchers, purchased false identity the public that fraud should not be considered a
documents in order to obtain menial employment. In “victimless” crime (consider the comments of the new
those extraordinary circumstances, the court upheld a Director of the SFO, Richard Alderman, reported in
sentence of six months imprisonment suspended for two Accountancy Age on May 15, 2008).
years, with a requirement that the offender undertake 80 It may therefore still be tactically preferable to prove
hours of unpaid work for the community that a victim has suffered a loss. The defence will, in any
It is worth noting that the maximum sentence has risen event, be able to request the evidence of a victim, in order
by nearly 50 per cent from to 7 years to 10. That would to attempt to challenge it and thereby disprove dishonesty.
result in the existing average sentence for fraud offences Consider the Jubilee Line case in which the prosecution
increasing from 3 years to 5. Reference was made to did not adduce evidence of gain or loss in its case of
existing guideline authorities for possession of forged conspiracy to defraud; the defence invited the prosecution
identity documents and so it appears that the fact of a to gather such evidence contending that it went to the
charge under the Act made little difference to the sentence question of the defendants’ intentions. When it was not
imposed. produced, the defence argued to the jury that its absence
If and when you come to read the case you may be able demonstrated the lack of intent to cause a loss or gain and
to resolve a puzzle. The judgment refers to charges under therefore an absence of dishonesty.
section 51 of the Fraud Act 2006; a puzzle because the Act There is also the fact that the existence and extent of any
is commendably succinct and runs to only 16 sections. consequences of the fraudulent conduct will be central to
Did the court mean to refer to the section 6 offence of the sentencing exercise, as well as to compensation and
possession of articles for use in fraud? confiscation orders: a victim who is not named on an
indictment or in an offence taken into consideration
PROSECUTORIAL ATTITUDES cannot be compensated by the court. This means that it
Unsurprisingly, the Act was generally welcomed by will still be necessary in many cases to gather this evidence.
14 prosecuting authorities. It is perceived that substantive The Sentencing Guidelines Panel is currently considering
Amicus Curiae Issue 75 Autumn 2008
how sentencing judges should approach cases in which it be better in some cases not to have a jury but instead
there is no evidence of loss or gain. have a judicial tribunal of fact (for example in the
stereotypically unpopular professions)? I am not going to
There is also a feeling among prosecutors that the use of
list them for fear of giving offence, but another area in
substantive fraud counts may not be able to adequately
which trial by judge alone might be attractive is where
reflect the totality of offending in complex cases. This
there has been widespread critical press coverage in a case
comment has been made at recent lectures by members of
such as the SFO investigation of BAe and the Al-Yammah
both the Attorney-General’s Office and the Serious Fraud
contract. I will return to juryless trial later in this article.
Office. The common law conspiracy to defraud charge will
therefore still be attractive and is likely to be continued to Another practical issue for defence practitioners is
be used; indeed anecdotal evidence from defence whether there will be a need for expert evidence on
practitioners is that there has been no diminution in the practices within a particular profession, to counteract the
use of the common law offence at the charging stage. On allegation of dishonesty, thereby prolonging trials. The
any analysis of the statistics, this charge results in a auction house I discussed earlier is an example. If the
relatively lower number of convictions. While this may be capacity for expert evidence to lead trials into complex
a good thing for the defence, it seems to go against the corners of particular expertise requires demonstration,
general desire for efficiency which lies behind this Act. may I commend to you the extraordinarily learned first
instance judgment of Jack J in Thomson v Christie Manson &
An interesting point of reference in this context is the
Woods Ltd [2004] EWHC 1001 (QB) which concerns the
CPS guidance to prosecutors, found on its website
provenance of a pair of Louis XV porphyry and gilt-bronze
(www.cps.gov.uk/legal/section8/chapter_d.html). It is
vases.
clear from the guidance that the CPS is aware of potential
difficulties with the Act, for example the criminalising of One more point for consideration – should defence
“trade puffs” and possible attempts to use the legislation to practitioners encourage use of conspiracy to defraud,
settle what are effectively personal or commercial disputes. which has a relatively low conviction rate?
It states that, when considering the public interest test, the
borderline between criminal and civil liability “is likely to OTHER MEASURES TO COMBAT FRAUD
be an issue.” Fraud is a massive and constantly growing problem.
Where prosecutors have a choice between a charge According to figures from the Association of Chief Police
under the Act and a charge under the Theft Act, as may Officers for 2007, its cost including detection and
regularly be the case, it seems likely that the former will prosecution is estimated to be approximately £20 billion a
often be preferred. The thrust of the guidance is that a year, or around £330 for every person in this country. It is
simpler charge is always better, and that the Fraud Act is obvious then, that the Fraud Act cannot be expected to
generally simple, notwithstanding the difficulties raised solve the problem on its own. The Home Office reports
above, because it focuses only on conduct. Thus, a person that 79 per cent of prosecutions for fraud and forgery
who has stolen from their employer is more likely now to offences result in a conviction, but only 10 per cent of such
be charged with fraud by abuse of position, rather than recorded offences are ever actually prosecuted (making a
theft by an employee. conviction rate of 8 per cent for recorded offences, which
in turn are just a drop in the ocean of all frauds). The
reality is that it is not the legislation, but a lack of resources
DEFENCE PERSPECTIVE
at an investigatory level which is the real issue; in that
In my view, there is a very real practical significance for context, the impact of this Act, or any Act, will be limited.
the defence practitioner in the Act’s reliance on dishonesty.
It will be more difficult to advise clients to enter a plea Government Fraud Review
of guilty, as there is often a “chance with a jury” on The Government has recognised the problem and the
dishonesty; the Act may militate against guilty pleas, which Government Fraud Review was commissioned by the
runs contrary to the government’s desire for speedier and Attorney General in October 2005. The final report,
more efficient justice. It is a good point in mitigation to which contained some 62 recommendations was published
say to a judge that it is impossible for legal advisors to give in July 2006 and the government then published its formal
definitive advice to a client in cases in which the only issue response in March 2007. Its conclusion was that anti-
is whether the accepted conduct is dishonest. Who can fraud work is fragmented and lacking in co-ordination.
predict with certainty the view the jury will take? In those
circumstances is the client not entitled, just as the judge is, National Anti-Fraud Strategy
to leave dishonesty to the jury?
The principal recommendation of the Government
However, the reluctance of appeal courts to overturn Fraud Review was the National Anti-Fraud Strategy. This
convictions in which the jury made a finding of dishonesty is intended to herald a change of attitude, making the
is well-established. That train of thought leads to this: will country a hostile environment for fraud, and a move 15
Amicus Curiae Issue 75 Autumn 2008
 towards a more pro-active and co-ordinated approach to alluded to earlier, if the idea can be translated into working
the prevention and investigation of fraud. Some £29 practicality there may be circumstances in which the fraud
million of government funding has been allocated, which is defendant might welcome the jurisdiction of the Financial
perhaps relatively modest if the scale of problem is Court, enabling him/her to resolve in an efficient and
considered. There are three central “building blocks” to consistent way the criminal allegations and civil claims
the strategy: which almost inevitably follow corporate collapse.
• The National Fraud Strategic Authority (NFSA) will be
set up, to supplement the efforts of existing Plea bargaining
organisations, co-ordinating the fight against fraud. On April 3, 2008, the Attorney-General’s office
• The National Fraud Reporting Centre and Intelligence launched a consultation on the Introduction of a Plea
Bureau (NFRC) will also be created, as a central Negotiation Framework for Fraud Cases in England and Wales.
contact point for receiving and analysing reported cases The consultation arose out of one of the recommendations
of fraud. This should become fully operational in 2009 of the Fraud Review, which identified advantages in offering
and the intention is that it will allow patterns in
parties to fraud cases the opportunity to reach a court-
offending to be identified which cannot not be spotted
at a local level, resulting in a better allocation of sanctioned agreement at an early stage.
resources. In England and Wales, informal post-charge discussions
• A National Lead Force for Fraud has also been created, between the prosecution and the defence already take
a role which will be taken on by the City of London place, with varying degrees of success. There is also the
police. system of “Goodyear” indications, in which defendants can
receive an indication of their likely sentence from the judge
Serious Crime Prevention Orders before entering a guilty plea.
The Serious Crime Act 2007, which commenced on April
6 2008, introduced the concept of Serious Crime Prevention This differs from the formal system which exists in the
Orders – the so called “super ASBOs.” In essence, these are US and of which the recent Marine Hose case is an example.
civil orders, similar to injunctions, which restrain serious and In this case of cartel behaviour affecting the US and UK
serial offenders’ business and commercial activities. They markets the defendant was able to negotiate a fixed
are available to a Crown Court on either conviction or sentence with US Department of Justice prosecutors in
committal for sentence and can be used for convictions advance of entering a formal plea in the US. He was then
under sections 1, 6, 7, 9 and 11 of the Fraud Act (as well as able to return to the UK, the sentence in the US being
for conspiracy to defraud). The first orders were served in suspended upon condition that it would not be activated if,
Northern Ireland on April 22, 2008, on four people who following a guilty plea in the UK, the sentence passed here
were the subject of a HM Revenue & Customs prosecution was equal to or in excess of the US sentence. This would
for revenue evasion in relation to fuel fraud. allow the defendant to serve his sentence in the UK and
avoid two prosecutions. Quite how the defence will
The Financial Court present the case to a Crown Court judge when mitigating
Another recommendation of the Fraud Review was the (“you must sentence the defendant to at least four years
establishment of a Financial Court jurisdiction, so that the …”) remains to be seen, but clearly this coordinated
different proceedings arising from serious fraud cases, both approach to sentencing has advantages for defence and
criminal and civil, can be brought together in one court. prosecution alike.
This would not be a new institution as such, but would The consultation sets out a framework for plea
involve extending the jurisdiction of the High Court to negotiation whereby the parties enter into voluntary pre-
create a “virtual” court sitting in existing courtrooms and charge discussions with a view to agreeing a basis of plea.
using a specialist group of judges who have experience of, It envisages discussions taking place on the presumption
and familiarity with, financial issues and well developed that nothing said by the suspect could be used against him
case management skills. They would be drawn, not just as in any subsequent proceedings (although a written
now from Crown Court judges (with presiding High Court agreement to the contrary would be possible). Prosecutors
judges taking an occasional fraud case), but also from are expected to comply with their disclosure obligations on
amongst High Court judges more generally: from the a voluntary basis as the statutory obligations set out in the
Commercial Court, its mercantile judges and possibly even Criminal Procedure and Investigations Act 1996 are not
from the Chancery Division. triggered until after charge. The framework includes
This proposal is currently being considered by a working guidelines for prosecutors on when to accept a guilty plea.
group, with the aim of producing a full cost/benefit study If accepted, the basis of plea would then be recorded in a
by spring 2009. The practical issues relating to the written plea agreement to go before the Crown Court at
proposal are legion, so the working group’s the defendant’s first appearance. The judge could accept
16 recommendations will be important to consider. As or reject the agreement or defer a decision pending further
Amicus Curiae Issue 75 Autumn 2008
information; he/she could also give an indication of a as to whether or not such a use of its resources is justified,
maximum sentence. and so foreign corruption cases often do not get beyond
the “vetting stage.”
The consultation ended on June 26, but the proposals
have already attracted criticism and there have been The Law Commission is currently considering the law of
questions as to whether the framework is actually in the bribery (although the consultation period has now closed).
public interest. Of particular importance is that, as The proposals are interesting and I suspect represent the
drafted, the framework does not differentiate between best route forward to reaching a consensus between the
corporations and individuals. This means that the interested parties. I hope that we will see progress, which
unavailability of legal aid pre-charge could leave unfunded has been promised since the Law Commission produced its
individuals in a position where they do not have access to first proposals in 1998. I do not have time to consider
independent legal advice. these proposals in any depth here (there is a paper on our
The FSA is among the prosecuting authorities which website), but in the context of my topic, it is interesting to
have long been pushing for plea-bargaining in this country, note that the proposals make no reference to investigative
as it believes, for example, that only by securing evidence powers but do deal with the requirement of consent to
from those inside the ring will it ever be able to secure prosecute, which is a related but separate issue. The
convictions for insider trading. There is a view that plea- consultation paper, which is worth reading in full, also
bargaining would allow it to reduce the length of cases, demonstrates the overlap between what might in lay terms
therefore freeing up resources and meaning more cases can be considered as corruption and the fraud offence under
be pursued, whilst lessening the strain of such proceedings the Fraud Act. It remains to be seen whether a newly
on victims and witnesses. It must also be the case that drafted corruption offence will overlap with the Act.
there is a hope it will secure convictions in cases where the
success at trial is by no means certain. Trials without jury
The Fraud (Trials Without a Jury) Bill, which sought to
However, there are some doubts as to whether plea-
amend section 43 of the Criminal Justice Act 2003, had its
bargaining in this country can actually achieve all this. The
second reading in the House of Lords on March 20, 2007.
realities of the UK justice system are very different to those
It was voted down by the Lords on that occasion and has
of the US, not least because of the sentencing regime and
not been resurrected. Section 43 of the CJA 2003 allowed
the availability of public funding. There will be a carrot but
a defendant to elect trial by Crown Court judge alone; the
no stick, and it is hard to envisage the system resulting in,
Bill was drafted to amend the Act by requiring a High Court
as it does in the US, people “coming clean” to the
judge rather than a Circuit judge to sit in the Crown Court
authorities without some sort of push. In addition, given
in such cases; this was seen as a “softener”, but failed to
that the new offences hang so much on dishonesty, which is
curry favour with those who oppose trial without jury.
a jury issue, it may be, as suggested above, that individuals
are still prepared to take their chances on remaining silent. It appears that the government has dropped the plans to
pursue juryless trials in complex fraud cases. If and when
Criminal Justice and Immigration Act 2008 we have a change of government, expect this issue to
The Serious Fraud Office has compulsory powers under resurface. The power is on the statute book, but like so
section 2 of the Criminal Justice Act 1987 to compel the many reforms in recent years has never been enacted.
disclosure of evidence that may be relevant to a current
investigation into serious or complex fraud. The Criminal CONCLUSION
Justice and Immigration Act, which received Royal Assent Although there is plenty to consider in relation to the
on May 8, introduces a new section 2A into the 1987 Act, prosecution of fraud, in response to the question I have
which allows the director of the SFO to approve the use of posed as to whether the Fraud Act has had any impact, I am
section 2 powers at the vetting stage in cases where it afraid my answer has to be that “it is still too early to tell”. A
appears that there may have been a corruption offence Home Office review of the operation of the Act is due three
involving a foreign official. years after its implementation, so if I am asked again in
2010, I may have a better chance of answering the question.
In practice, the provision will allow the SFO to compel
British companies and individuals to provide evidence One final thought: if it is right that the Fraud Act turns
about possible corruption abroad, as long as the material is out to be an improvement upon the old law theoretically,
in the United Kingdom. It is said that corruption abroad but in practice has little impact, is that a result of our
is particularly hard to investigate, as not only are the system rather than the black letter law? A development
potential witnesses many hundreds of miles away and which I believe may be capable of producing a fundamental
reluctant to come forward, but the foreign jurisdiction may shift in the punishment of fraud carried out in the
well be unable and unwilling to provide information. The commercial/business sector is Part 3 of the Regulatory
SFO cannot justify commencing a formal investigation Enforcement and Sanctions Bill currently making its way
without sufficient information on which to make a decision through Parliament. This is a topic worthy of its own 17
Amicus Curiae Issue 75 Autumn 2008
 article, but I invite you to look at it and the reports which of Fair Trading, the Health and Safety Executive and the
proceeded it, the Hampton Review in 2005 and the Environmental Agency are among the prosecutors which
Macrory Review in 2006. do. We may be witnessing a movement away from the
criminal law as the primary method of regulating conduct
The Bill heralds a new enforcement regime of civil
in commerce, in which event legislative changes such as the
sanction rather than criminal trial (save in the worst cases);
Fraud Act may, over time, have less and less effect.
it is clear the Government has a jealous eye on the revenue
creation enforcement actions of the Department of Justice • This article is taken from a lecture delivered at the
and Securities Exchange Commission in the United States. Institute of Advanced Studies on May 14, 2008.
Although the SFO and CPS do not feature in Schedule 5 to Ben Summers
the Bill, the regulators to be given the new civil powers of Partner, Peters & Peters
enforcement, the Financial Services Authority, the Office bsummers@petersandpeters.com

Institute Events
Friday, 31 October 2008, 9.0am WATT, University of Warwick; DR STUART WEINSTEIN and
One day conference DR CHARLES WILD, University of Hertfordshire; ROGER
WELCH, University of Portsmouth
Control of national resources: the challenges for international
dispute resolution This one day conference is being hosted by the Socio-Legal
Studies Association with support from the Institute of Advanced
Speakers drawn from the IDR group and will include: Legal Studies.
PRINCE BOLA AJIBOLA, PROFESSOR AHMED EL
KOSHERI, JOHAN GERNANDT, DAVID BRANSON
Tuesday, 11 November, 9.30am
Chairs will include: RT HON LORD ANDERSON OF
SWANSEA DL, SIR HENRY BROOKE, SIR ANTHONY One day conference
EVANS The Pinochet case and its consequences ten years on
This one-day conference will look at three topics: 1. The issue of Sponsored by: The British Institute of International and
resource nationalism 2. Whether “good offices” can assist in Comparative Law; Centre for Law and Society at Lancaster
relation to resource nationalism 3. Whether established University; Institute of Advanced Legal Studies and Institute for
international dispute resolution bodies have a role to play in the Study of the Americas, School of Advanced Study, University
resolving disputes between resource – rich countries and of the London; JUSTICE (the British Section of the
consuming countries: Can these traditional “western” bodies International Commission of Jurists).
satisfy non-western countries that they will receive a fair and
unbiased hearing? Participants will include:
PROFESSOR LAURA BIANCHI
Wednesday, 5 November, 9.15am Lawyer representing victims in the Italian judicial investigations
One day conference of crimes committed by Pinochet against Italians
Socio-legal studies and the humanities DR JIMMY BELL
Keynote speaker: MELANIE L WILLIAMS Chilean exile and human rights activist
Professor of Literary Jurisprudence, School of Law, Exeter SIR GEOFFREY BINDMAN
University, with PROFESSOR PENNY BOOTH, Staffordshire Solicitor, who acted for Amnesty International and others in the
University; DR LORIE CHARLESWORTH, Liverpool John Pinochet case
Moores University; MARC COEN, Trinity College Dublin;
PROFESSOR KATE NACE DAY and PROFESSOR RUSSELL G REED BRODY
MURPHY, University of Suffolk; DR WOUTER DE BEEN, VU Counsel and Spokesperson, Human Rights Watch; coordinated
University, Amsterdam; DR PENNY ENGLISH, Anglia Law Human Rights Watch’s intervention in the House of Lords and
School; ALEXANDRINE GUYARD-NEDELEC, University of is co-author of “The Pinochet Papers: The Case of Augusto
Paris, Diderot; PROFESSOR ERIC HEINZE, Queen Mary, Pinochet in Spain and Britain”
University of London; ROBIN LISTER, University of Bradford; DR JUAN E GARCÉS
DR STEFAN MACHURA, Bangor University; DR EUGENE legal team coordinator for the Spanish case against Pinochet
MCNAMEE, University of Ulster; DR JUDITH
ROWBOTHAM, Nottingham Trent University; ALECIA CHRISTOPHER HALL
SIMMONDS, University of Sydney, Australia; MEGAN Senior Legal Adviser, International Justice Project, Amnesty
WACHSPRESS, University of California, Berkeley; GARY International

All events take place at the Institute of Advanced Legal Studies except where otherwise indicated. Lectures and seminars
free unless specified. CPD accreditation is provided with many events. For CPD and all other enquiries contact Belinda
Crothers, Academic Programmes Manager, IALS, 17 Russell Square, London WC1B 5DR (tel: 020 7862 5850; email:
18 IALS.Events@sas.ac.uk). See also our website for further information (http://www.sas.ac.uk/events/list/ials_events).
Amicus Curiae Issue 75 Autumn 2008