Individual Penalties and Third-Party Rights: The UK Perspective

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26.1       Individuals: criminal liability

On 30 November 2015, the Serious Fraud Office (SFO) agreed to its first-ever deferred prosecution agreement (DPA)1 with ICBC Standard Bank plc,2 reflecting a long-standing practice in the United States of granting corporates amnesty from prosecution on criminal charges, either through the use of non-prosecution agreements or DPAs, in exchange for the fulfilment of certain requirements. However, it has been argued that ‘[a]n increased focus on corporate criminal liability should not result in the culpability of offending individuals within a corporation being overlooked.’3

The fact that ‘the most serious cases of bribery generally involve companies’4 renders the maximum custodial sentences for financial crimes somewhat obsolete as individuals escape the maximum sentences for these serious corruption cases, which instead are borne by corporate entities and their shareholders in the form of unlimited fines. As Richard Alexander comments, ‘any kind of agreement that penalises the company concerned, but does not deal with the individuals who were actually behind the commercial bribery, whether by paying the bribes or by arranging for others to do so, fails to recognise the essential nature of what took place.’5

Individual penalties are important because they deter offending in the first place. Further, in instances where the individuals alone are punished, it ensures that innocent parties, such as the shareholders, pension funds and other stakeholders in the company, are not punished indirectly; and where the corporate also faces a penalty, the stakeholders can rest assured that the wrong­doing within the company has almost certainly been dealt with.

While DPAs in the United Kingdom are not available for individuals – with no indication that they will be any time soon – there is an increasing emphasis on incentivising individuals to enter an early plea. Enshrined in section 144 of the Criminal Justice Act 2003 (CJA 2003) is the statutory authority that compels the courts to consider a reduction in the sentence of an offender who has pleaded guilty to an offence. Subsection 1 obliges the court to take into account the stage in the proceedings that the offender indicated an intention to plead guilty; and the circumstances in which this indication was given. The Reduction in Sentence for a Guilty Plea: Definitive Guideline (Definitive Guideline) guides the courts in establishing an appropriate level of reduction for the offender in question. Unless, on the facts, there is a sufficiently good reason for a lower amount, there is a presumption that for each of the following categories, the recommended reduction will be given. If the offender pleads guilty (1) at the first reasonable opportunity,6 he or she can expect the sentence to be reduced by a maximum of a third; (2) after the trial date has been set, the offender may receive a quarter reduction in the sentence; or (3) after the trial has begun, the offender may see the sentence reduced by a tenth. The Definitive Guideline states that where the prosecution case is overwhelming, it may not be appropriate to give the full reduction that would otherwise be given.7 The Serious Organised Crime and Police Act 2005 (SOCPA)8 contains several provisions that can benefit an offender who assists in the investigation or prosecution of a crime. For example, if an offender provides or offers assistance in the investigation of prosecution of others, the court in return may reduce the offender’s sentence;9 or a defendant, already serving a prison sentence, that provides or offers assistance in this regard could benefit by having a sentence reviewed.10

26.1.1    Imprisonment

Pursuant to section 11 of the Bribery Act 2010 (Bribery Act), the maximum sentence for an individual convicted on indictment of an offence by virtue of sections 1, 2 or 6 of the Bribery Act is 10 years’ imprisonment.11 An individual tried and convicted summarily of any of the aforementioned offences is liable to a maximum prison sentence of 12 months. The maximum sentence for individuals under the Bribery Act is identical for any of the fraud offences both at common law and under the Fraud Act 2006 but is far greater (up to a maximum of 14 years’ imprisonment) for any of the money laundering offences pursuant to sections 327 to 329 of the Proceeds of Crime Act 2002 (POCA).

Historically, under the corruption regime that persisted until the later part of the 20th century, individuals were liable to three years’ imprisonment on conviction of corruption charges. This was subsequently increased to seven years under the Criminal Justice Act 1988 (CJA 1988)12 and increased again under the current regime. The shift in policy in relation to the penalties imposed on individuals who commit financial crime can largely be attributed to the distrust and anger felt by the public towards misconduct in big business and is nowhere so apparent than in the case of Tom Hayes. Mr Hayes is currently serving an 11-year prison sentence (which was cut on appeal from an original sentence of 14 years), one of the longest prison terms on record for UK white-collar crime13 for his role in the manipulation of the LIBOR rate while he worked as a derivatives trader at UBS and Citigroup. It is widely accepted that the hefty sentence was handed down to serve as a warning to other individuals who may be tempted by the allure of profit to participate in such practices; in passing sentence, the court said that it ‘must make clear to all in the financial and other markets in the City of London that conduct of this type, involving fraudulent manipulation of the markets, will result in severe sentences of considerable length which, depending on the circumstances, may be significantly greater than the present total sentence.’14

In cases of financial crime, it is rare for defendants to be charged with one count, and in the most serious of cases, and as was the case for Mr Hayes, a judge can order the sentences for each individual count of which a defendant has been convicted to run consecutively; ‘Hayes was sentenced consecutively for the conspiracies he was found guilty of while at UBS and those while at Citigroup between 2006 and 2010. Had the market rigging been seen as one offence, Hayes would have faced a maximum 10-year sentence.’15 Whether a judge perceives a concurrent or consecutive sentence as appropriate on the facts will be decided by reference to the same factors that judges tend to consider when deciding on the severity of a sentence, such as whether the defendant has any previous convictions, the magnitude of the offence (in the Fraud, Bribery and Money Laundering Offences Definitive Guideline, it expressly states that ‘consecutive sentences for multiple offences may be appropriate where large sums are involved’16) or where it can be established that the defendant failed to respond to warnings about his or her behaviour.

Despite the current prominence of financial crime cases in the media and the apparent fervour of prosecutors and courts to ensure that convicted individuals receive long custodial sentences, suspended sentences may well be considered appropriate in some cases. In R v. Dougall,17 an employee heading a company’s corrupt Greek practice, who had failed to convince other employees to end the practice of making payments to medical professionals to persuade them to buy the company’s goods, had his 12-month custodial sentence suspended on appeal after Mr Dougall’s level of criminality, ‘combined with a guilty plea, and full co-operation with the authorities investigating a major crime involving fraud or corruption’18 were taken into account.

The Attorney General’s Guidelines on Plea Discussions in Cases of Serious or Complex Fraud (Attorney General’s Guidelines) set out a process by which a prosecutor may discuss an allegation of serious or complex fraud with a suspect. The implementation of the Attorney General’s Guidelines, with the support of the judiciary and prosecuting authorities, has garnered a quasi-plea discussion system that can be advantageous to defendants. Although the Attorney General’s Guidelines do not make any provision for a defendant to receive a greater discount on the sentence than is available for simply entering a guilty plea (as set out above), in a case brought by the Financial Services Authority (FSA)19 against Paul Milsom, a senior equities trader, for disclosing inside information between October 2008 and March 2010, Judge Pegden QC indicated, in passing sentence on 18 March 2013 at Southwark Crown Court, that he had given Mr Milsom full credit for pleading guilty at the earliest opportunity (i.e., a discount of one-third) and extra credit for entering into a plea agreement with the FSA.20 The sentencing remarks of Judge Pegden QC convey the ‘clearest articulation to date that an individual can reasonably expect to receive in excess of one third discount on sentence in circumstances where he enters into early plea discussions with a prosecutor.’21

Another case worthy of note, and one that again highlights how co-operation with the authorities can really pay dividends when it comes to sentencing after conviction, was that of Bruce Hall. On 22 July 2014, Mr Hall, CEO of Aluminium Bahrain BSC from September 2001 to June 2005, received a 16-month custodial sentence22 for conspiracy to corrupt (having allegedly received £2.9 million in bribes23). However, were it not for Mr Hall’s co-operation and early plea, Judge Loraine-Smith stated that his prison sentence would have been far longer. According to the SFO website, Judge Loraine-Smith said: ‘Mr Hall had co-operated with numerous authorities throughout the investigation. If he had not been so co-operative, Mr Hall could have faced around six years in prison, close to the maximum sentence for conspiracy to corrupt, the judge said. Due to his co-operation, Mr Hall was entitled to a 66 per cent reduction in his sentence. He was also entitled to a further reduction of one-third due to entering a guilty plea.’24

26.1.2    Fine

Fines for individual perpetrators of financial crime can be unlimited and are handed down either separately or in conjunction with a custodial sentence.

Section 164 of the CJA 2003 regulates the fixing of fines in criminal cases. The Sentencing Council’s Fraud, Bribery and Money Laundering Offences Definitive Guideline states that as a general principle in the setting of a fine for fraud, bribery or money laundering, ‘The court should determine the appropriate level of fine in accordance with section 164 of the Criminal Justice Act 2003, which requires that the fine must reflect the seriousness of the offence and requires the court to take into account the financial circumstances of the offender.’25

26.1.3    Compensation order

Like a confiscation order, a compensation order is an ancillary court order and is designed to compensate a victim for personal injury or any loss or damage that may have resulted from the offence committed by the defendant and is made in addition, or instead of, other sentencing options under section 130 of the Powers of Criminal Courts (Sentencing) Act 2000 (PCCSA).

In both a magistrates’ court26 and the Crown Court, the amount that can be awarded as compensation is now unlimited but is restricted to an amount that can feasibly be paid by the defendant. The court must have regard to the evidence of the defendant’s financial means when deciding the level of compensation to award the victim and must prioritise the payment of compensation over any other financial penalty.

26.1.4    Confiscation order

It is becoming more common for courts to address the confiscation of the assets of a convicted individual, especially when the court satisfies itself that the defendant was said to be living a ‘criminal lifestyle’.27 Confiscation orders are available only after a defendant has been convicted, and are debts to the Crown. Where a confiscation order is not paid, the defendant will serve a period of imprisonment in default. This mechanism is highlighted in the case of Phillip Boakes who, after failing to satisfy the full value of a confiscation order determined by the courts, was ordered to serve 730 days’ imprisonment in addition to the 10 years he was already serving after pleading guilty, inter alia, to two counts of fraudulent trading.28

Confiscation orders derive from section 6 of POCA and are intended to deprive the defendant of the benefit of any proceeds of his or her crimes; they are not, however, intended to act as a fine or further punishment. They do not always involve the sequestration of the defendant’s personal property. Instead they usually entail the payment of a sum of money; ‘where, however, a criminal has benefited financially from crime but no longer possesses the specific fruits of his crime, he will be deprived of assets of equivalent value, if he has them.’29 In accordance with the decision in R v. Waya,30 prosecutors should ensure that the confiscation is proportionate, which entails an assessment of the ability of the defendant to pay the order in full.

In determining the amount of £165,731 Mr Boakes was required to pay under his confiscation order, the court was able to take into account how the money that he had acquired was spent. The court determined that much of the proceeds that Mr Boakes had benefited from was spent on a lavish lifestyle and unsuccessful financial trading that was indicative of a criminal lifestyle, which the courts will take into account when determining the recoverable amount.

The Attorney General’s Guidelines are silent as to confiscation orders – they provide no framework to regulate the discussions and agreement of confiscation orders as part of plea discussions. Should the prosecution and the defendant reach any form of agreement in relation to a confiscation order, this agreement would not bind a court. In Mr Milsom’s case, however, the judge agreed to make a confiscation order at the sentencing hearing in the value of Mr Milsom’s personal benefit from his offending, which had been agreed between the prosecution and the defence within the basis of the plea and joint sentencing submission. This suggests that prosecutors could be willing to negotiate the terms of a confiscation order as part of a plea negotiation, and that the courts may be willing to accept the joint submission which ‘provid[es] a defendant with greater certainty and control over his financial liabilities.’31

The burden of proof in criminal confiscation orders rests with the defendant, who must show, on the balance of probabilities, that his or her assets are not derived from criminal conduct.

Where it is reasonably foreseeable that a court will make a confiscation order, the prosecution may take steps in the High Court to ensure that the defendant’s assets will remain available to meet the terms of the order. Such steps include, inter alia, an order requiring the defendant to disclose where assets are kept; an order appointing a receiver; and an order restraining assets.32

26.1.5    Disqualification orders

Directors of companies are fiduciaries and there is consequently a high level of probity expected of them by the law. It is therefore expected that ‘those who are involved in bribery, whether as individuals or as part of their role as directors, are very likely to be disqualified from acting as a director for a lengthy period of time.’33

Directors disqualification orders (DDO) are designed to help protect creditors and the public from those individuals who may act dishonestly. DDOs can be made where the defendant director of a company has been convicted of an indictable offence which, by virtue of the decision in R v. Creggy,34 must have some relevant factual connection with the management of the company.

A director is disqualified pursuant to section 2 of the Company Directors Disqualification Act 1986 (CCDA). This is a general disqualification that prohibits the former director from conducting various activities as set out in sections 1 and 2 CCDA. Directors can be disqualified for a maximum of 15 years.

26.1.6    Costs

As in all criminal cases, cost orders are usually made against a convicted defendant, who will be required to pay the prosecution’s costs as well as any court fees that materialise during the criminal proceedings.

The legislative authority enabling a court to award costs in criminal proceedings is primarily contained in Part II of the Prosecution of Offences Act 1985 (sections 16 to 19B), the Access to Justice Act (in relation to funded clients) and in regulations that have since been made pursuant to these statutes, including the Costs in Criminal Cases (General) Regulations 1986, as amended.

26.2       Individuals: regulatory liability

The FCA has continued the FSA’s legacy of adopting a robust enforcement stance, underpinned by its ‘credible deterrence’ strategy. In furtherance of its policy of ‘credible deterrence’, the FSA had signalled a willingness to pursue criminal actions through the courts and to seek custodial sentences. For the FCA, the pursuit of criminal prosecutions, where appropriate, remains high on its agenda, particularly for market misconduct offences.

Under the Financial Services and Markets Act as amended by the Financial Services Act 2012 (FSMA), the FCA has many tools at its disposal to punish non-criminal offences and breaches. This includes the issuing of public censures or statements, and imposing unlimited financial penalties.

Other sanctions available to the FCA include varying or cancelling a firm’s permission under Part 4A of FSMA; intervening against an incoming EEA or EU Treaty firm; suspending or restricting a firm’s Part 4A permissions; suspending or restricting the approval given to an approved person; prohibiting an individual from performing regulated functions; withdrawing the approval of an approved person; and imposing a penalty on a person who has performed a controlled function without approval.

There will always be an element of publicity along with the imposition of such sanctions, however, public sanctions are certainly not the only way of dealing with cases of regulatory non-compliance. Taking into consideration the severity of an offence, it may be satisfactorily addressed by using other remedial measures (for example, through the use of private warnings).

Chapter 6 of the FCA’s Decision Procedures and Penalties Manual (DEPP 6) contains the FCA’s statement of policy in relation to the imposition and amount of penalties under FSMA. DEPP 6A sets out its policy in relation to imposing suspensions or restrictions on firms and on approved persons. Chapter 7 of the FCA’s Enforcement Guide sets out specific guidance on the FCA’s powers in relation to financial penalties and public censures.

26.3       Other issues: UK third-party rights

Section 393 FSMA gives third parties certain rights in relation to warning and decision notices given to another person in respect of whom the FCA is taking regulatory action. Where a warning notice has been given, section 393(1) provides that a third party prejudicially identified in the notice must be given a copy and a reasonable period to make representations on it.35

Section 393(4) gives third-party rights in relation to a decision notice. It provides that a third party prejudicially identified in the notice must be given a copy of it and a reasonable period to make representations on it. Section 393(11) provides that a person who alleges that a copy of the notice should have been given to him or her may refer that alleged failure to the Upper Tribunal.36

The scope of the rights conferred by section 393(4) was revisited recently in Macris v. FCA.37 Mr Macris argued before the Court of Appeal that the FCA had, in the warning notice, decision notice and final notice issued to the firm JP Morgan Chase & Co38 which did not name him, included reasons that identified and were prejudicial to him and which he had not had the opportunity to contest.

The FCA had not treated Mr Macris as a third party and had not therefore accorded him third-party rights.

The Court of Appeal upheld the decision of the Upper Tribunal that the FCA had prejudicially identified Mr Macris in issuing a final notice to JP Morgan but commented that the judge had not applied the correct test for resolving the issue of identification. The FCA has been granted leave to appeal the judgment to the Supreme Court with judgment expected in October 2016.

In a recent decision of the Upper Tribunal, Julien Grout and the Financial Conduct Authority,39 the Tribunal applied the construction put on section 393 FSMA by the Court of Appeal in Macris, which set out a two-stage test to determine the identification issue. The first stage is to consider whether the relevant statements in the notice that are said to identify the third party refer to ‘a person’ other than a person to whom the notice was given. This stage is to be carried out without recourse to external material. The second stage is answering the question whether the pointer identified at stage one is a pointer to the third party. This stage includes reference to external material but that material is limited to that which objectively would be known by persons acquainted with the third party or operating in the relevant section of the financial services market.40


  1. DPAs are only available to corporate organisations.
  2. See the Approved Judgment of 30 November 2015 in Case No. U20150854 between the Serious Fraud Office and Standard Bank, available at, accessed 30 June 2016.
  3. V K Rajah SC, Prosecution of financial crimes and its relationship to a culture of compliance, Company Lawyer, 2016, at p. 5, accessed via Westlaw UK.
  4. Richard Alexander, The Bribery Act 2010 in force: an opportunity to be taken, Company Lawyer, 2011, at p. 2, accessed via Westlaw UK.
  5. Ibid. at p. 2.
  6. In Annex 1 of the Definitive Guideline, there is further guidance for the court on how to interpret the words ‘first reasonable opportunity’, and examples to help the courts adopt a consistent approach. Essentially, the courts should look at the benefit that arose out of the guilty plea (both for those directly involved in the case in question, but also in enabling the courts to deal more quickly with other outstanding cases).
  7. Definitive Guideline, para. 5.3.
  8. Chapter 2 (ss 71–75).
  9. s.73 SOCPA.
  10. s.74 SOCPA.
  11. An individual cannot be convicted of an offence under s.7 of the Bribery Act because the offence refers only to a ‘commercial organisation’ for which the only sentence available is an unlimited fine.
  12. See s.47 of the CJA 1988.
  13., accessed 30 July 2016.
  14. R v. Hayes [2015] EWCA Crim 1944, at para. 109.
  15., 30 November 2015, accessed 29 July 2016.
  16. At p. 10.
  17. [2010] EWCA Crim 1048.
  18. R v. Dougall [2010] EWCA Crim 1048, at para. 36.
  19. As of 3 April 2013, the FSA became two separate regulatory bodies; the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
  20., accessed 29 July 2016.
  21. Chris Dyke, The Benefits of Early Plea Discussions, CrimeLine:, accessed 29 July 2016.
  22. Mr Hall was also ordered to pay a confiscation order of £3,070,106.03 within seven days or face serving an additional term of imprisonment of 10 years; a compensation order of £500,010; and to pay £100,000 as a contribution to the prosecution’s costs.
  23., 22 July 2014, accessed 29 July 2016.
  24. Ibid., accessed 29 July 2016.
  25. At p. 51.
  26. Before 11 December 2013, the amount that a magistrate could award as part of a compensation order was £5,000, but, by virtue of s.131 PCCSA, this limit has been removed.
  27. Pursuant to s.75 of the CJA 2003, ‘(1) a defendant has a criminal lifestyle if (and only if) the following condition is satisfied. (2) The condition is that the offence (or any of the offences) concerned satisfies any of these tests – (a) it is specified in Schedule 2; (b) it constitutes conduct forming part of a course of criminal activity; or (c) it is an offence committed over a period of at least six months and the defendant has benefited from the conduct which constitutes the offence.’
  28., accessed on 30 June 2016.
  29. R v. May [2008] UKHL 28, at para. 9.
  30. [2012] UKSC 51.
  31. Chris Dyke, The Benefits of Early Plea Discussions, CrimeLine:, accessed 29 July 2016.
  32. See s.37(1) Supreme Court Act 1981.
  33. Eoin O’Shea, The Bribery Act 2010, A Practical Guide, Jordans, at p. 238.
  34. [2008] EWCA Crim 394.
  35. Unless he or she has been given a separate warning notice in relation to the same matter.
  36. In April 2010 the Financial Services and Market Tribunal, established by s.132 of FSMA as an independent judicial body to hear decision notices issued by the FSA, was abolished and its functions transferred to the Upper Tribunal.
  37. [2015] EWCA Civ 490.
  38. The notices included the words ‘CIO London Management’.
  39. [2016] UKUT 0302 (TCC).
  40. These persons are referred to as ‘relevant readers’.

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