Fraud Newsletter 12 – October 2017

CASES

Ghosh Dishonesty Test Emasculated: Supreme Court held in a reasoned judgment (albeit obiter) that the second (subjective) limb of Ghosh should not be used. Part of their reasoning is that:

•  The more warped D’s standards of honesty are, the less likely that he will be convicted of dishonest behaviour.
•  The rule is unnecessary to preserve the principle that dishonesty, and especially criminal responsibility for it, must depend on D’s  actual state of mind of the defendant.
• Jurors often find the test puzzling.
•  There is no reason why the law should excuse those who make a mistake about what contemporary standards of honesty are, whether in the context of insurance claims, high finance, market manipulation or tax evasion.

Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67.

LPP: Defendant in SFO v ENRC  [2017] EWHC 1017 (QB) has been granted permission to appeal (with a real prospect of success) Law Society Gazette 11 Oct 17.

LPP and search: a mobile telephone may be the subject of a search warrant even if it contains LPP. Suitable provisions can be made for opening, downloading and review thereafter:  R. (A. and another) v. CCC and anor; R. (C. and ors) v. Same  [2017] EWHC 70 (Admin), [2017] 1 W.L.R. 3567, D.C.

Search warrant: validly issued, even if not, sound grounds that documents should not be returned without copies being made and retained by HMRC: R (Newcastle United Football Club Ltd and Ors) v HMRC [2017] EWHC 2402 (Admin), [2017] 4 W.L.R. 187.

Search warrant: power to extend time retrospectively. Court has power to extend time (here 2 days) retrospectively for an application to retain illegally seized material under s59 CJPA 2001. No bad faith found despite multiple failings: R (Malik and ors) v Manchester and Salford JJ and ors [2017] EWHC 2901 (QB).

SENTENCING AND CONFISCATION

Confiscation: Business profits: confiscation is intended to be severe, not disproportionate: Waya [2013] 1 AC 294. For businesses:

(i)      Turnover of a criminal enterprise is the proper measure in many cases: Waya [26]; Harvey [2017] AC 105.

(ii)     Legitimate goods and services provided where the transaction is otherwise tainted may result in a profits-based order: Sale [2014] 1 WLR 663; King (Scott) [2014] Cr.App.R(S) 621 [32], NB (its true scope needs revisiting – a hint at bribery calculations?).

(iii)    If business obtained by corruption leading to market distortion and additional advantage, the additional pecuniary advantage is to be calculated. Sale [60]; Waya [29].

(iv) Amount of loser’s loss generally irrelevant save where full restoration has been made when requirement to pay again would be disproportionate.

Here, all benefit tainted as arising from breach of trust by employee, upon which entire conspiracy founded: Reynolds [2017] EWCA Crim 1455.

15% late plea discount upheld by CA. Facts: 18 months for importation of 742 kgs tobacco with £137k duty evaded; no comment interview; not guilty at PTPH in June 2016; trial fixed for May 2017; plea indicated in March and taken in April 2017: Terry [2017] EWCA Crim 1451 (Westlaw).

BILLS, STATUTES & STATUTORY INSTRUMENTS

Criminal Finances Act 2017 (CFA) Provisions come into force: s10-12, 15, 17, 36-37, 43, 53 re duty to report ML suspicions.  Criminal Finances Act 2017 (Commencement No. 2 and Transitional Provisions) Regulations 2017 SI No 991.

Data Protection Bill 2nd reading. To replace DPA 1998.

Review of Criminalisation of Doping in Sport DDCMS report, 23 Oct 17.

Finance Act 2016, s 166 (Appointed Day) Regulations 2017 SI No 970 bring into force 3 new strict liability failure HMRC offences (s 106B, 106C and 106D of TMA 1970) re offshore income or capital for failure to notify or file a return or inaccuracy in a return. The threshold amount for a year of assessment for these sections is £25k.  Sections 106B, 106C and 106D of the Taxes Management

Act 1970 (Specified Threshold Amount) Regulations 2017 SI 2017 No. 988.

NHS Counter Fraud Authority (Investigatory Powers and Other Miscellaneous Amendments) Order 2017, SI No 960 creates new body (NHSCFA) to replace NHS Business Services Authority to focus entirely on counter fraud functions.

POCA Codes of Practice Orders being drafted: The Proceeds of Crime Act 2002 (i) (Recovery of Listed Assets: Code of Practice) (England and Wales and Scotland) Regulations 2018: (ii) (Investigations: Code of Practice) Order 2018; (iii) (Cash Searches: Code of Practice) Order 2018; (iv) (Search, Seizure and Detention of Property: Code of Practice) Order 2018.

CONSULTATIONS, GUIDANCE, CIRCULARS AND REPORTS

FSB Report on Financial Sector Cybersecurity Regulations, Guidance and Supervisory Practices. Financial Stability Board stocktake report, 13 Oct 17.

HMRC Guidance on self-reporting facilitation of tax evasion 29 Sep 17.

JFT (Joint Fraud Taskforce) Board Minutes 11 Sep 17 (fairly boring).

Money Laundering and Terrorist Financing Regulations 2017 National Risk Assessment HM Treasury, 20 Oct 17.

ONS Crime Survey 2017: Includes experimental statistics on fraud and computer misuse, June 2017.

SAR Annual Report 2017. NCA reports 9.5% increase in reports, most from credit institutions including 82% from banks, 1% accountants and tax advisers, 0.7% legal professionals, 11 Oct 17.

NEWS

Barristers Statistics and Probability for Advocates: Understanding the use of statistical evidence in courts and tribunals: COIC /RSS (Council of the Inns of Court/ Royal Statistical Society), 5 Oct 17. The RSS also produces:

• Fundamentals of probability and statistical evidence in criminal proceedings (Nov 10).
• Assessing the probative value of DNA evidence (Mar 12).
• The logic of forensic proof: inferential reasoning in criminal evidence and forensic science, May 14.
• Case assessment and interpretation of expert evidence (Jan 15).

EPPO (European Public Prosecutor’s Office) new EU cross-border prosecutor’s office to be established (Malta, Netherlands, Ireland, Poland, Hungary, Sweden, Denmark, & UK are not signatories), 8 Jun 17.

Ernest & Young fined £1.8m by FRC (Financial Reporting Council) for misconduct (inadequate standards in audit of Tech Data/Computer 2000 Distribution). FRC starting figure of £2.75m reduced for mitigation and settlement discount. E&Y ordered to pay £225k costs, 16 Oct 2017.

New City of London Court: New 18 court Centre to replace all City courts save the Old Bailey, focusing on fraud, economic crime and cyber-crime. Feasibility study completion expected early 2018. City Press release, 9 Oct 2017.

SIM-swap fraud identity theft: Rapidly growing fraud to gain access to bank accounts, credit card numbers and personal data, usually aimed at pre-identified profitable victims. Targeted through internet search/social media. Personal information is collected and collated via internet and social media, telephone provider contacted claiming a lost/damaged SIM, and security questions answered or bypassed using the database of information collated from social media etc. Once unfettered access is gained to the victim’s telephone number, SMS messages can be read, including password resets etc. Thereafter, bank accounts can be accessed. Some banks use IMSI (International Mobile Subscriber Identity – unique number associated with specific GSM mobiles) to ensure one time codes are sent only to legitimate subscribers. UK banks are working on the issue. Avoid using SMS as data is not encrypted.