Criminal Justice and

Criminology
By
Abhishek Chattopadhyay
NICFS, Ministry of Home Affairs (GOI)
2019
(Under, Dr B.N Chattoraj)

Evaluating the range of

agencies involved in the
investigation and prosecution
of corporate fraud in the UK:
is there an alternative to
criminal justice?

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.

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Contents:

Abstract 3

Introduction 4

Chapter 1: The Police, the Prosecutors and the Problems. 6

Chapter 2: Is Regulation the Answer? 16

Chapter 3: The Possibility of a Joint Approach. 26

Conclusion 34

Bibliography 37

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Abstract:
Fraud, like most other white-collar crimes, has historically been
neglected within academia, the media and government policy
compared to more traditional, street crimes. Yet, where levels of
many conventional crimes have declined in recent decades,
incidence of corporate fraud have consistently increased and
continue to cost the UK billions of pounds every year (University
of Portsmouth, 2016). Indeed, fraud as a whole is arguably the
costliest issue facing the UK when it comes to crime, with
corporate fraud being the most expensive type. It is therefore
becoming ever more important to focus on the way in which such
crimes are dealt with in the UK and how the current situation can
be improved.

Significantly, where criminal sanctions are seen as the default

response to the majority of other crimes, corporate fraud features
very little within traditional justice (Fisher, 2010). Thus, by
assessing the relevant literature, this paper will explore the
current way in which corporate fraud is responded to in the UK
and consequently assess whether there can be a more suitable
alternative to the use of traditional criminal justice. Though it can
be concluded that any system attempting to deal with corporate
fraud is likely to be constrained by the lack of resources, this
paper will find that creating a new, national, ‘joint’ system to
investigate and prosecute corporate fraud could be the most
effective alternative to the use of the criminal justice system.

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Introduction:
In order to be able to successfully delve into the workings of the
systems which investigate and prosecute corporate fraud, it is
important to first understand what exactly the offence of fraud
constitutes. Broadly defined, fraud involves firstly, the use of
deception (or intention to deceive) and secondly, the intention to
either make a gain or cause a loss to another (Fraud Act, 2006).
Notably, this is an extremely general classification and thus fraud
is a deceptively simple term which encompasses an enormous
range of behaviours. It has many different potential perpetrators,
a heterogeneous set of victims, many different levels of visibility
within society and varying scales of complexity (Croall, 2003). It
would therefore appear logical to narrow the focus of this essay
to a more specific type of fraud as an attempt to evaluate
responses to the offence as a whole would perhaps be
overambitious; this dissertation will therefore pay specific
attention to corporate fraud. Though there are differing
perspectives on what corporate fraud entails, this paper will take
a more comprehensive definition in order to encompass as many
relevant kinds of fraud as possible and so will broadly look at any
fraud committed within a business setting. O’Gara’s definition is
of particular use here as he determines that corporate fraud is
not only the dishonest or illegal activities committed by, or on
behalf of, a corporation but also those acts committed by
individuals against the business, in the course of their occupation
and for their own personal gain (O’Gara, 2004). Therefore,
examples of corporate fraud may include anything from
embezzlement, insider trading or large scale company tax
evasion.

Moreover, the extent of fraud in the UK and its consequent

impact on society is also significant pretext to this dissertation.
The fact that fraud, particularly corporate fraud, is so well hidden
makes it extremely difficult to know the full extent of its cost to
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society. However, it is estimated that the annual fraud loss for
2016 could amount to as much as £193 billion. More specifically,
of this amount, corporate fraud is estimated to cost the UK £144
billion, which is a ‘conservative figure given the general
sentiment among our biggest businesses against releasing
commercially sensitive, or potentially

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damaging, financial fraud data’ (University of Portsmouth,
2016:12). It is thus widely agreed that fraud is perhaps the
costliest crime facing the UK in terms of economic factors, which
is unsurprising considering the scale of many of the businesses
that commit it on a daily basis (Doig and Levi, 2008).
Interestingly, however, a point which is seldom mentioned is the
harm caused by fraud on local communities and individuals. For
example, corporations who commit tax evasion can harm local
communities as there are less resources invested into public
sector industries such as schools or the police (Croall, 2009).
Additionally, individuals who are victims of scams, or those who
lose their businesses as a result of corporate fraud, for example,
can suffer devastating consequences that go beyond monetary
losses such as paranoia, stress related illness and in a few severe
cases, suicide (West, 1987). Not only this, but the links that
corporate fraud has with funding organised crime or terrorist
groups means that it should not be dismissed as a non-dangerous
or victimless offence (Doig and Levi, 2008). Gee commented that
after many years of research into the extent of fraud it is clear
that it is not just a low volume high value offence that most
people can avoid but instead is a phenomenon present in any
organisation of any size which has the potential to affect business
or individual (University of Portsmouth, 2016).

Given the scale, nature and impact of corporate fraud in the UK it

is perhaps shocking that it is largely neglected by the criminal
justice system (Levi, 2007). For the majority of other offences
criminal justice is the default response when a crime occurs.
However, due to an extensive list of problems related to the
investigation and prosecution of corporate fraud by the criminal
justice system, it fails to appear nearly as often as other theft
related offences (Levi. 2007). It is this reason that has lead the
focus of this dissertation to be on the way corporate fraud is
investigated and prosecuted in the UK and whether there can be

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a suitable alternative to traditional criminal justice. It will begin
by detailing this extensive list of problems within UK criminal
justice responses to frauds in chapter one, before moving on to
consider two possible alternatives. Chapter 2 will hence look at
how the increased use of regulation could stand as an alternative
to criminal justice

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 and will consider how this may solve many of the problems
presented in chapter 1, but also the issues that would arise when
using such a system. Finally, chapter three will highlight that the
current disjointed use of the use of both criminal justice and
regulation has created an architecture of responses which is
hugely dissimilar to that of any other crime and so will suggest
that the answer perhaps lies in amalgamating all the related
agencies into one central, united, national body to respond to
fraud: a joint system.

After evaluating these current and potential systems involved in

investigating and prosecuting corporate fraud this paper will
conclude that, firstly, due to the way fraud is viewed within the
government policy, and by the media and public, resources
dedicated to dealing with it are insufficient and likely to constrain
any system that attempts to investigate and prosecute it. Despite
this, of the three presented paradigms, it seems that there can
be an alternative to criminal justice as the joint system arguably
presents the most efficient and fair way of investigating and
prosecuting fraud in the UK. The joint system allows the best
aspects of regulation and criminal justice to be combined into a
more consistent, coherent and comprehensive response to
corporate fraud.

Chapter 1: The Police, the Prosecutors and the

Problems:
There is ample evidence and a wide body of literature which
details the economic impact, social harm and danger corporate
fraud creates, yet it continues to feature so little in
traditional criminal justice (Fisher, 2010). Sutherland noted that
‘crimes of the lower class are handled by policemen, prosecutors
and judges with penal sanctions’ whereas crimes of the upper
and middle class usually result in either no action or a range of

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administrative sanctions (Sutherland, 1968:47). Indeed, the
criminal investigation and prosecution of fraud in general in the
UK has been subject to immense criticism since the 1970s,
leading to the first significant official review in 1986 where Lord
Roskill made a number of recommendations in

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order to try and remedy some of the concerns that had arisen
(Roskill, 1986). While the more recent 2006 Fraud Review also
intended to create an ‘anti-fraud culture throughout society
based on deterrence, prevention, detection, investigation,
sanctions and redress for victims’, the way in which fraud is dealt
with by the criminal justice system has arguably changed very
little since Sutherland made his observations in the 1960s (Fraud
Advisory Panel, 2016:II). The responsibility of investigating and
prosecuting all types of fraud in the UK lies primarily with three
entities: the police, the Serious Fraud Office (SFO) and the
Crown Prosecution Service (CPS), thus, the main issues that exist
surrounding each of these bodies will be discussed in more detail
throughout this chapter.

Most lay members of the public would assume that responding to

fraud is a matter for the police to deal with as they are perhaps
familiar with the classic media and TV depiction of fraud squads
or Economic Crime Units (ECUs) (Middleton, 2005). However, due
to a range of different problems surrounding the investigation of
fraud (particularly corporate fraud), in reality, the police play only
a minor role.

For a crime to become a matter for the police to handle, it needs

to be reported to them and this is the first problem that presents
itself to the police when dealing with the investigation of
corporate fraud offences. It is widely accepted amongst
criminologists that a large portion of the crimes that occur in
society are not reported to the police for many reasons. In
relation to fraud, and more specifically corporate fraud, however,
the issue of under reporting is arguably much more severe (Fraud
Advisory Panel, 2016). Interestingly, the true extent to which it is
under-reported is unclear as the Crime Survey of England and
Wales (CSEW) did not included questions about fraud until 2015,
so there is little to compare official police data to- perhaps

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highlighting the lack of attention that has been paid to the
reporting and recording of fraud in past years (Fraud Advisory
Panel, 2016).

An attempt to improve this issue saw the 2006 Fraud Review

create Action Fraud which was established in 2010. Action Fraud
is the national reporting centre for all fraud and cyber-crime
and is now run by City of London

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Police. This has created a more centralised system for the
reporting and recording of fraud offences in the UK meaning that
the burden has been somewhat removed from individual forces.
However, Action Fraud is only responsible for the reporting and
recording of offences and so it remains at the discretion of the
police whether to investigate the case further (Button et al,
2008). Additionally, despite the creation of Action Fraud, under
reporting still remains a prominent issue as national trading
standards research suggests that 90% of scam victims still
never report the crime to the police (Fraud Advisory Panel,
2016). This is may be because many victims of scams may not be
aware that what has happened to them was criminal, they may
think that the matter is one of civil deception so feel no need to
alert the police. Alternatively, they may be under the impression
that the act was actually legal and was perhaps their own fault so
they may feel too embarrassed or ashamed to report it (Levi,
1988). While it is recognised that these factors may also impact
on the under-reporting of other crimes, due to the complexities of
corporate fraud as a crime and the consequent fact that many
people are likely to be uninformed about the relevant details,
such under-reporting is likely to affect this area much more (Levi
and Burrows, 2008).

Likewise, Government research suggests that ‘reputational and

regulatory concerns prevent the reporting of all but a tiny
proportion (less than 2%) of corporate frauds’ (Fraud Advisory
Panel, 2016:11). Issues surrounding reputational damage and the
desire to avoid financial scrutiny which could draw attention to
flaws in a business’ security or practices means that the majority
of frauds in this area are not reported to anyone and are usually
dealt with internally in order to remain discrete (Levi, 1988).
Smith et al suggest that private sector organisations have learnt
that police investigations are lengthy and often do not result in
full monetary reimbursement so are more inclined to deal with
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them privately (Smith et al, 2011). Hence, the long term under
reporting of corporate fraud is a significant obstacle facing police
investigations as it caps their ability to investigate it effectively
before they have even started.

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Significantly, some corporate fraud offences do get reported to
the police but there is often a chance that they will still not be
recorded as crimes if, for instance, they are referred elsewhere
for further investigation. Levi notes that whether the police take
on a fraud investigation is not only dependent on it being
reported, but also how busy they are at the time and whether
they are willing to record it (Levi, 1988). Thus, because very few
police resources are dedicated to crimes of this
nature, many of the corporate frauds that do get reported to
the police are not investigated leading onto, perhaps, the most
significant issue facing police investigation into fraud: the lack of
allocated resources (Button et al, 2007).

There are many studies which highlight the vast decline in police
fraud department resources over the last 30 years as well as how
much fraud squads have ceased to exist in the majority of forces
(Gannon and Doig, 2009). Doig et al’s research found that 28 of
the 32 fraud squads that existed in 2001 were staffed by 10 or
fewer officers, and 20 of these squads had decreased in size over
the previous 5 years (Doig et al, 2001). Despite the
recommendations of the Fraud Review in 2006, in a climate of
austerity and public sector budget cuts, fraud and other
economic crimes departments are usually the first to go (Button,
2011). This is especially concerning, and possibly even ironic,
when considering such budget cuts were perhaps a result of a
financial crisis cause by economic wrongdoing (Tombs, 2015).
Gannon and Doig’s study found that between 1998 and 2008, of
the 15 responding forces, 13 stand-alone fraud squads had
reduced to only 2 forces having departments retaining the word
fraud in the title (Gannon & Doig, 2009).

The consolidation of fraud resources into Economic Crimes

Units has been viewed by some as a positive step
in the investigation of corporate fraud because some specialist

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departments still exist. However, the creation of the ECU has
actually meant that resources in this area have been diluted even
further (Gannon and Doig, 2009). Like the almost extinct fraud
squads, ECU staffing levels are very low with the average ECU
hiring around 23 staff (Gannon and Doig, 2009). Additionally,

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the remit of these units is much wider than that of the fraud
squad’s as their resources need to be spread across all economic
crimes, including all serious and organised crimes. Research
found that only one of the studied ECUs expressed that the
investigation of fraud was the primary responsibility of the
department; most other units discussed the policing of fraud in
the context of tackling organised crime and not as a soul priority
(Gannon and Doig, 2009). This highlights the vast reduction in
policing resources dedicated to fraud that has occurred over the
past two decades and indicates that the policing of fraud in the
UK has not been, and still is not, a priority.

Indeed, fraud in general is not mentioned in the National Policing

Plan as a priority for forces and the City of London Police is the
only force that has a Key Performance Indicator (KPI) relating to
fraud (Button et al, 2008). It has been suggested that much of
the reasoning behind this is based on practicality; investigations
into complex corporate frauds are much more labour intensive
than the investigation of most other crimes, and are
certainly more time consuming and costly. Not only this, but in
order to understand and investigate corporate fraud cases
sufficiently a high level of understanding and knowledge
surrounding finance and business practices is usually required,
and the majority of police officers do not have this expertise. It is
also worth mentioning that evidence for fraud trials is usually
very difficult to collect; particularly when it comes to corporate
fraud. Because the nature of businesses is usually extremely
private, if there was any evidence of wrongdoing in the first
place, it is relatively easy for them to destroy any incriminating
documents before the police begin investigating (Smith et al,
2011). Therefore, the inefficiency and ineffectiveness of fraud
squads and other specialist fraud departments has meant that
more conventional crimes have always been at the forefront of
police investigation in order to meet targets and KPIs (Levi,
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1999). Additionally, police forces were originally created in order
to maintain public order so it is perhaps not so surprising that
corporate fraud and other economic are not the focus of forces as
they have historically concentrated on more traditional crimes
(Emsley, 1991).

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Significantly, it is also noted that there is a lack of political
pressure surrounding the investigation of corporate fraud
compared to other crimes. Because corporate frauds are not as
visible as street crimes such as burglary or violent offences,
policy makers have not seen it as an important point of focus for
criminal justice resources (Levi, 2007). It has further been argued
that because the suspects of corporate fraud offences have a
high social status, there is a degree of class bias surrounding the
neglect of policy makers to prioritise the policing of such crimes
over street crimes. Fooks argues that there are potentially
millions of offences going on that are not registered by officials
because they are committed by ‘suspects from populations of
whom the police generally service as opposed to those from
populations whom the police generally regard as property’
(Fooks, 2003:124). Police priority is arguably shaped by scandal
and media panics which frequently occur around topics such as
young offenders, sex crimes or murder; but since fraud is not
viewed as newsworthy as such crimes, political pressure on
forces to police fraud offences more vigorously is virtually non-
existent (Levi, 2007). Being the first port of call for most people
when a crime has occurred, the problems that have been
discussed up to this point, associated with the policing of fraud,
are extremely important as they have the potential to permeate
through the following stages of the criminal justice system and
create a myriad of additional problems.

With regards to the prosecution of fraud in the UK, the Serious

Fraud Office deals only with the most serious and complex
frauds, whereas the Crown Prosecution Service is responsible for
prosecuting the majority of others (Fisher, 2010). The SFO was
created in 1987 as a result of the Lord Roskill’s report in order to
deal with cases of fraud where the amount exceeds £1 million,
there is wide spread public concern, there is an international

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element or very specialist knowledge is needed and so
this includes many corporate fraud offences (Smith et al, 2011).
This means that in the last 30 years the number of serious and
complex corporate frauds that are

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being prosecuted has actually increased because there was no
other similar body with such a capacity prior to the introduction
of the SFO (Fisher, 2010).

Nevertheless, since its inception the SFO has been intensely

scrutinised for its low conviction rate, choice to often opt for civil
actions as opposed to criminal ones and a number of high
profile acquittals (Fisher, 2010). Similar to police fraud
departments, the SFO has faced resource reduction and a budget
decrease of over 15% since 2009. Not only this, but, the
complexities of the frauds being prosecuted mean that a typical
SFO case takes approximately double the average length of non-
fraud trials, compromising the effectiveness in which it is able to
prosecute defendants. Significantly, between 2008 and 2009 the
SFO prosecuted only 60 defendants and of that 60, 24 were
acquitted meaning that the annual conviction rate was 60%
(Fisher, 2010). In the year ending in 2015, however, this rate did
markedly improved increasing to a 78% rate of successful
convictions, though the number of defendants prosecuted
reduced significantly to only 18 (Cassin, 2015). Thus, it seems
that where the rate of convictions may have been improved, the
number of prosecutions taking place is still alarmingly low,
meaning that the SFO is still being criticised for its
ineffectiveness.

The CPS has similar issues in securing convictions, although it

has a consistently higher annual conviction rate than the SFO,
when compared to more conventional crimes it seems that, not
only are general fraud cases less likely to be prosecuted, but
are also more likely to fail (Wright, 2006). For example, in
2015, there were over 7000 theft and handling prosecutions, just
under 1300 burglary defendants but only 888 prosecutions for
fraud and forgery; not only this, but fraud and forgery had the
highest percentage of unsuccessful convictions out of these 3

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offences (16.7%) (CPS website, 2015). The low overall numbers
of prosecutions may echo the effects of under-reporting and
problems surrounding police investigation, however, the low
conviction rate presents a number of other issues related
specifically to the prosecution of corporate fraud, in the UK.

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When deciding whether to prosecute in any case the CPS use a
two test system in order to assess whether the case would bring a
successful conviction, this includes looking at the evidence (test
1) as well as the public interest (test 2) (CPS Communications
Division, 2013). As mentioned earlier, evidence in corporate fraud
cases is particularly hard to get hold of and therefore, if the police
are unable to collect sufficient evidence, the CPS are likely to find
that there is not a realistic prospect of conviction. Moreover, the
public interest test also presents a significant obstacle when it
comes to the prosecution of corporate fraud as, generally,
offences related to finance are not seen as dangerous or
particularly harmful to the public so it can often be decided that it
is not in the interest of the public to pursue what would turn out
to be an extremely long and costly prosecution (Smith et al,
2011).

Furthermore, a frequent topic of discussion in this area is the

unsuitability of using juries in fraud prosecutions, particularly
complex corporate frauds (Roskill, 1986). The Roskill report
pointed out that since the 1980s the declining quality of the jury
was becoming more prevalent in official discourse surrounding
the issues with fraud prosecutions, particularly concerning moral
standards and education levels (Roskill, 1986). A typical fraud
case is likely to involve several defendants, even more witnesses
and rely heavily on complicated documentary evidence, all of
which add to the lengthiness of the trial and often make it hard
for jurors to fully understand the details of the case (Wright,
2006). It has thus been argued that defendants convicted of
corporate fraud are more likely to be acquitted because juries
either do not understand the evidence or are too disinterested by
the end of the trial to make a fair decision (Roskill, 1986).
Because of this, Roskill suggested that all fraud trials should be
tried by a single judge or lay members drawn from a panel who
have particular knowledge and expertise relating to the relevant
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practices, however, the attempted Bill was rejected by the House
of Lords in 2007 (Smith et al, 2011).

Where it does seem that the uneducated or uninformed jury does

have the potential to affect the outcome of a corporate fraud
trial, Levi felt it important to point out that many acquittals in
fraud cases were actually a result

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of judge’s ruling there was no case to answer (Levi, 1987). Wright
adds that, often, judges are also not equipped with the adequate
knowledge or expertise of certain practices relating to corporate
fraud and judges who try these cases are not selected based on
suitable understanding or ability but simply a willingness to try
them because there are so few that will (Wright, 2006). It is also
noted that in many circumstances judges who are reluctant to try
such cases have the responsibility thrust upon them unwillingly;
it is even believed that in some cases that judges are obligated to
take on fraud trials as form of punishment or forfeit- though the
evidence surrounding this point is largely anecdotal, it remains
unsurprising that a disproportionate number of fraud cases do
not make it to the trial stage (Wright, 2006).

Additionally, it has been suggested that more fraud prosecutions

result in acquittals because of the inherent unfairness that is
present in a system where more expensive representation is
likely to result in a more favourable verdict (Cook, 1989).
Because those who commit corporate fraud are typically
middle class businessmen or often even company owners, they
can afford better representation than other offenders who
commit acts such as burglary or theft. They are perhaps then
more likely to leave with a not guilty verdict because they can
afford specialist and more experienced legal assistance (Cook,
1989). This issue in particular also has the potential to impact on
sentencing where a guilty verdict does occur. The Fraud Review
found that there was a discrepancy between the custodial
sentences given to those convicted of fraud and those convicted
of other comparable offences- the average custodial sentence
lengths given by the crown court to someone who committed
burglary or robbery were 24.6 and
41.1 months retrospectively, whereas the average custodial
sentence length given to someone convicted of fraud was 15.4
months, considerably lower (Smith et al, 2011). Though it is more
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conceivable that offences such as burglary and robbery would
receive higher custodial sentences due to the psychological harm
and the fact that there is a recognised, direct victim, the sheer
size of the economic impact of most fraud cases is incomparable
and it could be argued that this should balance the scales when it
comes to sentencing. Levi commented that empathy is often
afforded in sentencing to

25
those who have ‘fallen from grace but such humanity is seldom
extended to those who have no grace from which to fall’ (Levi,
1999:165). It is typical of people to view those who commit fraud,
especially corporate fraud, in a different way to those who
commit other, more conventional crimes because they are
thought to be less violent, less dangerous and therefore are a
much smaller threat to society (Levi, 1999). However, as detailed
in the introductory chapter to this paper, fraud can have
devastating economic impacts on wider society, local
communities and sometimes can cause real harm to individuals.

This unfairness within the criminal justice system that comes

from viewing such offenders in a different way arguably infiltrates
each stage of the process; it provides part of the explanation as
to why the police so rarely investigate these offences, why so
little resources are dedicated to combatting them, why
prosecutors are less likely to try such offenders and why, when
they do get to the trial stage, they are treated with more leniency
and empathy than many other offenders in the same position.
Though there have been attempts to improve the system in
recent years with the creation of action fraud and the SFO, it
would still seem reasonable to conclude that there remains a
number of problems present when investigating and prosecuting
corporate fraud in the UK criminal justice system. It is with this
thinking that many organisations are increasingly opting to take
alternative routes when dealing with fraudulent behaviour that
are based on regulation and compliance strategies. The
proponents of regulatory strategies argue that the use of
regulation has the potential to combat many of the issues
presented in this chapter and could therefore provide a much
more effective way of dealing with fraud (Braithwaite, 2008).

26
Chapter 2: Is Regulation the Answer?
In Regulatory Capitalism, Braithwaite speaks of the widespread
explosion of regulatory practices within businesses throughout
the 1990s and how this was surprising as it took place in an era
of liberalisation, privatisation and laissez faire (Braithwaite,
2008). Perhaps then, this growing use of regulatory practices
could partly be explained by the increasing awareness of issues
relating to the criminal investigation and prosecution of fraud and
the consequent desire to find different, more effective ways of
dealing with it (Braithwaite, 2008). In a system of regulation, the
aim is to achieve compliance with the law by using administrative
efforts, economic incentives and thus using criminal sanctions
as a last resort (Smith et al, 2011). Therefore, the way in
which corporate fraud is dealt with in the UK has arguably
become a rather inconsistent combination of regulation and
criminal justice. This chapter will consequently consider whether
a heavier reliance on a regulation based approach would be a
suitable alternative to the use of criminal justice.

Regulation is defined by Croall as ‘the use of law to constrain and

organise the activities of business and industry’; in such an
approach offences are referred to as technical violations or non-
compliance and the purpose is to maintain a high standard of
business and commerce while balancing the interests of the
organisation with the protection of the public (Croall, 2003:45).
There are a range of different types of regulation for example:
state regulation involves the government being the primary actor
and using the law to regulate organisations and enforce
compliance (Zednre, 2006). However, Braithwaite, among others,
proposes that regulation extends far beyond the state and often
companies are more effectively regulated internally (Jordana and
Levi-Faur, 2004). Hence, this chapter will refer mostly to two
other types of regulation. Firstly, self-regulation, which involves

27
companies having soul responsibility for the internal monitoring
of their own non-compliance (Braithwaite, 2008). Secondly,
responsive regulation, which is based on the notion that
regulators should respond to the conduct of those they are
monitoring and use this to decide on the

28
amount of directive that is needed. It is regarded as the middle
ground between state intervention and complete freedom as
those organisations that comply are rewarded with incentives to
continue law-abiding (they are often allowed more freedom to
self-regulate), but those who fail to adhere to compliance
strategies are subject to a range of sanctions and consequently
stricter regulation (Rorrie, 2015). A key aspect of responsive
regulation which is worth mentioning is the regulatory pyramid;
this is an order of sanctions which should be given in cases of
non-compliance. Generally, these are likely to start with
persuasion or dialogue as the first sanction, then move onto a
variety of other penalties in the middle (all increasing in severity
as they move up the pyramid) before typically ending with either
criminal charges or license revocation at the top (Braithwaite,
2008). Having a structure like this in place enables bodies to
prevent and deter fraudulent behaviour in a range of ways before
reverting to criminal prosecutions, which is often the aim of many
organisations.

The Financial Conduct Authority (FCA) is an example of a

regulatory body which is responsible for the regulation of over 24
000 financial service firms and markets in the UK. They state that
all their regulated firms are required to have effective systems
and controls in order to be able to detect, prevent and deter
fraud, however, where wrongdoing occurs the government is
responsible for imposing sanctions. Such sanctions refer mainly
to asset freezing and financial sanction orders, which prohibit the
transfer of any funds either to particular firms or targeted
countries in order preventing the possibility of further non-
compliance. Though the FCA themselves do not have the
statutory ability to impose these sanctions they do state that
they expect all their firms have systems which meet the financial
sanction obligations enforced by the government (FCA website,
2016). Additionally, HM Revenue and Customs (HMRC) are
29
responsible for dealing with frauds relating to tax evasion and
avoidance in the UK; they also tackle fraud primarily through non-
criminal sanctions, most often out-of-court settlements or
administrative fines. Criminal prosecutions are used only when
HMRC wants to send out a strong deterrent message or in
cases

30
where the severity of the fraud considers only criminal sanctions
appropriate (National Audit Office, 2015).

It has been made clear in the previous chapter that there are
many issues when it comes to the efficiency of criminal
investigations and prosecutions of corporate fraud and
regulation, therefore, has the potential to present a much more
effective option. Significantly, regulation strategies usually have
a proactive element which directly contrasts the police’s highly
reactive strategies when investigating corporate fraud (Smith,
2011). This means that using internal regulators and proactive
methods of detection such as regular audits has the potential to
combat the issue of underreporting as fraudulent behaviour is
being actively sought within the business (Smith, 2011). It has
additionally been argued that using company investigators or in
house regulators is a much more effective way of gaining
compliance and reducing offending as they have a more
specialist knowledge of the internal practices, can monitor
potential violations easier and are best placed to decide on the
most fitting course of action (Croall, 2003). This is a persuasive
point considering the issues that exist surrounding the lack of
expertise or understanding amongst jurors and some judges
when dealing with corporate fraud cases at trial.

Additionally, when using a regulatory pyramid or another similar

system it is always seen as preferable to start at the bottom with
persuasion, no matter how serious the offence is (Braithwaite,
2008). Braithwaite notes that the pyramid is an effective way of
deciding when it is best to punish and when is best to persuade
so that time and resources are not wasted on the wrong method
(Braithwaite, 1985). Therefore, treating all violations with the
cheapest and quickest sanction first allows the opportunity to
save time and money that would be wasted on an uncertain
outcome in a criminal trial, only when the dialogue is ignored and

31
offending continues is there a need to allocate more time and
resources by using escalating sanctions (Levi, 2010). Middleton’s
study on investment fraud by solicitors is particularly useful to
look at here: he found that between 1993 and 2002 there were
56 law firms and 59 individuals involved in high-yield
investment frauds

32
(Middleton, 2005). Of these 59 individuals a mere 10 were
prosecuted and only 2 convicted, whereas interventions by the
Law Society saw 29 of the firms closed down, 25 individuals
struck off, 7 individuals suspended and 11 fined (Middleton,
2005). This shows that where criminal prosecutions struggle to
secure a conviction in the majority of their cases (effectively
wasting time and resources), a range of regulatory sanctions, all
varying in severity can effectively step in and make up for this
failure (Middleton, 2005).

Middleton’s work also points out that, as well as being quicker

and more cost effective, regulation still has the potential to be a
just punishment and effective deterrent. Where some may feel
that a criminal sanction is the only appropriate punishment for
wrongdoing of this nature, it has been argued that with regards
to prevention and punishment of corporate fraud it is possible
that more can be achieved through various regulatory
techniques; thus, the criminal justice system cannot be seen as
the only competent institution in dealing with criminal behaviour
(Ashworth, 2003). As suggested in this study, and the more
general CPS and SFO prosecution and conviction rates, the
possibility of securing a guilty verdict in a fraud trial, particularly
in corporate fraud trials, is unlikely in most cases. Securing a
regulatory sanction, however, can be done with relative ease and
can arguably be just as devastating as a criminal one (Middleton,
2005).

For many, the use of a sanction pyramid and the mere threat of
criminal prosecution or public punishment is enough to make
them comply with regulations and thus deter any further
violations, so the actual use of criminal sanctions is not necessary
(Levi, 2010). The pyramid is viewed as a ‘slippery slope that will
inexorably lead to a sticky end’ and so the use of persuasion and
dialogue is often enough to achieve compliance through the fear

33
of more severe sanctions in the future, hence a reduction in
offending can be achieved as effectively as it would when using
the criminal justice system (Braithwaite, 2008:92). Additionally,
many of the people who work for such organisations may be
more fearful of being dismissed or losing their licence to practice
their profession, especially if they are aware of the increased
likelihood of them being acquitted in the case of a criminal

34
prosecution (Smith, 2011). As demonstrated in Middleton’s study,
dismissal or licence revocation can be enforced by regulatory
agencies and so there is a valid argument that such an approach
has the potential to deter, punish and incapacitate offenders
more in circumstances involving fraudulent behaviour within
businesses (Middleton, 2005).

The Australian system is an interesting comparison to look at

when considering the potential benefits of a regulation based
system; since the early 1990s, they have shifted away from the
use of criminal justice when dealing with fraud towards a more
prominent use of administrative and regulatory justice (Sarre,
1995). Fraud, corporate crime and general corruption gained
increasing attention in Australia throughout the 1980s after a
series of high profile scandals and, after experiencing similar
failures in pursuing criminal justice in these areas, it is
unsurprising that it has been almost completely replaced with
administrative remedies (Braithwaite, 1985). Australian
regulation is built primarily on the use of self-regulation, aiming
to avoid pushing the matter, as well as the offender, into the
criminal justice system through a ‘slow and cumbersome process’
(Sarre, 1995:287). Regulation has without a doubt saved
Australia time and expense in justice and is usually seen as
preferable because of its ability to change and adapt to society
and context much easier and quicker than legislation can (Sarre,
1995).

As well as efficiency and flexibility however, the increasing use of

regulation in Australia as a response to fraud is largely a based
on Braithwaite’s work in re-integrative shaming, perhaps its most
significant advantage. This model is one which is reliant on the
offender acknowledging wrongdoing and displaying a desire to
re-build links with the community (Makkia and Braithwaite,
1994). By using regulation, the Australian system hopes to create

35
a model which avoids the labelling process that is often a result
of criminal prosecutions thus speeding up re-integration back into
society and consequently reducing the possibility of reoffending
(Sarre, 1995). It can provide a much more respectful and
legitimate way of dealing with wrongdoing of this nature which
contrasts the formal, authoritarian and

36
heavy handed process of criminal justice that is typical of
disintegrative shaming (Makkia and Braithwaite, 1994).
Therefore, it may be contended that there are a number clear
benefits to using a system that is primarily based on regulation,
so much so that the Australian fraud responses are almost
entirely reliant on such an approach. Overall, using a regulatory
method enables people with more expertise of the relevant
practices to implement effective sanctions which much more
ease, efficiency and legitimacy than the criminal justice system.
Nevertheless, though it may seem to solve many issues relating
to the criminal prosecution of corporate fraud in the UK, using
regulation brings about an array of new problems which need to
be considered when discussing whether they could provide a
more effective alternative to criminal justice.

Indeed, where some would suggest that the Australian system

has set an example that should be followed by the UK with
regards to responding to corporate fraud, others have criticised
the use of such a system for a variety of reasons. Firstly, fraud
continues to be a significant problem in Australia despite
regulatory efforts to reduce the cost and impact (KPMG, 2016). In
fact, estimates suggest that in the last year the total value of
fraud cases in Australia has increased 3 times to over 380 000
000 Australian dollars (KPMG, 2016). The fact that fraud still
remains such a costly problem in Australia, particularly in
Queensland which is described as a ‘hotbed’ of investor fraud
activity, would imply that regulation is perhaps not the most
effective way of dealing with such offences (KPMG, 2016:x). Not
only this, but some have noted the use of regulation has brought
about a number of inconsistencies and anomalies due to its
fragmented nature (Sarre, 1995). The responsibility of regulating
fraud within different sectors is delegated to a range of different
government and non-government bodies, all with differing
interests and strategies when it comes to fraud regulation
37
(Grabosky and Braitwaite, 1987). Therefore, there is less
consistency within regulatory remedies when compared to
criminal justice because the discretion is left with the responsible
agency to enforce the law or overlook offences where they see fit
(and their interest is served best by overlooking in most cases)
(Grabosky and Braithwaite, 1987).

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This links largely to arguably the most significant drawback of

using regulation as the primary method of dealing with fraud
which is the lack of fairness (Sarre, 1995). There have been vast
criticisms towards the Australian regulatory system for treating
those who commit frauds with too much leniency compared to
those who commit other crimes. Administrative sanctions can be
dealt with quickly and in private, whereas criminal proceedings
are much more drawn out and public; yet those who commit
other comparable crimes, such as theft, do not get the option of
swifter, more hidden regulatory justice (Sarre, 1995). There is an
important moral debate surrounding whether it is fair to dedicate
an entirely different system to dealing with one type of
behaviour, such as corporate fraud, especially considering the
homogenous nature of the social group that commits it; this
would perhaps constitute a form of class bias as it entails treating
one group of people more favourably (Sarre, 1995). If the UK
were to follow suit and instate a system to deal with fraud based
mainly on regulation, there is a significant chance that these
issues would arise and lead to similar criticisms and so such
problems should be discussed in more detail.

Similar to the Australian system, there is a concern as to whether

the use of regulation within business actually works at
reducing the amount of corporate fraud that occurs in the UK.
As discussed in the introduction to this essay, fraud remains a big
problem, it is one of the few offences that has continued to
increase over recent years and its economic impact is not
comparable to any other offence (Fisher, 2010). Though this may
be down to issues with ineffective criminal justice, efforts from
regulatory strategies have not only failed to improve the picture
but could actually be making it worse. It has been suggested that
using a regulation pyramid could be problematic in the sense that
dialogue and persuasion, put simply, often do not work

39
 LAW3035 – Long word count:
(Braithwaite, 2008). There is
Dissertation a widespread reluctance
11982 amongst
many organizations to escalate up a sanction pyramid and so the
threat of a more serious punishment is usually low due to the
selective nature of the enforcement (Braithwaite, 2008).

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Significantly, the rational actor argument dictates that many
people who commit fraud are aware that the likelihood of them
getting a harsh sanction is almost non-existent, and so by
weighing the costs and benefits of offending often conclude that it
is worth committing the fraudulent act because the potential
gains outweigh the risks (Braithwaite, 2008). It is argued that
while attention has moved towards persuading people to do the
right thing, it has consequently ‘strayed from effectively dealing
with people who were never going to comply voluntarily’
(Braithwaite, 2010). It therefore seems that there should be a
system in place that is prepared to effectively punish those who
are not deterred by education or persuasion, and in many cases
regulation has not succeeded in this area. Tombs adds that the
ideas relating to regulation, particularly responsive regulation,
make sense theoretically and are endorsed because criminal
prosecutions are expensive, complex and uncertain; however, in
practice approaches in this area actually have ‘no record of
demonstrable success’ and so are simply just the quicker and
cheaper option, not necessarily the more effective one (Tombs,
2015:65). Moreover, with regards to self-regulation, the notion of
leaving businesses in charge of monitoring their own non-
compliance and wrongdoing has been vastly criticised as it is
often suspected that corporations tolerate and perhaps
encourage deceitful and fraudulent behaviour and so are
extremely unlikely to impose sanctions when it occurs; meaning
that the practice of regulation may not work at preventing
corporate fraud but merely burying it deeper (Slapper and Tombs,
1999).

Another significant problem associated with the use of

administrative sanctions, pointed out by critics of the Australian
system, is the risk of inconsistencies. Allowing corporations to
regulate their fraudulent activity through either self or responsive
regulation means that there is wide discretion within such bodies
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to decide, not onlyDissertation
on what sanctions they use but also how often
11982
they should rely on administrative remedies at all (Sarre, 1995).
Though the use of a regulatory pyramid does provide some
structure with regards to the way organisations use regulatory
sanctions, it is ultimately the regulator that decides on the order
of penalties and how often to escalate (which is not usually very
often) (Braithwaite, 2008). It is typical

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of organisations of this type to have differing interests and so
they, more often than not, act out of self-interest when it comes
to regulating fraudulent behaviour; this means that they do not
act in the consideration of public protection or justice as the
criminal justice system does (Smith, 2011). This therefore leads
to many different bodies using a range of sanctions to varying
degrees (Sarre, 1995).

The most controversial aspect of using regulation as the primary

method of responding to corporate fraud, however, is arguably
the questionable ethics and morality associated with such an
approach (Croall, 2003). It is almost uncontested that the use of
regulation is the cheaper and quicker option when it comes to
imposing sanctions for corporate fraud, however, there is a
strong moral debate as to whether effectiveness should be the
most important factor when issuing a punishment. It has been
convincingly stressed that there are many problems when it
comes to using criminal sanctions but there is perhaps no real
replacement for the symbolic role of the criminal justice system
when it comes to imposing fair punishments (Croall, 2003). There
is a wide spread view in the UK that the people who commit
corporate fraud, the respectable, middle class, businessmen, are
not criminals as they do not fit into the portrayed stereotype of a
classic offender (Cook, 1989). Indeed, under a system of
regulation fraudulent practices are not referred to as crimes or
offences, but non-compliance or technical violations; and as
mentioned earlier, often, behaviour of this nature constitutes
typical business practice and is not only tolerated but sometimes
encouraged in order to make profits and meet targets (Cook,
1989).

Having almost an entirely separate system in place

to regulate corporate fraud that does not involve the use of
criminal justice has an element of class bias as it is

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fundamentally a failure to prosecute
Dissertation one particular social group
11982
(Tombs, 1990). It is stated that when using a regulatory pyramid,
you should always start at the bottom with dialogue no matter
how serious the offence is: however, for those who commit
burglary or theft, there is no option to start with such a
sanction, criminal justice is

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seen as the only rout to punishment and deterrence (Smith et al,
2011). Levi pointed out that it is surely unethical to send
thousands of shop lifters to prison every year whilst leaving a
company director, who stole more than all of them put together,
to be simply disqualified (Levi, 1999). Additionally, the nature of
regulation means that sanctions are given in private away from
the watchful eye of the media and the general public, thus
avoiding the stigmatisation and criminalisation that is dealt upon
those who are processed by the criminal justice system (Tombs,
1990).

Fundamentally, criminal justice is about more than just

punishment and achieving compliance, it represents a moral
condemnation of illegality and so by using regulation to deal with
corporate fraud there are fewer opportunities for such
condemnation, especially publicly (Croall, 2003). Though, as
discussed in the previous chapter, the nature of criminal justice
in practice may not represent an entirely fair option when it
comes to the investigation and prosecution of corporate fraud, it
still ensures that all types of offending behaviour are being
processed under the same system and so the degree of special
treatment or leniency is arguably much less (Smith et al, 2011).
Additionally, even if the use of regulation, at best, presents the
same level of class bias as the use of criminal justice, there
seems little logic in replacing one structure with the other as
there would be no improvement in this area but still the
possibility of further deterioration. It can consequently be
contended that the use of regulatory strategies to monitor
fraudulent behaviour in UK corporations creates at least as many
problems as it solves.

In summary, whether the increasing use of regulatory strategies

has the potential to improve the way in which corporate fraud is
investigated and prosecuted by replacing criminal justice hinges
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around this debate between
Dissertation whether effectiveness or fairness
11982
should be the priority when dealing with such offences in the
UK. The majority of the literature and evidence surrounding the
benefits of using regulation more are based primarily on its
efficiency and ability to impose sanctions and punishments much
easier and quicker than criminal justice. However, the
difficulties that have been

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highlighted by the critics of this approach are mostly concerned
with the issues surrounding fairness and whether it is appropriate
to treat such a particular group of people in a different, arguably
more lenient, way. The fact that there are significant pros and
cons to both regulation and criminal sanctions would dictate that
transitioning towards a more regulation based approach would
not be a suitable alternative to criminal justice because, where it
may solve some problems, it also would create some other
very substantial ones. Significantly, however, a recommendation
from the Roskill report which is still pertinent in recent literature
has argued that situation could perhaps be bettered by
forming a more centralised, united, national system for dealing
with corporate fraud which would incorporate aspects of
regulation and criminal sanctions (Roskill, 1986). Creating a new
joint system has the potential to solve many of the issues flagged
up in the previous two chapters regarding criminal prosecutions
and regulation (Croall, 2003) and so whether such an approach
would be a feasible alternative to criminal justice in the UK will be
debated in the following chapter.

Chapter 3: The Possibility of a Joint Approach:

The previous chapters have concentrated largely on the problems
that are associated with the use of criminal prosecution and the
subsequent issues that could arise if regulation were to be used
as an alternative. However, it has been a suggestion for over 30
years, by a number of academics on the subject, that the only
way to effectively detect, investigate, prosecute and prevent
fraud is to harness the efforts of all the agencies involved and
merge them into one centralised, united organisation with the
capacity to use both regulatory methods and criminal sanctions
(West, 1988). It can perhaps be contended that when it
comes to the investigation and prosecution of corporate
fraud the pertinent question should not be which is more

47
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effective between Dissertation
criminal justice and regulation 11982
but what can be
done about the ‘institutional mess’ that has been created as a
result of the half- hearted use of both methods (Fisher, 2010:1).
In 1986 Lord Roskill’s fundamental argument was that the
current system in place to investigate

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and prosecute fraud was too disjointed and he therefore
recommended that a new unified system should be put into place
which should include the police, prosecutors, civilian staff as well
as other private organisations (Roskill, 1986). This idea has
continued to echo throughout the relevant literature, perhaps
more so since the increasing use of regulation over recent years
has created an ever growing assortment of agencies that deal
with corporate fraud which has added to the fragmentation of the
current system (Fisher, 2010). Significantly, though this is not a
new idea, there still remains little research into what the result of
such an organisation would be in practice. This chapter will
therefore attempt to shed some light on how such an approach
would work, the potential issues it would face if it were to be put
into place and consequently if it could be a suitable alternative to
the use of criminal justice, or regulation.

Those who have supported the idea of creating a new joint

system to investigate corporate fraud consistently agree that
such an organisation should include agents from the police, the
CPS and the SFO but also a large body of private and civilian staff
such as lawyers, auditors and accountants which would all work
towards responding to corporate fraud in the most efficient way
using the positive aspects of both criminal justice and regulation
(Button, 2008). In Fisher’s 2010 recommendation he argued that
the frame-work for the new entity responsible for the
investigation and prosecution of corporate fraud should
consolidate all existing organisations (HMRC, FCA, CPS, and the
SFO for example) into one new body thus including all the
variants of staff within it (Fisher, 2010). His main suggestion was
that the new system should be based on the use of the use of the
US- style deferred prosecution agreement (DPA) (Fisher, 2010).
Under a DPA the prosecutor initiates a criminal prosecution but
arranges to suspend the action if the defendant complies with
certain conditions which typically include admission of
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wrongdoing, a fine and full
Dissertation cooperation with the investigation
11982
(Fisher, 2010).

Interestingly, the use of the DPA was introduced to the UK in

2014 as part of the Crime and Courts Act 2013, however, has
only been used to settle

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three SFO cases since then (SFO website, 2016). It would perhaps
benefit this paper to look at one of these cases in more detail in
order to see how the DPA could better the use of traditional
criminal justice in practice. In its most recent use, the SFO
initiated a DPA to settle a case with engine giant Rolls Royce.
Over the course of a 5-year investigation it was found that Rolls
Royce used deceptive and corruptive methods in order secure
orders in 6 counties including the UK, US and Brazil (Watt et al,
2017). Instead of opting for a criminal trial, the SFO initiated a
settlement which included terms such as: the company must pay
a £671million fine (roughly equal their expected profits for 2016),
they must also admit wrongdoing and submit to measures of
regulation over a specific period of time. Given that all these
conditions are met for this specific period, Rolls Royce will not be
prosecuted, although individual executives may still be tried and
if any conditions are broken they SFO will continue with the
initiated prosecution (Pratley, 2017). Sir Brian Leveson QC noted
that the main difference that came with using the DPA as
opposed to criminal prosecution is the scale of cooperation; the
lack of cooperation that would perhaps have come with a criminal
trial (which would have arguably made for a much more lengthy,
costly and complex endeavour), assists the argument that the
incorporation of regulatory remedies into a criminal justice
response not only increases efficiency and reduces costs but
deals with defendants in a much more respectful way (Watt, et
al). It is also worth pointing out that avoiding prosecution not only
saves the UK money in the most basic sense, but also in the
wider economic sense – Leveson also noted that it is rarely in the
public interest to prosecute corporations as big as Rolls Royce in
case their removal from the economy would negatively affect the
country (Watt et al, 2017). And so, where the state has a vested
interest in not prosecuting large companies for this reason, the
DPA allows an appropriate sanction to still be readily available.
Additionally, the use of such an agreement has enabled
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reparations to be Dissertation
paid in the form of a fine as 11982
well as a public
admission of wrongdoing so the corporation has not escaped the
consequences of reputational damage. Also, the threat of
prosecution is stronger and much more imminent that instances
of responsive regulation as the action has already been initiated
and so this is potentially enough to instil the symbolism and
authority of the

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criminal justice system. Thus, this perhaps provide a mechanism
in which both criminal sanctions and regulation can be used
under the same system to achieve a result that is both fair and
effective and the combination appears to have been an effective
one in this instance.

Moreover, these agreements are used successfully in a wide

variety of circumstances relating to financial crime within the US
and, significantly, the 2016 Fraud Advisory Panel added that the
US are much more effective at tackling fraud in the courts than
the UK (Fraud Advisory Panel, 2016). It could therefore be
suggested that if a new system were to be created it should be
more reliant on DPAs as they act as a middle ground between
regulation and criminal justice. This is just one potential way of
combining the efforts of the criminal justice system and
regulatory practices into one united organisation, there are other
forms this could take (Fisher suggested that an alternative would
be the enlargement of the SFO into a new body) but, in any
case, it is convincingly argued that such a response to
corporate fraud would be a much more effective one than the
current system (Fisher, 2010).

The example of the Rolls Royce case helps demonstrate that the
creation of a system of this type, which ever form it may take,
has the potential to solve many of the issues discussed
throughout this paper. Firstly, the benefits that come with the use
of a regulatory system as highlighted when looking at the
Australian system (chiefly how cost effective and quick it is),
would not only be seen in full but could also be used to aid the
efficiency of criminal justice as opposed to replacing it. For
example, creating a mechanism where the police work alongside
auditors and other staff who proactively detect corporate fraud
would mean that more crimes are recorded by the police and not
kept internally within the private organisation, enabling more
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investigations andDissertation
prosecutions to take place 11982
(Doig and Levi,
2008). This a significant benefit of using the joint system when
one considers how widely underreported and under recorded
corporate fraud is by the UK police forces. Additionally, a
significant recommendation from the Roskill report with regards
to creating such an organisation was that all the

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staff within it would have to receive sufficient training and more
knowledge surrounding the complexities of corporate fraud and
the relevant business practices (Roskill, 1986). This was based on
the criticism that many barristers and judges that prosecute fraud
in UK courts do not always fully understand all the details within
corporate fraud cases. This recommendation would therefore
ensure that all the people working to investigate and prosecute
such offences would have more expertise in the subject and be
better advised to choose the right course of action; also, if
barristers were to receive more complete training it may be easier
to relay information and explain evidence at the trial stage so that
juries are more likely to understand the details of the case,
perhaps solving another prominent issue within the trials of fraud
in UK criminal justice (Roskill, 1986). Having a joined up unit
would therefore enable a more extensive base of knowledge to be
created around the extent of corporate fraud in the UK, it would
create a more specialist body of staff who are better equipped to
deal with it and would, fundamentally, allow the most efficient use
of resources as there would be a more cooperative balance of
criminal justice sanctions and regulation remedies, arguably
solving many of the issues that arise when using the current
prosecutorial system.

As well as potentially solving the problems that occur when using

criminal sanctions as the main form of punishment for corporate
fraud, a joint system could also limit the problems that are often
levied towards the use of regulation, particularly those from
critics of the Australian system. An example of one of the
prominent issue brought up when discussing the regulation of
corporate fraud in Australia, as discussed in chapter 2, is the
inconsistencies that are created when multiple agencies are used
to monitor the same thing (Sarre, 1995). The vast number of
organisations that regulate fraud has created a system that lacks
consistency, cohesion and often results in the same case being
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investigated multiple times by
Dissertation different bodies (Button, 2011).
11982
Having a united system has the potential to provide the oversight
that is needed to ensure that resources are not wasted in this
way and so more communication, cohesion and consistency is
achieved (Button, 2011).

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Moreover, another worry that was mentioned with regards to the
Australian regulatory example, is that using regulation to deal
with fraud is arguably a more lenient punishment and hence does
not deter people from engaging in fraudulent behaviour
(Braithwaite, 2008). Indeed, when recommending the joining up
of fraud resources in 2006 The Fraud Review suggested that
creating such a system would be the best way to send out a
strong deterrent message in society that fraud is being taken
seriously in the UK (Button, 2011). So it was hoped that by
creating a unified body that encompasses all the resources from
criminal justice and regulation agencies there will be the strong
deterrent that is perhaps lacking in Australia by using regulation
alone. Additionally, it has been argued throughout this paper that
the symbolism and moral implications that come with the use of
traditional criminal sanctions have no realistic replacement;
regulation in particular is not believed to be an appropriate
alternative in this context (Sarre, 1995). Consequently, by
harnessing this feature and creating an organisation that not only
has the legitimacy, authority and morality of the criminal justice
system, but also more consistency and a strong deterrent aspect,
it can be argued that the outcome would encompass the best of
both fairness and effectiveness.

Nevertheless, it would certainly be too simplistic to suggest that

creating a unified body to deal with fraud would be the solution
to all the problems that exist in this area, after all it is an idea
that has been suggested for many years and yet has never been
put into place (Fisher, 2010). A potential reason for this could be
due to the nature of fraud as an offence. As discussed in the
introduction of this paper, fraud encompasses a huge range of
behaviours and even narrowing focus to corporate fraud still does
not considerably reduce the amount of offences that would need
to be dealt with under such a system. It has consequently
been argued that because corporate fraud includes such a vast
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list of behaviours Dissertation
it would be almost impossible to create one
11982
single agency which could deal with it effectively (Doig and Levi,
2008).

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Similarly, because corporate fraud encompasses such a wide
variety of offences, there is an unusually wide variety of
organisations that are in place to deal with it. This essay has
touched on a number of these organisations (the CPS, SFO, FCA
and HMRC etc.) but there are perhaps dozens of other bodies
which are responsible for the monitoring of corporate fraud within
the UK (the National Crime Agency, The Department for Business,
Enterprise and Regulatory Reform or The Office of Fair Trading,
for example) (Doig and Levi, 2008). The various entities that
exist to investigate and prosecute corporate fraud naturally have
different structures, departmental cultures, working methods and
objectives (Grabiner, 2000). Many departments which are
focussed on fraud, simply focus on dealing with it in the interests
of their own organisation and not the interest of the public; this
could be problematic in the creation of a new system as
cooperation between a variety of different organisations on this
scale may be impractical and overambitious (Button, 2011). Doig
and Levi present some interesting research on this subject: they
conducted a study on a number of organisations which monitor
fraud in the UK in order to see if a joined up working would be
feasible (Doig and Levi, 2008). They found that most
organisations would operate according to their own interests
(usually to pursue profit in the most efficient way) and that
‘departments were reluctant to take on any additional anti-fraud
responsibilities’ other than the ones that directly affected their
practices (Doig and Levi, 2008:x). This creates an issue that
would perhaps hinder the effectiveness of an amalgamated
system in the UK as it would require an extreme re-structuring of
many of the relevant organisations in order for them to fit into
the new mechanism. It would entail many organisations altering
or even drastically changing the way in which they investigate
and prosecute corporate fraud in order to create a unified system
which would inherently have the interests of the public at the
forefront (Doig and Levi, 2008). It has been suggested that the
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commitment and ongoing investment
Dissertation that would be required by
11982
organisations in order to work towards creating a basis for
genuine joined up work, that goes beyond the simple sharing of
intelligence or information is perhaps unlikely to achieve and it is
therefore difficult to see how overall cooperation could occur
(Doig and Levi, 2008).

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Considerably, an amalgamation of this type which would attempt

to create such a large organisation to tackle such a prominent
problem would require a lot of resources and this presents
another significant problem (Doig and Levi, 2008). As discussed
earlier, the UK criminal justice entities responsible for
investigating and prosecuting fraud are consistently facing
budget cuts and diminishing resources. The police rarely have
sufficient resources to investigate corporate frauds and because
it is not thought to be a priority amongst most forces they are
usually referred elsewhere as a matter for civil pursuits or
handed to other organisations (Doig et al, 2001). Even the SFO,
who were created specifically in order to deal with complex
frauds and improve the prosecution of such offences in the UK
are facing a depletion of resources which hinders their ability to
improve the current issues facing the response to fraud in this
country (Fisher, 2010). Doig and Levi’s study suggested that
joining up of resources would be constrained by the lack of
political interest in this area as the Government is uncommitted
to allocating appropriate resources to sustain such an
organisation long term (Doig and Levi, 2008). Though the new
system would incorporate regulation and other organisations
which could provide funding, being based on the authority and
morality of criminal justice would require substantial support
from the state and this is perhaps unlikely considering current
lack of interest in this area (Doig and Levi, 2008). For an
effective, national organisation to be created to tackle fraud in
the UK, it needs to become a Government priority and more
resources need to be assigned towards the fight against it as a
new system would more than likely be held back by the
current allocation (Doig and Levi, 2008).

It is convincingly argued that the current use of both inconsistent

regulatory sanctions, and lack of criminal prosecutions is an

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insufficient and ineffective way
Dissertation of responding to fraud in the UK.
11982
The joining up of both practices therefore seems like a logical
step towards improving the current situation as it could create a
system with the best aspects of both methods which would
potentially solve many of the issues raised in this paper. There is
a compelling argument that this would be the best alternative
to the use

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of criminal justice as it does not involve a full replacement but
rather a rearrangement of resources (Fisher, 2010). However, it is
important to note that the creation of a new system may be
hindered by the diversity and scale of the offence itself as well as
the practical issues that would arise from attempting to merge
such a vast range of organisations. Indeed, for an amalgamation
of this size to work successfully it would need a large amount of
resources both from the public and private sector and this is
perhaps the reason that such an organisation has not yet been
created despite the many recommendations since the mid-1980s.
In spite of this, compared to the prosecutorial based system in
the UK, or the Australian regulation based system, the joint
approach seems to present a much more suitable and effective
alternative than the other two options.

Conclusion:
The tendency for some to see criminal justice as the default
response to all criminality is unsurprising as it can be the most
suitable option in a variety of situations. However, when it comes
to dealing with fraud, particularly corporate fraud, the prospect of
an alternative method is perhaps more appealing considering the
many issues that arise when it comes to dealing with these types
of offences under the criminal justice system, as argued in
chapter one. Consequently, the idea that criminal justice is the
only suitable response to instances of criminality is one has been
debated throughout this dissertation with particular reference to
two potential alternatives: regulation or the joint approach.
Looking in more detail at the workings of all three systems, whilst
paying attention to the existence of the issues that would arise in
the use of either one, presents at least one useful conclusion. It is
important to consider that the investigation and prosecution of
corporate fraud in the UK, under any potential system, is
hindered by how the offence of fraud in general is perceived and
treated by the government and the general public (Smith, 2011).
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Fraud, particularlyDissertation
corporate fraud, is extremely hidden and
11982
therefore is often not viewed as dangerous, as having a direct
victim and in most cases not even seen as a crime (but rather a
technical violation or corporate wrongdoing) (Levi, 1999). In
recent years fewer and fewer resources have been allocated to
tackling corporate fraud,

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and other financial crimes, and so the fact that fraud remains
such a low priority for UK policing and prosecution is likely to
hinder any system that attempts to respond to it. It should
perhaps then be asserted that the type of system used to
investigate and prosecute corporate fraud in the UK is not the
debate that needs to be addressed; the focus should rather be on
how the UK can higher the importance of fraud in UK policy
priorities and consequently improve the resourcing of corporate
fraud investigation and prosecution. After all, as discussed in the
introduction to this essay, the problem of fraud is certainly
serious enough to warrant further funding.

Nevertheless, out of the three potential paradigms that have

been analysed throughout this paper it appears clear that there is
a more favourable option. Though regulation has the ability to
make the investigation and prosecution of fraud more efficient,
and so would perhaps be the least effected by the lack of
resources, many comment that such remedies lack the authority
and morality of the criminal justice system and so, essentially, do
not work as well (Braithwaite, 2008). Arguments relating to this
point, particularly from critics of the Australian system, suggest
that the use of a fully regulatory based regime would be too
lenient and that there can be no real replacement for the
symbolism that comes from using the criminal justice system
when inflicting a fair and just punishment; hence using regulatory
remedies could arguably then be seen as treating a particular
group of offenders with more sympathy than the majority of
others (Croall, 2003). Therefore, the use of a joint system, which
would harness all the efforts of fraud investigation and
prosecution bodies, hence encompassing both regulation and
prosecution, may have the potential to provide the most suitable
alternative to the use of criminal justice (and regulation) as it
would combine the efficiency of the regulatory approach with the
authority, morality and symbolism of criminal justice (Fisher,

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2010). The earliest recommendations
Dissertation regarding how to improve
11982
responses to fraud in the UK promote this idea and thus it has
echoed throughout the relevant literature through the following
decades. As discussed in chapter three, creating such a system,
via the expansion DPA use or other appropriate mechanisms,
would potentially solve many of the issues present in the UK
prosecutorial

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system, as well as problems with regulatory based systems such
as the Australian one. Though, of course, this system is not
without its potential issues (mostly relating to the earlier point
regarding the resourcing and priority of fraud in the UK), it still
presents a more efficient, fair and complete way of responding to
corporate fraud in the UK than the current use of criminal justice
and so there is perhaps a more suitable alternative.

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Dissertation 11982
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