Financial Crime: A Practical Guide

Introduction: what this allegation means for you

Financial crime allegations can be some of the most complex and serious cases dealt with by the criminal courts. They often involve detailed evidence, large volumes of financial records, digital material, business documents and investigations that may have taken months or years.

A financial crime allegation does not simply mean that money has been lost. The law covers a wide range of conduct, including dishonest attempts to obtain money, misuse of financial systems, concealing the origins of funds, and abusing positions of trust.

Being investigated for a financial offence does not mean that you are guilty. Many cases turn on difficult questions about intention, knowledge, dishonesty and whether the prosecution can prove what you knew or intended at the time.

Key points at a glance

• Financial crime covers a wide range of offences involving money, property or financial systems.
• The prosecution must usually prove dishonesty and a particular intention, not simply that something went wrong.
• Complex financial evidence does not automatically prove criminality.
• Many cases depend on whether a person genuinely understood the circumstances or relied on information provided by others.
• Early advice is important because explanations given during an investigation can have a significant impact on the outcome.
• Sentences vary widely depending on the offence, the amount involved, the level of planning and the offender’s role.

What types of financial crime are there?

Financial crime is a broad category rather than a single offence. Common allegations include:

Fraud

Fraud is one of the most common forms of financial crime.

Under the Fraud Act 2006, fraud can generally be committed in three main ways:

• fraud by false representation;
• fraud by failing to disclose information where there is a legal duty to do so; and
• fraud by abuse of position.

The focus is often on whether a person acted dishonestly and intended to make a gain for themselves or someone else, cause a loss to somebody else, or expose another person to a risk of loss.

Common examples of fraud allegations involve accusations of false applications or claims; dishonest business transactions; misuse of company funds; dishonest accounting; manipulating documents or records; and misleading another person or organisation.

Money laundering

Money laundering allegations usually involve dealing with money or property that is suspected to represent the proceeds of crime. It is the process of disguising illegally obtained money as legally obtained money. For example, if money has been obtained via a loan fraud, then it might be laundered so it can pass into the banking system with the appearance of legitimate business income.

These cases often involve complex banking evidence and questions about what a person knew or suspected.

Bribery and corruption

Bribery allegations involve offering, requesting or accepting improper financial or other advantages. The purpose of the bribe will usually be to persuade the recipient to exercise their authority in a particular way. The bribe need not be cash in a brown envelope passed under a table. For example, Acme Limited is hoping for a local authority contract so it gifts FA Cup final tickets to the decision maker on the understanding he will choose Acme’s bid.

In that situation, everybody involved commits a crime. Acme Limited commits a crime as the corporate entity. The Acme director who makes the ‘gift’ commits a crime and the person receiving the tickets commits a crime.

False accounting and business-related offences

Businesses and professionals may face allegations where they are found to have kept inaccurate financial records; misleading accounts; engaged in dishonest reporting; misused of company structures; or have failed to comply with regulatory obligations.

A very basic example might be where Martin owns a limited company and pays for his daughter’s school fees from the company but makes a false entry in his company accounts to disguise the school fees as a legitimate business expense.

What does the law require the prosecution to prove?

The exact legal test depends on the offence charged, but financial crime cases commonly involve several key issues.

Dishonesty

Many financial offences require proof that the defendant acted dishonestly.

A disagreement, mistake or poor business decision is not automatically a criminal offence. The prosecution must usually prove that the conduct went beyond carelessness or incompetence.

Knowledge and intention

The prosecution often needs to show what the defendant knew and intended at the time. This will lead to questions for a jury to answer, such as: did the person know information was false? Did they intend to obtain a benefit? Did they know or suspect that money came from criminal conduct?

These questions are often central to the defence.

Let’s go back to our bribery example where Acme Limited gave the council decision maker FA Cup final tickets. If this is a normal part of Acme’s hospitality and not intended to influence the decision then no offence is committed. As a defence solicitor, we would want to look at the timing of the gift, who else was invited and involved, etc. Let’s imagine a situation where the event is organised for a group of people before the council puts out the tender, then it becomes harder to prove that the gift was intended to influence the decision. However, if Acme gives two tickets to the decision maker so he can take a friend along and the ‘gift’ is made just before he is due to choose a contractor then it will be harder to justify from a defence point of view.

The defendant’s role

In large investigations, different people may have different levels of involvement.

A person who made a decision, a person who followed instructions, and a person who had no knowledge of wrongdoing may all be treated differently. This can involve questions about whether there is a ‘joint enterprise’ or a ‘conspiracy’ at play.

Common defence strategies

Every case depends on its own facts, but common approaches include:

Lack of dishonesty

A defendant may accept that something happened but dispute that it was dishonest. Ot may be that an apparently false accounting entry is in fact an error; or a misunderstanding by somebody in the accounts department; it could be the result of poor administration; or based on incorrect information supplied by someone else.

Lack of knowledge

Some cases turn on whether the defendant knew what was happening.

A person may argue that they were unaware of false documents; inaccurate information; the source of funds; or another person’s actions.

This is likely to be particularly relevant in large organisations where senior people are being accused of involvement in offences by more junior people. In contrast, the junior people may say they acted under the direction of their superiors, that they lacked sufficient information about how their actions fitted into any criminality and thus they did not know they had been involved in a crime.

Lack of intention

Some financial offences require proof of a specific intention.

A person may have made a mistake or acted negligently without intending to cause loss or obtain a benefit.

Authority or consent

In some cases, the issue may be whether the defendant was authorised to act.

This is where keeping good business records that record both the decision taken and the reason for it can be invaluable. Such records can show whether permission was given to use funds; whether they had authority within a business; or whether arrangements were agreed.

Challenging the evidence

Financial investigations rely on documentary evidence such as bank records; emails; messages; accounting material; expert analysis; and witness evidence.

The prosecution will put their own spin on the evidence, which may be superficially attractive, but which falls apart when properly interrogated. This is why proper consideration and analysis of the evidence is crucial to putting forward your version of events.

Evidence that may help your case

The same evidence used by the prosecution can be useful to the defence case. Interpreting the story told by the evidence is the important thing. You should look carefully for material that corroborates your version of events such as emails or messages showing instructions or agreements; business records; contracts; accounting records; evidence of authority or permission; explanations of transactions; expert advice, such as from an accountant; evidence of legitimate income or sources of funds.

Early preservation of documents is crucial.

Common mistakes defendants make

Assuming the evidence speaks for itself

Financial cases often involve complex transactions. Investigators may interpret events differently from the people involved. Just because something seems obvious to you, don’t assume it will be obvious to others!

Giving a detailed account without preparation

A police interview can be a critical stage of the investigation. An explanation that is unclear or incomplete can create difficulties later. We always try to get disclosure from the police before any interview takes place. That way we can discuss the situation with you and settle on how best to express your position in a way that serves your best interests.

Deleting messages or documents

Removing material, even unintentionally, can create additional suspicion. It can also deprive you of corroborative material that supports your case.

Trying to resolve matters informally

Speaking directly to complainants, businesses or investigators without advice can make matters more difficult.

What sentences are available for financial crime?

Sentencing depends on the specific offence and the circumstances.

The court will consider factors such as the amount of money involved; the harm caused; whether there was planning; the defendant’s role; whether the offence was repeated; whether there was abuse of trust; attempts to conceal wrongdoing; previous convictions; and personal mitigation.

Sentences can range from a discharge right up to a lengthy prison sentence.

Serious fraud and related financial offences can attract significant custodial sentences, particularly where there is substantial loss, sophisticated planning or abuse of a position of trust.

What happens next?

Financial crime investigations can take longer than many other criminal investigations because authorities may need to examine large quantities of very complex material.

You should expect to be interviewed under caution by the police or a specialist investigator from an organisation such as HMRC or the Serious Fraud Office. Once the interview(s) are complete, the investigators will assess the evidence and prepare a file to be submitted to the Crown Prosecution Service solicitors who will make a decision whether to bring charges.

If charged, the case will usually proceed through the criminal courts. The seriousness of the allegation will determine whether it is dealt with in the Magistrates’ Court or Crown Court.

How Chetwode Criminal Defence Solicitors can help

Financial crime allegations require careful preparation.

At Chetwode, we can assist by:

• advising before police interview;
• reviewing prosecution evidence;
• identifying weaknesses in the case;
• preparing representations to investigators or prosecutors;
• obtaining expert evidence where necessary; and
• providing representation throughout court proceedings.

Early advice can make a significant difference, particularly where the investigation involves complex financial records or allegations of dishonesty.

FAQs

Does being investigated mean I will be charged?

No. Many investigations end without charges being brought. The prosecution must decide whether there is sufficient evidence and whether a prosecution is in the public interest.

Is a financial mistake a criminal offence?

Not necessarily. Criminal offences usually require proof of dishonesty and the required mental element. Mistakes, misunderstandings and poor decisions are not automatically criminal.

Should I answer questions in a police interview?

You should obtain legal advice before deciding how to approach a police interview. What is said during interview can become important evidence.

Can I be convicted without money actually being lost?

Yes. Some offences focus on dishonest conduct and intention rather than whether the intended outcome was achieved.

Next steps

If you are being investigated for a financial crime allegation, getting advice at an early stage is important.

The earlier the evidence can be reviewed and your position understood, the better placed you will be to make informed decisions about the investigation and any future court proceedings.