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Judicial Commission of NSW Sentencing in fraud cases Monograph 37 September Sentencing in fraud cases Rowena Johns Principal Research Officer (Legal) Judicial Commission of NSW Published in Sydney
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Judicial Commission of NSW Sentencing in fraud cases Monograph 37 September 2012 Sentencing in fraud cases Rowena Johns Principal Research Officer (Legal) Judicial Commission of NSW Published in Sydney by the: Judicial Commission of NSW Level 5, 301 George Street, Sydney NSW 2000 DX 886 Sydney GPO Box 3634 Sydney NSW National Library of Australia Cataloguing-in-Publication entry Author: Title: ISBN: Notes: Subjects: Other Authors: /Contributors Johns, Rowena. Sentencing in fraud cases/rowena Johns (pbk.) Includes bibliographical references and index. Sentences (Criminal procedure) New South Wales. Fraud New South Wales. Judicial Commission of New South Wales. Dewey Number: Judicial Commission of NSW 2012 This publication is copyright. Other than for the purposes of, and subject to the conditions prescribed under the Copyright Act 1968 (Cth), no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior permission. Enquiries should be addressed to the publisher. The views expressed in this monograph are the views of the individual authors and do not represent any official views of the Judicial Commission of New South Wales, nor are they necessarily shared by all members of the staff of the Commission. Whilst all reasonable care has been taken in the preparation of this publication, no liability is assumed for any errors or omissions. Editor: Pauline Buckland Graphic design and typesetting: Lorraine Beal Printed by: Emerald Press Table of contents List of tables Table 1: Fraud, identity and forgery offences under the Crimes Act 1900 comparisons with... 5 selected corresponding repealed offences Table 2: Fraud, forgery and identity offences under the Criminal Code (Cth) comparisons with...13 selected corresponding repealed offences 1. Introduction Rationale for change Change in methods of fraud Necessity for discrete forgery and identity offences Change in costs of fraud Framework of new offences in NSW Fraud offences Identity offences Forgery offences Maximum penalties Expected impact of increased maximum penalties Fraud offences Identity offences Forgery offences Summary disposal in NSW and the effect of jurisdictional maximums Commonwealth provisions Comparing maximum penalties for Commonwealth and NSW offences Comparing Commonwealth and NSW cases Summary disposal of Commonwealth offences Interstate provisions Identity offences Fraud and forgery offences Relevance of past sentencing principles Whether to impose full-time imprisonment Imprisonment as last resort Alternative forms of imprisonment The current ICO debate Fines Special circumstances Prevalence of offence General deterrence Fact finding and the De Simoni principle Extent of loss and duration of offending Role and position of offender Prior good character iii 6.9 Planning Motivation Reparation Totality Form 1 offences Delay in proceedings Influence of summary penalties when sentencing on indictment The use of statistics Conclusion Bibliography Table of cases Table of statutes iv Sentencing in fraud cases 1. Introduction The Crimes Amendment (Fraud, Identity and Forgery Offences) Act 2009 (the amending Act), which commenced on 22 February 2010, marked a departure by Parliament from previous approaches to fraud offences in NSW. This departure included dramatically reducing the number of fraud and forgery offences under the Crimes Act 1900, 1 removing antiquated provisions, introducing new identity offences, 2 and using technologically-neutral language to accommodate changes in criminal methods over time. This monograph will examine the reasons for the reforms, set out the legislative framework for fraud, forgery and identity offences in NSW, make comparisons with Commonwealth and interstate provisions in light of the objective of national consistency, and conclude with a discussion of the applicable sentencing principles in such cases. The fraud, forgery and identity offences in NSW are to be prosecuted summarily unless an election is made to proceed on indictment. Early indications that lower numbers of offenders are being sentenced in the District Court than in the Local Court 3 seem to confirm that the bulk of these offences will be dealt with summarily, but may also reflect that major frauds often take considerable time to detect and then prosecute. 4 While this monograph focuses on criminal penalties, it should be acknowledged that civil penalties may also be imposed for fraudulent conduct. 5 1 Crimes Act 1900, Pts 4AA (Fraud) and 5 (Forgery). According to then Attorney General (NSW), the Hon J Hatzistergos, [m]ore than 30 fraud provisions [have been] replaced with four new provisions, and 25 forgery provisions [have been] replaced by six new provisions : Second Reading Speech, Crimes Amendment (Fraud, Identity and Forgery Offences) Bill 2009, NSW, Legislative Council, Debates, 12 November 2009, p (Second Reading Speech). 2 Crimes Act 1900, Pt 4AB (Identity offences). The term identity offences is used in the NSW legislation and is adopted in this monograph, except when referring to the terminology of other jurisdictions. Similar terms found in the literature include identity theft which refers to the theft of an actual pre-existing identity; identity fraud which involves gaining money or other benefits through the use of a false identity; and identity crime which is a broad expression for the commission of a crime facilitated by using a false identity: Model Criminal Law Officers Committee (MCLOC), Identity Crime, Final Report, March 2008, p 8, at www.scag.gov.au/lawlink/scag/ll_scag.nsf/pages/scag_chapter3 , accessed 30 July This can be demonstrated by statistics on the Judicial Commission of NSW s Judicial Information Research System (JIRS) for the new fraud offences sentenced in the Local Court compared with the District and Supreme Courts. For example, where dishonestly obtain property by deception (s 192E(1)(a)) was the principal offence, 418 offenders were sentenced in the Local Court from February 2010 to December 2011, whereas only one offender was sentenced in the higher courts from February 2010 to June For example, a 2010 survey into frauds in public and private organisations (committed in the period 1 February 2008 to 31 January 2010) found that the average time taken to detect a major fraud was 372 days, up from 342 days in 2008: KPMG, Fraud and Misconduct Survey 2010, November 2010, p 12, at www.kpmg.com/au/en/issuesandinsights/ ArticlesPublications/Fraud-Survey/Pages/Fraud-Survey-2010.aspx , accessed 30 July It should also be noted that many organisations conduct an internal investigation before a matter is referred to the police for investigation and ultimately prosecution. 5 AM Gleeson, Civil or criminal what is the difference? (2006) 8(1) TJR 1 at 4ff. See for example, Australian Securities and Investments Commission v Hellicar (2012) 86 ALJR Judicial Commission of NSW 2. Rationale for change In the 1990s, the Model Criminal Law Officers Committee (MCLOC) 6 of the Standing Committee of Attorneys-General highlighted the importance of simplifying fraud and forgery offences and orienting them to the use of computers. 7 The reforms introduced in NSW in 2009 were intended, according to then Attorney General (NSW), the Hon J Hatzistergos, to bring NSW closer to the national approach 8 of the Model Criminal Code, to replace outdated and redundant provisions 9 with simple and modern offences, 10 and to assist law enforcement to keep pace with modern criminal conduct Change in methods of fraud Technology has changed the face of fraud. 12 Some examples of using technology for fraudulent purposes in recent years include tampering with automatic teller machines and EFTPOS machines to skim account information from credit cards, sending s which purport to be from financial institutions to obtain personal details, and creating websites to make fraudulent investment schemes appear genuine. 13 Alex Steel, Associate Professor of Law at the University of NSW, has examined the way the internet in recent decades has facilitated the perpetration of fraud. 14 Online communications designed to defraud the recipients reach many more potential victims than approaching victims in person, and require less direct effort from the offender and lower risk of redress. The immediacy of online communications enables offenders to operate from anywhere in the world, removes many of the physical cues of behaviour and demeanour, and reduces the opportunity for a third party to verify or intervene in transactions. Crime syndicates also exploit technology in their operations, and may conceal the identities of personnel performing at one level in the organisation from those at another level, thereby protecting the syndicate if one member is arrested The Committee s name was, at various times, the Model Criminal Code Officers Committee (MCCOC) and the Model Criminal Law Officers Committee (MCLOC). For simplicity, the Committee will be referred to as MCLOC throughout the monograph. 7 MCLOC, Model Criminal Code, Ch 3, Theft, Fraud, Bribery and Related Offences, Report, December 1995, pp 1, 4, at www.scag.gov.au/lawlink/scag/ll_scag.nsf/pages/scag_chapter3 , accessed 30 July Second Reading Speech, above n 1, p In the words of Spigelman CJ in Stevens v R (2009) 262 ALR 91 at [2], the Bill was designed to harmonise New South Wales law with the national model scheme. 9 Second Reading Speech, above n 1, p ibid p ibid. 12 Fraud is an area of crime that has exploited the opportunities opened up by technology, and that makes it hard to police : Second Reading Speech, above n 1, p A comprehensive list of fraud scams using traditional or technological methods is available on the Australian Competition & Consumer Commission s SCAMwatch website at www.scamwatch.gov.au , accessed 30 July A Steel, The true identity of Australian identity theft offences: a measured response or an unjustified status offence? (2010) 33(2) UNSWLJ 503 at See also Identity Crime, Final Report, above n 2, p Submissions to MCLOC, Model Criminal Code, Ch 3, Identity Crime, Discussion Paper, April 2007, from Australian Federal Police (pp 3 4) and Australian Bankers Association (pp 1, 3), at www.scag.gov.au/lawlink/scag/ll_scag.nsf/ pages/scag_submissions , accessed 30 July Sentencing in fraud cases Necessity for discrete forgery and identity offences Forgery as a specific type of fraud is another area of crime characterised by rapid change. 16 Equipment is often involved in these offences and may be of a specialised nature. However, the increasingly high quality of common equipment such as scanners has also assisted forgers. MCLOC considered that the authenticity of documents was of such importance that separate forgery offences should be retained despite the availability of other fraud-related charges to cover such conduct. 17 A similar overlap occurs in relation to identity offences and the fraud provisions in Pt 4AA of the Crimes Act Inventing an identity or taking over someone else s identity is not new and many frauds involve some manipulation of identity. 18 The rationale for enacting separate identity offences in Pt 4AB of the Crimes Act 1900 was to address a growth crime, costing Australians millions of dollars a year 19 and to give police the power they need to investigate and prosecute it. 20 The breadth of the identity offence provisions, according to Steel, is intended to make it easier for law enforcement bodies to charge and prosecute offenders Change in costs of fraud The increased use of online systems and false identities has arguably expanded the cost of fraud across the community. Financial loss is the most obvious type of cost, although estimating monetary value is difficult. 22 Under-reporting of fraud hinders an accurate assessment of these costs as official crime statistics only reflect reported crimes. 23 However, while the methods of fraud are expanding, and the amounts of some individual frauds may be alarming, there is uncertainty about whether the aggregate value of frauds is rising or not Second Reading Speech, above n 1, p Theft, Fraud, Bribery and Related Offences, Report, above n 7, pp 195, Steel, above n 14, at Second Reading Speech, above n 1, p ibid. 21 Steel, above n 14, at , For fraud generally, KPMG s fraud surveys are based on self-reporting by public sector and private organisations in Australia and New Zealand. During the period 1 February 2008 to 31 January 2010, the value of frauds reported by the 214 organisations participating in the 2010 survey was $345.4 million: KPMG, above n 4, p 4. This figure excludes personal fraud, which was estimated to cost Australians $1.4 billion in : Australian Bureau of Statistics, Personal fraud , 2012, cat no , ABS, Canberra. For identity offences, estimates from are given in Identity Crime, Final Report, above n 2, pp In July to November 2011, the Australian Taxation Office (ATO) detected 7,300 tax returns suspected of using identities fraudulently to claim refunds worth around $36 million: ATO, We re all victims of identity crime, Targeting tax crime: a whole-of-government approach, Issue 6, March 2012, p 19, at www.ato.gov.au/corporate/content.aspx?doc=/content/ htm&pc=001/001/008/008&mnu=49910&mf p=001/001&st=&cy= , accessed 30 July Organisations may be reluctant to report fraud for various reasons, including the desire to avoid adverse publicity: J Lindley, P Jorna and RG Smith, Fraud against the Commonwealth annual report to government, Monitoring Report No 18, Australian Institute of Criminology, p 5, at www.aic.gov.au/documents/b/5/1/%7bb514c8bc d7f-a9c8-475ff %7dmr18.pdf , accessed 30 July Presumably not all individuals report fraud either, and some may not even realise they have been defrauded. 24 KPMG, Fraudsters target big guns, Fraud barometer, Edition 5, August 2011, p 2, at www.kpmg.com/au/en/ IssuesAndInsights/ArticlesPublications/Fraud-Barometer/documents/fraud-barometer-june-2011-readings.pdf , accessed 30 July The barometer, which is based on an analysis of court records, indicated that the aggregate value of serious fraud cases has been falling since the peak of the Global Financial Crisis in December However, it was also acknowledged that new trends appear to be developing in the types of frauds emerging and it seems too early to call a decline in serious fraud in Australia : p 2. 3 Judicial Commission of NSW Financial impact takes the form of direct costs, including the money lost by individuals or corporations and the costs involved in investigation and remedial action, while indirect costs include commercial damage to a victim s credit rating or to the reputation of a corporation. 25 Psychological and emotional impacts have always been felt by victims of fraud, but with the changing typology of offending, victims exposure to these impacts appears to have increased. Traditionally, victims experienced the betrayal of being duped by someone who approached them in person and cultivated their trust. More recently, victims have experienced the shock of their privacy and sense of identity being violated by strangers who have accessed personal information without their knowledge Framework of new offences in NSW The Crimes Amendment (Fraud, Identity and Forgery Offences) Act 2009 amended the Crimes Act 1900 by inserting Pt 4AA (Fraud) (ss 192B 192H) and Pt 4AB (Identity offences) (ss 192I 192M) and substituting Pt 5 (Forgery) (ss ). As stated, the offences commenced on 22 February The reformulated offences were influenced by three reports produced by MCLOC, although its recommendations were not adopted entirely as some of the thinking behind the model bill has progressed. 27 Table 1 compares the new fraud and forgery offences with a selection of repealed fraud and forgery offences, shows the new identity offences, and sets out the maximum penalties for each offence when dealt with on indictment. None of these offences attract or attracted a standard non-parole period. One reason for this may be the broad spectrum of conduct and financial amounts involved in fraud-related offences. 25 Identity Crime, Final Report above n 2, p 4. The financial impacts discussed in the context of identity offences apply generally to fraud offences. 26 ibid p 5. Access to information may be gained through the use of technology (for example, malicious software which detects a password to an online banking account) or by using manual methods (for example, stealing mail). 27 Second Reading Speech, above n 1, p The three MCLOC reports were Theft, Fraud, Bribery and Related Offences, Report, above n 7; MCLOC, Model Criminal Code, Ch 3, Credit Card Skimming, Final Report, February 2006, at www.scag.gov.au/lawlink/scag/ll_scag.nsf/pages/scag_chapter3 , accessed 30 July 2012; Identity Crime, Final Report, above n 2. 4 Sentencing in fraud cases Table 1: Fraud, identity and forgery offences under the Crimes Act 1900 comparisons with selected corresponding repealed offences New offences Crimes Act 1900 Section Offence Max penalty (yrs) Pt 4AA (Fraud) s 192E(1)(a) Obtain property belonging to another by deception s 192E(1)(b) s 192F(1) s 192G s 192H(1) Pt 4AB (Identity) s 192J Obtain financial advantage or cause financial disadvantage by deception Intention to defraud by destroying or concealing accounting records Intention to defraud by false or misleading statement Intention to deceive members or creditors by false or misleading statement of officer of organisation Deal with identification information with intent to commit or facilitate indictable offence Selected corresponding repealed offences Section Offence Max penalty (yrs) 10 s 179 Obtain property by false pretences s 178A Fraudulent misappropriation a 7 s 184 Fraudulent personation a 7 s 176A Director cheat or defraud a s 178BA Obtain money by deception 5 s 178C Obtain credit by fraud 1 s 178A Fraudulent misappropriation a 7 s 184 Fraudulent personation a 7 s 176A Director cheat or defraud a 10 5 s 174 Director or officer wilfully omit to make entry in records of property received s 175 Director or officer wilfully destroy, alter, etc, records of company 5 s 178BB Obtain money by false or misleading statement 7 s 176 Director or officer publish false statement 10 n/a s 192K Possess identification information 7 n/a with intent to commit or facilitate indictable offence s 192L Possess equipment to make 3 n/a identification document or thing with intent to commit or facilitate indictable offence Pt 5 (Forgery) s 253 Make false document 10 s 300(1) Make false instrument 10 s 271 Forge will 14 s 265 Forge bank note 14 s 254 Use false document 10 s 300(2) Use false instrument 10 s 255 Possess false document 10 s 302 Custody of false instrument 10 s 256(1) Make or possess equipment for making false document with intent to commit forgery 10 s 302A Make or possess implement for making false instrument 10 a. Conduct which would have been caught by these repealed provisions may now give rise to offences under either ss 192E(1)(a) or 192E(1)(b), depending on the circumstances Judicial Commission of NSW A comparison with the repealed provisions reveals an overall reduction in the number of offences and the doubling of maximum penalties for some of the key offences such as obtain money/financial advantage by deception or obtain property by deception/false pretences. All of the new offences are drafted to be technologically neutral Fraud offences The four broad offences under Pt 4AA replaced more than 30 offences under various subdivisions of Pt 4. The amending Act also inserted a definition of dishonest in s 4B of the Crimes Act 1900: dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to those standards. The definition incorporates objective and subjective components, as recommended by MCLOC, 29 and mirrors the d
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