Lisa Marriott argues we need consistency in how financial crimes are treated, suggesting sentencing guidelines are a good place to start

By Lisa Marriott*

As it stands in Aotearoa New Zealand, beneficiary fraud (fraud by people on benefits) is largely dealt with under the Crimes Act, while tax evasion is prosecuted under the Tax Administration Act. This, among other factors, means beneficiaries engaging in financial fraud face significantly stiffer penalties than professionals doing the same.

This inconsistency in how fraud is handled in New Zealand underscores the strong case for ensuring financial crimes are treated the same. Sentencing guidelines are a good place to start.

To be fair, sentencing is more of an art than a science. The art is balancing consistency with fairness, alongside all the aims of sentencing: deterrence, denouncing the behaviour, holding offenders accountable, providing for the interests of the victim and, in some cases, protecting the community, assisting in rehabilitation, and providing reparation.

It probably goes without saying that the combination of these objectives creates a system that is multi-faceted and complex. What may be less clear is that the complexity generates the potential for inconsistencies in sentencing decisions. Sentencing guidelines could help.

Creating clarity in a complex system

Sentencing guidelines provide guidance to judges on the length and type of sentence that is appropriate for a particular offence. Typically they provide a sentencing range with some, usually limited, opportunity to depart from this range. Guidelines prescribe sentences based on the seriousness of the current offence, while considering any prior offending.

This approach to sentencing is not unheard of in New Zealand. Guideline judgements exist for a range of serious offences, including aggravated robbery, sexual violation, grievous bodily harm and various categories of manslaughter. These guidelines primarily deal with offending that is likely to result in a sentence of imprisonment.

But this limited approach is problematic because inconsistency is more likely to occur at lower levels of offending. This is also where there is less transparency of sentencing outcomes as there is generally less media, and therefore public, attention on these cases.

There have been efforts to establish sentencing guidelines across the spectrum of offences. Nearly 17 years ago, the Law Commission raised the idea of an independent sentencing council to develop sentencing guidelines in New Zealand.

The council came close to a reality. A bill establishing the council passed in 2007 and subsequently received royal assent the same year. But the legislation was never introduced after the change of government in 2008. It was repealed in 2017.

Crimes NZ today looked back at the largest white collar crime in New Zealand's history. Matt Nippert talked through the fraud and how it unraveled during the global financial crisis. https://t.co/ylipPhOZJj

— Jesse Mulligan Afternoons (@JMulliganRNZ) July 23, 2020

Minimising inconsistency across all sentencing

Research has identified inconsistencies in sentencing practice in New Zealand for many years. Findings include that the type of offender, the location of the court and/or the individual judge may influence the sentence handed down.

Sentencing guidelines can minimise these inconsistencies in sentences. Guidelines also offer a range of other benefits including:

• increased transparency

• efficiency gains, as sentencing guidelines generate a single source reference for a judge

• improving public trust and engagement in the sentencing process

• removing the politicisation of sentencing, whereby judges may feel pressure – or may wish to – move in response to the prevailing political or public mood.

We have seen this in action. In 2008, Justice Graham Panckhurst wrote:

sentence levels, and therefore the prison population, have increased in response to popular demand.

The increased visibility that sentencing guidelines can bring is important for addressing either the presence of, or the potential for, institutional bias.

Independence of the judiciary is essential. And at least some level of discretion is necessary, to ensure that the judiciary can consider all relevant factors when making sentencing decisions. However, where there is complete discretion, there will be disparities.

Some of the clearest illustrations of these disparities can be seen in how we respond to financial fraud.

The disparity in financial fraud

Historically, there have been clear differences in the numbers of investigations and prosecutions, and severity of sentences, for tax evaders and benefit fraudsters. That said, this is changing. A similar number of tax evaders and benefit fraudsters are now prosecuted in New Zealand.

But there are still stark differences in how different types of financial fraud are dealt with.

My research, to be published later this year, found that between 2018 and 2020, most benefit fraud cases were prosecuted under the Crimes Act (83%) with 17% charged under the Social Security Act 1964. This situation reversed for tax cases, where 84% were prosecuted under the Tax Administration Act and 16% were prosecuted under the Crimes Act 1961.

The Crimes Act provides for harsher sentences than the Tax Administration Act. This is despite the tax offences typically comprising higher average values of offending.

The Pencilsword: Greed vs Need https://t.co/7lALT0fuGs

— Alex Pirie (@AlexPirie75) October 31, 2019

Sentencing guidelines cannot address inconsistencies of treatment prior to sentencing, such as the use of different charging legislation, or even choices about who is, or is not, investigated or prosecuted.

However, guidelines can limit discrepancies in the sentence. Moreover, they can provide an opportunity for greater public engagement, as justification is typically required when sentences are outside the specified range.

With this in mind, there is a strong case to revisit introducing sentencing guidelines in New Zealand for financial fraud – and potentially many other offences.

Perhaps the strongest argument for sentencing guidelines is that of fairness. To the extent that sentencing guidelines can minimise the potential for different outcomes for offenders who commit similar offences, they can positively contribute to the justice system.

*Lisa Marriott, Professor of Taxation, Te Herenga Waka — Victoria University of Wellington. This article is republished from The Conversation under a Creative Commons license. Read the original article.