UK financial crime – differences between Scotland and England

In its Annual Fraud Report 2024, UK Finance reported that in 2023 £1.17 billion was lost by businesses and individuals following fraudulent activity.

In addition, the rise in fraud instances has been recorded by the Office of National Statistics noting that fraud accounts for over 40% of crime in England and Wales. The position in Scotland is similar with instances of fraud having increased 140% in the period 2015 – 2023.

The authorities north and south of the border are investing significant funds in addressing the rise in fraud, and other financial crimes. Measures include increasing the size of, and resources afforded to, specialist enforcement agencies. In addition, the UK Parliament has legislated to address the concern – section 199 of the Economic Crime and Corporate Transparency Act 2023 (ECCTA) creates a new offence of failing to prevent fraud. It will operate in a similar manner to the existing UK ‘failure to prevent’ offences, including failure to prevent bribery under the Bribery Act 2010 and failure to prevent the facilitation of tax evasion under the Criminal Finances Act 2017.

Financial crime is clearly an issue consistent across the UK. There are however differences of approach north and south of the border. In this article, we explain the key differences between the investigation and prosecution of financial crime in the UK.

The offences

Certain financial crime offences apply equally in Scotland as they do in the England and Wales. For instance, bribery, tax evasion and sanctions legislation apply across the UK.

Fraud is different. In England & Wales, the Fraud Act 2006 is the nucleus of fraud offences.

The Fraud Act 2006 does not apply in Scotland. Instead, the Scots law offences are grounded in common law – fraud (a widely defined crime of causing a practical result by means of a false pretence), uttering and embezzlement. Schedule 13 to ECCTA notes those offences as potentially giving rise to the failure to prevent fraud offence so, in that way, ECCTA has regard for the differences in fraud north and south of the border.

Prosecution of offences

In England and Wales, the main prosecuting body is the Crown Prosecution Service.  Other bodies can however bring prosecutions including for instance the Serious Fraud Office and the Financial Conduct Authority.

Again, Scotland is different. There is one Scottish prosecutor – the Crown Office and Procurator Fiscal Service (the Scottish Crown).  Investigating authorities such as Police Scotland submit reports to the Scottish Crown. Only the Scottish Crown decides whether to raise a prosecution. The test applied is:

1. Is there sufficient evidence that an offence has been committed?
2. Is it in the public interest to prosecute?

Private prosecutions (a prosecution conducted by a private individual or entity, rather than a prosecuting authority with a statutory power to prosecute) are also more straightforward to bring in England & Wales. In Scotland, private prosecutions are rare and in the first instance require permission from the High Court of Justiciary.

Self-reporting

England and Wales have implemented a Deferred Prosecution Agreement (DPA) scheme. In essence, the DPA scheme allows a prosecution to be suspended for a defined period provided the organisation in questions meets certain specified conditions. The DPA must be approved by the English courts.

Scotland operates a similar model, albeit there are differences. In the event an organisation identifies bribery, it can self-report to the Scottish Crown. As with DPAs, the benefit is that, if a self-report is accepted, the Scottish Crown will refrain from prosecuting the organisation. Instead, the matter is referred to the Scottish Civil Recovery Unit (CRU) for civil settlement. The CRU will quantify the appropriate level of a settlement by reference to the property that has been obtained by the organisation through unlawful conduct.

The key difference between the English DPA scheme and the Scottish self-reporting model is that the Scottish process operates outside the courts – a Scottish self-report does not require to be ratified by a Scottish court.

There are three other ‘Scottish’ points worth noting:

1. The fact of a self-report and civil settlement with an organisation does not prevent the Scottish Crown from prosecuting individuals in relation to the same circumstances.
2. According to the Scottish Crown’s guidance, any self-report must follow a “thorough investigation of the circumstances”. It is therefore important to seek expert legal representation to advise, and potentially lead, on the conduct of an investigation in circumstances where a self-report is contemplated.
3. We understand that the Scottish self-reporting regime will be extended to the new failure to prevent fraud offence in ECCTA, again underpinning the importance of seeking legal advice from experts in the jurisdiction.

Key takeaways

Financial crime is a key compliance issue north and south of the border.

The UK ‘failure to prevent’ offences require organisations to implement control measures to address the risk of financial crime internally and across supply chains.

There are key differences of approach between the jurisdictions. When it comes to financial crime, one size does not fit all. We are often asked by English solicitors and other professional services firms to provide Scots law advice to organisations. That collaborative approach ensures organisations can take into account jurisdictional differences when considering how to manage the risk of financial crime.