COUNTER FRAUD AND CORRUPTION POLICY
Incorporating the Fraud and Corruption Prosecution Policy and the Anti-Bribery Policy
1 Introduction
1.1 Fraud committed against the Council represents the theft of taxpayer’s money. It is unlawful and deprives the Council of resources which should be available to provide services to the public. The Council must have effective measures in place to counter risks of fraud and corruption, to help reduce losses and to minimise the impact on services.
1.2 This document sets out the Council’s policy on countering fraud and corruption risks. It includes overall arrangements and responsibilities for preventing, detecting and deterring fraud. It includes the Fraud and Corruption Prosecution Policy at annex A and the Anti-Bribery Policy at annex B. It forms part of the Council’s overall policy framework for combating fraud and corruption and should be read in conjunction with other relevant guidance and policies including the following.
· The Constitution
· Financial Procedure Rules
· Procurement and Contract Procedure Rules
· Counter Fraud and Corruption Strategy
· Whistleblowing Policy
· Anti-Money Laundering policy
· Disciplinary Procedures
2 Definitions and Scope
2.1 For the purpose of this policy, the term fraud is used broadly to encompass:
· acts which would fall under the definition in the Fraud Act (2006)
· anything which may be deemed fraudulent in accordance with the generally held view of fraud as causing loss or making a gain at the expense of someone by deception and dishonest means
· any offences which fall under the Council Tax Reduction Schemes Regulations (2013) and the Prevention of Social Housing Fraud Act (2013)
· any act of bribery or corruption including specific offences covered by the Bribery Act (2010)
· acts of theft
· any other irregularity which is to the detriment of the Council whether financially or otherwise, or by which someone gains a benefit they are not entitled to.
2.2 This policy does not cover fraud or corruption against third parties, except in circumstances where there may also be a detriment to the Council. It does not cover other acts – for example offences involving violence – which may affect the Council, which in most cases should be reported directly to the police.
3 Principles
3.1 The Council will not tolerate fraud or corruption in the administration of its responsibilities, whoever commits it. This includes, for example:
· councillors
· officers
· customers receiving services
· third party organisations contracting with the Council
· organisations or individuals receiving funding from the Council
· any other agencies the Council has business dealings with
3.2 There is a basic expectation that councillors, employees, and contractors’ staff will act with integrity and with due regard to matters of probity and propriety. All representatives of the Council are required to act lawfully and comply with all rules, procedures and practices set out in legislation, the Constitution, the Council’s policy framework, and all relevant professional and other codes of practice.
3.3 The Council will seek to assess its exposure to risks of fraud and corruption. It will prioritise resources available to prevent and deter fraud to help minimise this risk.
3.4 The Council will take all allegations and suspicions of fraud seriously, regardless of the source. It will consider any issues raised and if appropriate will undertake an investigation to confirm whether fraud has occurred and determine appropriate outcomes. Investigations undertaken will be proportionate to the circumstances of the issues raised. The Council may refer any incident of suspected fraud to the police or other agencies for investigation, where appropriate.
3.5 To act as a deterrent, the Council will take action in all cases where fraud (or an attempt to commit fraud) is proven, in proportion to the act committed and through any appropriate route. This may include prosecution, application of internal disciplinary procedures, referral under relevant codes of conduct or to a professional body, or any other action appropriate to the offence. Prosecution decisions will be made in accordance with the Fraud and Corruption Prosecution Policy which is contained in annex A.
3.6 As a further deterrent, and to minimise losses, the Council will attempt to recover any losses incurred through civil or legal action. In addition, the Council will seek to apply any appropriate fines or penalties, and recover any costs incurred in investigating and prosecuting cases.
3.7 The Council will not tolerate any form of bribery. This includes bribes offered to or by employees, councillors, or suppliers. Any act of bribery puts the Council at risk of committing a criminal offence. Further details about the Council’s measures to prevent and detect bribery are contained in the Anti-Bribery Policy which is attached at annex B.
4 Responsibilities
4.1 Overall responsibility for counter fraud arrangements rests with the [CFO / s151 officer] on behalf of the Council. The [CFO / s151 officer] has a responsibility for ensuring the Council has appropriate measures for the prevention and detection of fraud and corruption.
4.2 The Audit Committee has a responsibility to consider the effectiveness of counter fraud and anti-corruption arrangements at the Council. This includes monitoring of Council policies on raising concerns at work and countering the risks of fraud and corruption.
4.3 [Management board / CMT] are collectively responsible for ensuring that the Council has effective counter fraud and corruption procedures; that these comply with best practice and good governance standards; and that they are embedded across the organisation.
4.4 [Veritau] (who provide internal audit and counter fraud services to the Council) is responsible for reviewing the Council’s counter fraud and corruption policies on a regular basis and recommending any changes needed. In addition, [Veritau] leads on fraud prevention and detection for the Council and is responsible for investigating suspected cases of fraud or corruption. The internal audit team carries out audit work to ensure that systems of control are operating effectively. This helps to reduce opportunities for fraud to be committed.
4.5 All managers are responsible for preventing and detecting fraud in their service areas. This includes maintaining effective systems of control and ensuring that any weaknesses identified are addressed promptly.
4.6 The Council has a Chief Money Laundering Compliance Officer (CMLCO) who has oversight of all Council anti-money laundering arrangements and is specifically responsible for overseeing money laundering regulations.
4.7 All staff should be aware that fraud and corruption is a threat to the Council and are required to report any suspicions of fraud to [Veritau]. Where appropriate, staff can use the Whistleblowing Policy to raise concerns anonymously.
4.8 Officers within Human Resources are responsible for supporting service departments when pre-disciplinary investigations are required, or disciplinary processes are to be applied.
5 Overall Counter Fraud Arrangements
Introduction
5.1 The purpose of this section is to set out the Council’s overall framework for countering the risks of fraud and corruption. The Council aims to follow best practice in countering fraud risks[1], but recognises that new and emerging fraud risks require a dynamic approach to fraud prevention and detection.
Measurement
5.2 The Council will assess potential risks and losses due to fraud and corruption. It will use this information to prioritise counter fraud activity and determine the resources needed to mitigate those risks. A summary of fraud risks and proposed counter fraud activity will be reported to the Audit Committee on an annual basis.
Culture
5.3 The Council will promote a culture where all employees, councillors, service users, and contractors are aware that fraud or corruption in any form is unacceptable. To do this, it will:
· ensure that there are clear arrangements in place for anyone to report suspicions of fraud or corruption (including employees, councillors, partners, contractors, the public or any other stakeholders)
· investigate suspicions reported and take appropriate action wherever evidence of fraud or corruption is found
· ensure that the consequences of committing or taking part in fraud or corruption are widely publicised.
Prevention and Detection
Controls
5.4 As part of normal operations the Council aims to ensure that proper systems of internal control are in place. This includes controls that can directly prevent and detect fraud. For example, separation of duties, management review, vetting as part of recruitment processes, and systems for declaring interests or gifts and hospitality. The effectiveness of the systems of control are monitored by internal audit and reported to the Audit Committee.
5.5 Services will be encouraged to consider the risk of fraud as part of the Council’s risk management process. Any information on risks identified will be used to inform the annual review of counter fraud activity.
Proactive Work
5.6 The Council will carry out targeted project work (for example data matching exercises) to identify fraud and corruption in known high risk areas. This work will be carried out by [Veritau] as part of its annual work plan. Resources will be prioritised based on an annual assessment of fraud and corruption risks. Work may include joint exercises with other agencies, including other councils.
5.7 The Council will take part in projects led by other agencies that can help to identify potential fraud and corruption – for example the Cabinet Office’s National Fraud Initiative. Resources will be allocated to take part in these exercises and to follow up any high risk data matches identified. [Veritau] will support service departments to ensure data is available to be used for matching exercises – for example advising on data protection considerations.
Relationships
5.8 The Council will establish and maintain relationships with external agencies that can help it prevent and detect fraud. These include:
· the police
· the courts
· the Cabinet Office
· the Department for Levelling Up, Housing, and Communities
· the Department for Work and Pensions
· other councils
· other public sector organisations (eg housing associations)
· charities, community and voluntary groups.
5.9 [Veritau] will work with Council departments to ensure that systems for reporting and investigating suspected fraud and corruption are robust.
Fraud Awareness Training
Investigation
Figure 1: North Yorkshire Council investigation process
5.14 The Head of Internal Audit will ensure that systems for investigating fraud are reviewed on an ongoing basis, to ensure that they remain up to date and comply with best practice.
Publicity
· are alert to the risks of fraud and corruption
· know how to report suspicions of fraud
· are aware of the Council’s zero tolerance approach to fraud and corruption.
Recovery of Monies
5.18 Methods of recovery include (but are not limited to):
· civil enforcement through the courts
· recovery from assets held by the organisation or individual using the Proceeds of Crime Act or other relevant legislation
· recovery from salary payments for Council employees
· recovery from pension benefits for members of the LGPS
· petitioning for bankruptcy if appropriate.
6 Monitoring & Review Arrangements
POLICY APPROVED XX XX 2022
ANNEX A
FRAUD AND CORRUPTION PROSECUTION POLICY
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1
1.1
1.2 |
Scope and Purpose
The Council is committed to deterring fraud and corruption and recovering public funds. The decision to prosecute an individual is always a serious matter; however fair and effective enforcement is essential in protecting the Council from fraud.
Prosecution has a serious effect on suspects, witnesses, victims, and the public, so it is essential that the Council makes fair, consistent, and timely decisions in all cases. Where appropriate, lesser sanctions can be considered instead of prosecution.
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1.3 |
This policy sets out the decision-making process for those cases where fraud or corruption has been found to have been committed against the Council.[2] Decisions should be fair, appropriate, and in the best interests of both the public and the Council.
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1.4 |
The policy is based on principles set out in the Crown Prosecution Service’s Code for Crown Prosecutors.
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2 |
Principles
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2.1
2.2
2.3 |
All decisions on intended prosecutions should be transparent and independent from the investigating officer(s) involved in the case. Any decision to prosecute should only be made after a review by appropriate officers and be authorised by a senior council officer. All decisions and the reasons for them should be properly documented.
When making decisions on prosecutions, officers must be fair and objective. They must not let any personal views about the ethnic or national origin, gender, disability, age, religion or belief, sexual orientation or gender identity of the suspect, defendant, victim or any witness influence their decisions. Neither must they be motivated by political considerations. In prosecuting individuals, the Council must always be acting in the interests of justice and not solely for the purpose of obtaining a conviction. Decisions should be consistent with Council policy and the law on equalities and human rights. The circumstances of the offence and any mitigation offered by the offender should be taken into consideration when making a decision.
The consistent application of the policy will help ensure that those who have perpetrated fraud and corruption are appropriately penalised. It will also act as a meaningful deterrent to those who are contemplating committing fraud or corruption. The Council recognises the deterrent value of good publicity and therefore information regarding successful prosecutions and sanctions will be made public.
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2.4 |
Staff and members who are found to have committed fraud or corruption against the Council may be prosecuted in addition to such other action(s) that the Council may decide to take, including disciplinary proceedings in the case of staff, and referral to the Standards Committee in the case of members. Any decision not to prosecute a member of staff for fraud and corruption does not preclude action being taken in accordance with the Council’s disciplinary procedures or other policies.
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2.5 |
Irrespective of the action taken to prosecute the perpetrators of fraud and corruption, the Council will take whatever steps necessary to recover any losses incurred, including taking action in the civil courts.
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3 |
Prosecution
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3.1 |
Local authorities are granted the power to prosecute under the Local Government Act 1972 (section 222). The legislation states that these powers should only be used for “the promotion or protection of the interests of the inhabitants of their area”.
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3.2
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Not every contravention of the law should be considered for prosecution. The Council should weigh the seriousness of the offence alongside other relevant factors, including the circumstances of the offender, the level of any financial loss to the Council, mitigating circumstances and other public interest criteria.
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3.3 |
A prosecution should only be considered if the investigation has passed two tests: the evidential test and the public interest test.
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3.4 |
To pass the evidential test, authorised officers must be satisfied that there is a realistic prospect of conviction based on the available evidence (that is, there must be sufficient admissible, substantial and reliable evidence to secure a conviction). They should also consider what the defence case may be, and how it is likely to affect the prospects of conviction.
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3.5 |
In deciding whether there is sufficient evidence to prosecute, the Council should consider the following questions:
· Is the evidence admissible in court · Is the evidence reliable · Is the evidence credible · Is there any unused or unexamined material that might undermine the proposed charges · Is there any additional evidence that could be obtained through further reasonable lines of enquiry?
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3.6 |
Where there is sufficient evidence to justify a prosecution, authorised officers should consider whether a prosecution is required in the public interest. They should consider:
· How serious is the offence committed · What is the level of culpability of the suspect · What are the circumstances of, and harm caused to the victim · What was the suspect’s age and maturity at the time of the offence · What is the impact on the community · Is prosecution a proportionate response · Do sources of information require protecting?
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3.7 |
Where an investigation is found to meet the evidential test, but not the public interest test consideration should be given to lesser sanctions such as a formal written warning or a financial penalty (where appropriate). |
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3.8 |
Investigating officers and prosecutors will review the appropriateness of pre-charge engagement where prosecution is considered. This is likely to occur where such engagement may lead the defendant to volunteer additional information that may identify new lines of inquiry. Pre-charge engagement may be instigated by the investigating officer, the Council prosecutor, the defendant’s representative or a defendant themselves (if unrepresented).
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4 |
Alternatives to Prosecution
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4.1 |
If a case is considered strong enough for prosecution but there are mitigating circumstances which cast a doubt as to whether a prosecution is appropriate then the Council may consider the offer of a sanction instead. The two sanctions available are: · a formal written warning · a financial penalty. |
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Formal Written Warnings
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4.2 |
A formal written warning can be given to a person who has committed an offence, as an alternative to prosecution in certain circumstances. All warnings are recorded internally and kept for six years. If a person who has received a formal warning re-offends then this will influence the decision on whether to prosecute or not.
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4.3 |
For less serious offences a formal warning will normally be considered where all of the following apply:
· there is no significant public interest in prosecuting · it was a first offence, and · a financial penalty is not considered to be appropriate (for Council Tax Support offences). Only in very exceptional circumstances will a further warning be issued for a second or subsequent offence of the same nature.
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4.4 |
Offenders will usually be asked to attend the Council’s offices to receive the formal written warnings in person. For more minor offences an advisory letter can be issued by post.
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Financial Penalties
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4.5 |
In cases of Council Tax Support fraud, legislation[3] allows for a financial penalty to be offered to offenders as an alternative to prosecution. The penalty is set at 50% of the amount of the excess reduction, subject to a minimum of £100 and a maximum of £1,000. Once a penalty is accepted, the claimant has 14 days to consider their decision.
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4.6 |
Subject to the criteria set out in the guidelines below, a financial penalty will normally be offered by the Council in the following circumstances:
· the council believes that there is sufficient evidence to prosecute · it was a first offence or a previous offence was dealt with by way of a formal warning, and · in the opinion of the Council, the circumstances of the case mean it is not overwhelmingly suitable for prosecution, and · the claimant has the means to repay both the overpayment and the penalty, and · there is a strong likelihood that both the excess reduction and the penalty will be repaid. |
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4.7 |
It is important to note that the claimant does not need to have admitted the offence for a financial penalty to be offered. Financial penalties will be administered by authorised officers. If a financial penalty is not accepted or the acceptance is later withdrawn then the Council will usually consider the case for prosecution. In such cases the court will be informed that the defendant was offered a penalty but declined to accept it.
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5 |
Proceeds of Crime Act 2002 (POCA)
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5.1 |
In addition to the actions set out in this policy, the Council reserves the right to refer all suitable cases for financial investigation with a view to applying to the courts for restraint and/or confiscation of identified assets. A restraint order will prevent a person from dealing with specific assets. A confiscation order enables the Council to recover its losses from assets which are found to be the proceeds of crime.
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6 |
Implementation Date
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6.1 |
This policy is effective from 1 April 2023 and covers all decisions relating to prosecutions and sanctions after this date.
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ANNEX B
ANTI-BRIBERY POLICY
1 Introduction
1.3 Facilitation payments are unofficial payments made to public officials to secure or expedite actions. These are not tolerated and are illegal.
1.4 This policy should be read in conjunction with the [Council’s Gifts and Hospitality Protocol].
2 Principles
2.1 The Council is committed to preventing, detecting, and deterring bribery. It aims to:
· ensure all employees, workers, councillors, and other relevant groups are aware of their responsibilities under this policy by publicising it and providing training
· encourage employees to be vigilant and report any suspicions of bribery
· investigate any allegations of bribery or assist the police or other agencies in any investigations or prosecutions they undertake
· take action against anyone involved in bribery in relation to Council business.
3 Scope
3.2 For partners, joint ventures, and suppliers, we will seek to promote the adoption of policies consistent with the principles set out in this policy.
3.3 The Council requires employees, councillors and other relevant people to:
· raise concerns if they believe that this policy has been breached or may be breached in the future
· comply with the spirit, as well as the letter, of the laws and regulations of all jurisdictions in which the Council operates, in relation to the lawful and responsible conduct of activities.
3.4 As well as potential civil action and criminal prosecution, employees breaching this policy may face disciplinary action. This could result in dismissal in cases of gross misconduct.
4 Offences
4.1 There are four key offences under the Bribery Act 2010.
Section 1 – Offence of bribing another person
4.2 This section makes it an offence when a person offers, promises, or gives a financial or other advantage to another person and intends the advantage to induce a person to perform improperly a relevant function or activity or to reward a person for the improper performance of such a function or activity.
4.3 It is also an offence when a person offers, promises, or gives a financial or other advantage to another person and knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity.
Section 2 – Being bribed
4.4 This section makes it an offence when a person requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly.
4.5 It is an offence when a person requests, agrees to receive or accepts a financial or other advantage and the request, agreement, or acceptance itself constitutes the improper performance of the person of a relevant function or activity.
4.6 It is an offence if a person requests, agrees to receive or accepts a financial or other advantage as a reward for the improper performance of a relevant function or activity.
4.7 It is also an offence if a person in anticipation of or in consequence of the person requesting, agreeing to receive, or accepting a financial or other advantage, a relevant function or activity is performed improperly.
Section 6 – Bribery of foreign public officials
4.8 Under this section of the Act an offence is committed when a person intends to influence a foreign official in their official capacity and intends to obtain or retain business or an advantage in the conduct of business.
4.9 It is also an offence to offer, promise or give any financial or other advantage to a foreign public official.
Section 7 – Failure of a commercial organisation to prevent bribery
4.10 A relevant commercial organisation is guilty of an offence if a person associated with the organisation bribes another person intending to obtain or retain business for the organisation or to obtain or retain an advantage in the conduct of business for the organisation and the organisation fails to take reasonable steps to implement adequate procedures to prevent such activity.
Corporate responsibility
4.11 While the first three offences of the Bribery Act relate to the actions of people, a section 7 offence relates to the inaction of an organisation to prevent bribery. The legislation was drafted with commercial businesses in mind and after the legislation was adopted there was some debate as to whether public sector organisations could be found liable of the offence. In 2012 the government published guidance which clarified that any public sector organisation that “engages in commercial activities, irrespective of the purpose for which profits are made”[4] could be found guilty of a Section 7 offence.
· Does the Council have proportionate procedures in place to prevent bribery by persons associated with it? These should be clear, practical, and accessible?
· Is there top-level commitment to preventing bribery? This includes support by councillors as well as officers.
· Is the Council’s exposure to potential external and internal risks of bribery periodically assessed?
· Does the Council take a proportionate and risk based approach to mitigate bribery risks?
· Are anti-bribery policies and procedures embedded and understood throughout the organisation? Are they communicated internally and externally?
· Are procedures monitored and reviewed regularly?
Penalties
4.14 A person guilty of an offence under sections 1, 2, or 6 of the Bribery Act may be sentenced to:
· a maximum prison sentence of 12 months and/or a fine not exceeding £5,000 (if convicted in a magistrates court)
· a maximum prison sentence of 10 years and/or an unlimited fine (if convicted at a crown court).
4.15 An organisation found guilty of allowing bribery offences to occur may be subject to an unlimited fine that is in part determined by the gain that was sought to be made through bribery offences and an assessment of an organisation’s culpability by the court.
5 How to raise a concern
5.2 Members of staff should report suspicious activity to the counter fraud hotline on [0800 9179247 or by email to counter.fraud@veritau.co.uk.]. Alternatively, employees, workers, or contractors may raise concerns through the Council’s Whistleblowing arrangements.
6 What to do if someone reports a concern
6.1 All reports of possible bribery should be reported without delay to the Council’s [CFO / s151 officer], [Monitoring Officer], and [Veritau].