Wednesday, June 04, 2014
The Fraud Act 2006
If you have been accused of an Offence of Fraud you will need to consult a specialist lawyer as soon as possible to discuss the options available to you. Fraud is a huge area of the law and a detailed summary if impossible in a short article however below is a basic summary of the law.
On 15 January 2007, the Fraud Act 2006 came into force and created three ways of committing a new offence of fraud:
- Fraud by false representation
- Fraud by failing to disclose information
- Fraud by abuse of position
These offences are ‘triable either way’ and can be tried in the Magistrates’ Court or the Crown Court, with a maximum sentence of ten years imprisonment.
There are some mental elements that all three offences of fraud cases have in common.
Firstly, a person needs to have acted dishonestly, and in law a person acts dishonestly if:
- Their “fraudulent act” is deemed to be dishonest by the ordinary standards of reasonable and honest people
- The fraudster realised that what he was doing was, by the standards of reasonable and honest people, dishonest
Secondly, a person must act either with intent to gain for himself or another, or with intent to cause loss to another or expose another to a risk of loss. It does not matter whether any gain, loss, or exposure to risk of loss occurs – all that matters is that the fraudster acts with the requisite intent.
The fraud offences have a wide scope in that that they can be committed by a person outside of England and Wales. If you are accused of committing a fraud offence under the Fraud Act outside of this country, it is crucial that you take specialist advice, including advice on the issue of jurisdiction.
1. Fraud by False Representation
A person commits the offence of fraud by false representation if he dishonestly makes a false representation and intends, by making the representation, to make a gain for himself or another, or to cause loss to another, or to expose another to a risk of loss.
A representation is false if it is untrue or misleading and the person making it knows that it is, or might be, untrue or misleading.
A false representation can be made either to another person or to a ‘system or device’ (e.g. to a chip and pin card reader in a supermarket, or to an ATM machine on a high street).
As long as the false representation is made, there is no requirement for it to be communicated to the intended recipient. An offence of fraud by false representation may therefore be committed in circumstances where a letter containing a false representation is lost or intercepted in the post, or where the person to whom it is directed fails to hear or understand it.
A false representation can be implied, without any actual words being used, e.g. where someone tenders a forged or stolen credit/debit card to pay for goods or services, or where they show another person’s season ticket or bus pass in order to use facilities or services to which they are not entitled.
A false representation can also be proved by inference, e.g. where an elderly person has paid vastly more for a job or product (such as gardening work) than it was worth, it may be open to a jury to infer that the alleged fraudster must dishonestly have misrepresented the value of that job or product (even if there is no direct evidence of any misrepresentation). Similarly, if B takes A’s driving test in A’s name, it could be inferred that A was complicit in any false representations made by B with a view to gaining a pass certificate in A’s name.
2. Fraud by Failing to Disclose Information
A person commits an offence of failing to disclose information if he dishonestly fails to disclose information to another person information which he is under a legal duty to disclose and he intends, by failing to disclose the information, to make a gain for himself or another, or to cause loss to another, or to expose another to a risk of loss.
To commit this offence, a legal duty to disclose information must exist. “Legal duty” is not defined in the Fraud Act, but circumstances where a legal duty arises would include where the transaction in question is one of the utmost good faith (e.g. where someone takes out car insurance and dishonestly fails to disclose a previous conviction for drink driving, or where a recipient of benefits dishonestly fails to disclose income from employment that he is legally required to disclose).
3. Fraud by Abuse of Position
Fraud by abuse of position is committed where a person occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person, and he dishonestly abuses that position and intends, by means of the abuse of that position, to make a gain for himself or another, or to cause loss to another, or to expose another to a risk of loss.
The intention of this offence is to cover the dishonest abuse of a position of financial trust or responsibility, including that of a trustee, company director or executor. However, the offence is not confined to such relationships and extends to frauds committed by employees (e.g. where an employee of a company clones software or leaks confidential client information to a rival business).
The offence of fraud by abuse of position can also be committed by omission (for example, where a company director or employee dishonestly fails to secure a contract, with the object of later securing it for himself).
The Fraud Act also creates a number of other offences, including the possession or control of articles for use in fraud, making or supplying articles for use in fraud, obtaining services dishonestly, and participating in a fraudulent business.
4. Possession or Control of Articles for Use in Fraud
A person is guilty of this offence if he has in his possession or under his control any article for use in the course of, or in connection, with any fraud. The offence is triable either way and punishable with a maximum sentence of five years imprisonment.
An article includes any program or data held in electronic form. It is therefore possible that a person is possession of the controversial Blackshades computer program could be committing the offence of possessing an article for use in fraud, if it could be proven that the program had been used in the course of, or in connection with, a fraud.
5. Making or Supplying Articles for Use in Fraud
It is an offence to make, adapt, supply or offer to supply any article knowing that it is designed or adapted for use in the course of, or in connection, with fraud, or intending it to be used to commit, or assist in the commission of fraud. This offence could be used to prosecute persons who make, adapt, advertise or supply devices such as "black boxes" for the purpose of falsifying readings on electricity meters.
This offence is triable either way and punishable with a maximum sentence of ten years imprisonment.
6. Obtaining Services Dishonestly
This offence replaced the previous offence of obtaining services by deception under the Theft Act 1968. It is triable either way and punishable with a maximum of five years imprisonment.
This offence would cover the situation where someone orders food from a menu in a restaurant and then leaves without paying, and may even cover a situation where someone uses the services of a prostitute, does not intend to pay her and "does a runner" afterwards!
7. Participating in a Fraudulent Business
In addition to the above offences, the Fraud Act creates an offence of participating in a fraudulent business. This offence replicates a Companies Act offence and applies to fraudulent trading that is committed by unincorporated businesses. This offence is triable either way and punishable with a maximum of ten years imprisonment.
If you find yourself accused of any offence under the Fraud Act 2006 you will need detailed, clear advice from a legal specialist. Quentin Hunt is acknowledged to be one of the leaders in the field of fraud defence. You can contact him for a free no obligation conversation to see how he can help you.