Fraud is a serious and complicated crime. But before a criminal investigation can begin and charges are brought, there is a lot of information that has to be considered. If you have been a victim of fraud and want to go to the authorities or are facing an investigation, it is important to have a good understanding of what fraud is. Read on the legal definition of fraud in the UK.
Fraud Legal Definition UK
Fraud in UK law occurs when someone acts dishonestly with the intention of making a personal gain or causing a loss to another party.
Fraud also covers:
- Deliberately disclosing information despite having a legal obligation to do so
- Abusing your position of power if you have a duty to protect another party’s financial interests
- False accounting
- Using misleading accounting documents
- Conspiring with other parties to commit fraud by agreeing to do something that causes risk of loss to another party
Fraud Act 2006
A new anti-fraud act came into effect in 2007 that applies in England, Wales and Northern Ireland. It was designed to make things simpler, repealing previous anti-fraud legislation and outlining three ways of committing fraud. Under the Fraud Act 2006, the definition of fraud states that:
- The defendant’s conduct must have been dishonest
- The defendant’s intention must have been to make a personal gain or cause a loss to another party
- A gain or loss does not have to be made
- The maximum sentence for fraud is 10 years imprisonment
Fraud by False Representation
Section 2 makes it an offence for a person to deceive someone with the intent of making a personal gain, causing a loss or exposing the other party to the risk of a loss. False representations can include written, verbal and non-verbal communication and may be explicit or implied. The defendant must know the representation was or may be untrue. For example, if a person has a stolen credit card and uses it knowingly to pay for something, this is a false representation. In other words, this offence focuses on the defendant’s conduct.
Fraud by Failing to Disclose Information
Under Section 3, it is an offence for a person to commit fraud by knowingly withholding information from another person despite having a legal obligation to disclose. The defendant must have intended to make a gain or cause a loss to a third party. It is worth noting that it does not matter whether anyone was deceived or anything was gained or lost.
Fraud by Abuse of Position
Section 4 outlines fraud that occurs when the defendant is in a position in which they are expected to protect the financial interests of someone else and has dishonestly abused their position with the intention to make a gain or cause a loss. It does not matter if the defendant was unsuccessful in their enterprise or whether a loss or gain was made. However, this will be taken into account when determining a sentence, compensation and confiscation.
Boiler Room Fraud
In simple terms, boiler room fraud refers to a type of fraud committed through distance selling, telemarketing or telesales that results in victims being sold products or investments that are worthless or sold on false premises.
General ly, a team of salespeople will cold-call a list of people whose details have been gathered by a telemarketing company. The targets are usually vulnerable people such as the elderly.
It is not uncommon for office managers and telesales workers to be unaware. This lack of knowledge can be used as a defence against fraud allegations. It is also worth mentioning that even if the investor lost money, that does not mean fraud was involved.
How Does The Court Define Dishonesty?
A number of years ago, the test for dishonesty was based on the Ghosh test, a two-stage test that was first set out in the case of R v Ghosh [1982] EWCA Crim 2. Today, dishonesty is determined by a new test as decided in Ivey v Genting Casinos [2017] UKSC 67, [2017] All ER (D) 134 (Oct). This is due to the fact that Lord Hughes of Ombersley believed that the previous test was wrong and did not accurately represent the law.
The new test, which is commonly referred to as the Ivey test, sets out that the court must uncover the defendant’s knowledge or belief of the facts, regardless of whether the belief was reasonable. Once this has been established, a magistrate, judge or jury must objectively decide whether the defendant’s conduct was dishonest by the standards of ordinary, decent people. This means that the defendant does not have to appreciate that their conduct does not meet the standards of honesty held by ordinary people. In other words, it is harder for defendants to claim that they did not know that their actions were wrong.
This test was used in the case of R. v Barton and Booth [2020] EWCA Crim. However, the defendants appealed their convictions, claiming that the Ghosh test should be used instead to take into account their views. However, the Supreme Court unanimously decided that the subjective element did not represent the law correctly and that the new test must be followed.
Get The Legal Advice You Deserve
The Supreme Court’s decision has added an extra layer of complexity when navigating fraud cases. That is why it is important to have fraud solicitors in your corner who have a strong understanding of the current law.
It’s crucial to understand that fraud is a complex issue with distinct legal implications. While we’ve outlined the UK definition of fraud in this blog, it’s essential to remember that criminal fraud is a separate matter handled by the Crown Prosecution Service. Our team of civil fraud solicitors specialise in helping individuals and businesses recover losses caused by civil fraud. However, we cannot provide legal aid and our services are fee-based. If you believe you’ve been a victim of civil fraud, we encourage you to seek legal advice promptly.
