Until recently, authorities have been finding it increasingly difficult to prosecute offenders in the modern electronic age using laws which were passed before the advent of desktop computers, the Internet and mobile telephones. The Fraud Act 2006, which came into force on 15 January 2007, goes some way towards redressing the balance.
For the first time, ‘fraud’ is an offence. The Fraud Act repeals some of the old offences, such as obtaining property or services by deception. According to the Home Office, the aim behind the new legislation is to “clarify the law, and provide law enforcers and prosecutors with a modern and flexible law of fraud”.
The Act makes it an offence to commit fraud in any one of three ways (by false representation, by failing to disclose information or by the abuse of position), at the same time creating some new offences and extending the scope of old ones. However, it remains the case that the Act still doesn’t define the word ‘fraud’.
Importantly, The Fraud Act creates the ‘new’ offences of obtaining services dishonestly, the possession of articles for use in frauds, the making and supplying of articles for use in frauds and fraudulent trading applicable to unincorporated businesses (including sole traders and partnerships).
Fraud by false representation
A person commits fraud by false representation if he or she dishonestly makes a false representation and intends to make a gain for themselves or another, or to cause loss to another by making that false representation. 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.
‘Representation’ is defined very widely, and can be either express or implied. In particular, representations can include those made by speech or in writing and, when made by electronic systems or devices, those “designed to receive, convey or respond to communications (with or without human intervention)”. Therefore, those involved in ‘phishing’ and ‘pharming’ scams online would be caught. These activities include sending spam e-mails, tricking consumers into providing confidential information, redirecting users to fake web sites when logging onto legitimate ones and the fixing of devices to ATMs to steal bank account details.
A person commits fraud if he or she dishonestly fails to disclose information which they are under a legal duty to disclose, and by failing to disclose the information they intend to make a gain for themselves, or intend to cause loss to another.
The prospective employee who – either in a written job application or at interview – fails to disclose when asked that he or she has a conviction would be guilty of the offence, as would the applicant for insurance who deliberately omits information such that a cheaper premium is payable.
Fraud by abuse of position
An individual is said to have committed fraud by abuse of position if they occupy a position in which they are expected to safeguard – or not to act against – the financial interests of another person. They commit this offence if they dishonestly abuse that position, intending to make a gain for themselves or another, or to cause loss to another person (either by committing an actual act, or by omission).
The classic example would be a person who’s employed to care of an elderly or otherwise vulnerable individual, and who abuses their position to obtain money or property from that person.
To be guilty of any of the above offences, in each case there is a requirement for the prosecution to prove dishonesty. They must also prove an intention to either create a gain or cause a loss which can be either temporary or permanent. Punishment by imprisonment for up to 12 months, a fine of GB pound 5,000 – or both – in the Magistrates Court is a possibility, so too imprisonment for up to ten years, an unlimited fine or both if the trial is in the Crown Court.
Possession of articles
Section 6 of The Fraud Act creates the offence of the possession of articles for use in frauds. The intention behind this provision was to expand the old law of “going equipped” under the Theft Act 1968, with which someone could only be charged if found going equipped to commit a theft or burglary away from their place of abode. The new offence will catch those who engage in fraud in the comfort of their own home, using a home computer and an Internet connection.
Although not clear from the Act, guidance from case law on the offence of going equipped has made it clear that the prosecution must prove that a defendant was in possession of an article and had a general intention to use it for a fraudulent purpose. Punishment by imprisonment of up to 12 months, a fine of up to GB pound 5,000 or both can be imposed if convicted in the Magistrates’ Court, or imprisonment for up to five years, an unlimited fine or both if convicted in the Crown Court.
Section 7 creates the offence of making or supplying articles for use in frauds. This makes it an offence to make, adapt, supply or offer to supply any article knowing that it is designed or adapted for use or in connection with fraud, or intending it to be used to commit – or assist in the commission of – fraud.
An example would be a person who makes or supplies devices for obtaining bank account details from ATMs. It’s difficult to conceive any legitimate use of such a device. The obtaining of information through these devices would obviously be intended to result in a loss to the person whose details had been obtained.
This offence attracts a term of imprisonment of up to 12 months, a fine of up to GB pound 5,000 or possibly both if convicted in the Magistrates’ Court. The equivalent punishment in the Crown Court would be imprisonment for up to ten years, an unlimited fine or both.
Obtaining services dishonestly
Section 11 of The Fraud Act makes it an offence for a person who, by a dishonest act, obtains services knowing that payment is required for those services. This offence cannot be committed by an omission alone… Only where the dishonest act was done with the intention of not paying for the services as expected.
This offence replaces that of obtaining services by deception in the Theft Act 1978 but, unlike the old offence, the new offence doesn’t require deception on the part of the offender. A person who attaches a device to their television to enable them to view satellite channels without paying the service provider would commit this offence, as would a person leaving a restaurant without paying for a meal provided a prosecutor was able to prove dishonesty.
This offence attracts a term of imprisonment of up to 12 months and a fine of up to GB pound 5,000 – or both if convicted in the Magistrates’ Court, or imprisonment for up to five years, an unlimited fine or both if convicted in the Crown Court.
Fraudulent trading activities
Section 9 of the Act extends the existing offence of fraudulent trading under the Companies Act 1985 (which applied only to limited companies) to sole traders and partners. To be guilty of this offence the prosecution must prove that business has been carried out with intent to defraud or for other fraudulent purposes.
A fraudulent purpose has been defined as going beyond the bounds of what ordinary decent people engaged in business would regard as honest. The offence is therefore capable of catching a wide variety of behaviour within business generally if it can be characterised as dishonest.
Punishment by imprisonment of up to 12 months, if convicted in the Magistrates’ Court, or of up to ten years if convicted in the Crown Court – as well as fines – may be imposed for fraudulent trading.
The Act recognises that the pre-existing law was created in a different ‘age’, at a time when there was no electronic banking or ATMs, no Internet, very few computers and no mobile phones. In recognising this, the Government has attempted to remedy the deficiency, and the Act has been designed to help combat the ever-increasing levels of fraud in all of its numerous guises.