What Does Fraud Mean in the Law?

In everyday language, fraud can describe a wide range of dishonest conduct. In the criminal law of England and Wales, however, the principal offence is defined by the Fraud Act 2006. A person commits fraud by acting dishonestly in one of three specified ways. In each case, the person must also intend to make a gain for themselves or another, or to cause another person loss or expose them to a risk of loss.

The offence is concerned with dishonest conduct and the defendant’s intention. It is not necessary for the prosecution to prove that the defendant actually obtained money or property, or that anyone actually suffered a loss. The offence may be complete once the dishonest act is carried out with the required intent.

How can fraud be committed?

• Fraud by false representation: dishonestly making a false representation, where the representation is untrue or misleading and the person making it knows that it is, or might be, untrue or misleading. The representation may be express or implied, may concern fact, law or a person’s state of mind, and may be made to a person or to any system or device.
• Fraud by failing to disclose information: dishonestly failing to disclose information where there is a legal duty to disclose it.
• Fraud by abuse of position: dishonestly abusing a position in which a person is expected to safeguard, or not act against, another person’s financial interests. The abuse may consist of an act or an omission.

What is meant by “gain” and “loss”?

Under the Fraud Act 2006, gain and loss extend only to money or other property, including intangible property. A gain includes keeping what one already has as well as obtaining something new. A loss includes not obtaining what one might otherwise have obtained as well as losing existing property. Either may be temporary or permanent.

Examples include giving false information in an application, withholding information that a person is legally required to provide, or misusing access to another person’s finances. However, a mistake, an inaccurate statement or a breach of contract is not automatically criminal fraud. The prosecution must prove every element of the relevant offence beyond reasonable doubt, including dishonesty and the required intention.

What does “dishonestly” mean?

Whether conduct is dishonest is assessed in two stages. The court or jury first establishes the defendant’s actual knowledge or belief as to the facts. It then decides whether the conduct was dishonest by the standards of ordinary decent people. The defendant does not have to appreciate that other people would regard the conduct as dishonest.

What is the maximum sentence for fraud?

Fraud is an either-way offence. On conviction in the Crown Court, the maximum sentence is 10 years’ imprisonment, an unlimited fine, or both. As it is an either-way offence, many cases are instead dealt with in the Magistrates’ Court, where the sentencing powers are more limited. The sentence in any individual case will depend on matters including the defendant’s culpability, the loss caused or intended, the impact on any victim, and any aggravating or mitigating features. In practice, most sentences fall well below the maximum, and the outcome turns heavily on the sums involved and the role the defendant played.

Fraud investigations can involve extensive financial and digital evidence and may have serious reputational and professional consequences. Early legal advice can be important, particularly before an interview under caution or when responding to requests for documents or information.

If you require advice in relation to an allegation of fraud, please contact Lorena Lowen, or our financial crime department at these offices.