Keith Mack
The Fraud Act 2006 is an Act of the Parliament of the United Kingdom which affects England, Wales, and Northern Ireland. The Act defines fraud in three classes: fraud by false representation, fraud by failing to disclose information, and fraud by abuse of position. A person found guilty of fraud is liable to a fine or imprisonment for up to twelve months on summary conviction (six months in Northern Ireland), or a fine or imprisonment for up to ten years on conviction on indictment. The Act also establishes two supporting offences, including the possession of articles for use in fraud.
This Act largely replaces the laws relating to obtaining property by deception and obtaining a pecuniary advantage, which were created under the Theft Act 1978.
| Characteristics | Values |
|---|---|
| Applicable Law | Fraud Act 2006 |
| Territory | England, Wales, and Northern Ireland |
| Effective Date | 15 January 2007 |
| Definition of Fraud | Criminal offence defined in three classes: false representation, failing to disclose information, and abuse of position |
| Penalty | Fine or imprisonment for up to 12 months on summary conviction (6 months in Northern Ireland), or fine or imprisonment for up to 10 years on conviction on indictment |
| Supporting Offences | Possession of articles for use in frauds, making or supplying articles for use in frauds, obtaining services dishonestly |
| Fraud by False Representation | Making a representation as to fact or law that is known to be untrue or misleading |
| Fraud by Failing to Disclose Information | Failing to disclose information to a third party when under a legal duty to do so |
| Fraud by Abuse of Position | Occupying a position to safeguard financial interests and abusing that position, including through omission |
| Intent | Gain for oneself or others or inflicting a loss (or risk of loss) on another |
| Gain or Loss | Includes gain or loss in money or property (tangible or intangible), temporary or permanent |
| Companies | Participating in fraudulent business carried on by a company or sole trader is an offence with a maximum penalty of 15 years' imprisonment and/or a fine |
| Directors and Officers | Liable if an offence is committed with the "consent or connivance" of a director, manager, secretary, or officer |
| Prosecution Considerations | Public interest, relative standing of parties, defendant's explanation, regulatory regime, advertising and commercial activities, private confidences, ownership disputes |
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What You'll Learn
Fraud Act 2006
The Fraud Act 2006 is an Act of the Parliament of the United Kingdom that applies to England, Wales, and Northern Ireland. It came into effect on 15 January 2007 and provides a statutory definition of the criminal offence of fraud, outlining three classes: fraud by false representation, fraud by failing to disclose information, and fraud by abuse of position. This Act largely replaced the complex and criticised laws relating to obtaining property by deception and other offences under the Theft Act 1978.
The Act defines "fraud by false representation" as an individual making any representation as to fact or law, express or implied, which they know to be untrue or misleading. "Fraud by failing to disclose information" occurs when an individual fails to disclose information to a third party despite having a legal duty to do so. "Fraud by abuse of position" involves an individual who occupies a position where they are expected to safeguard the financial interests of another and abuses that position by action or omission.
In all three classes of fraud, the Act requires that the person acted dishonestly, intending to gain for themselves or others or inflicting a loss (or risk of loss) on another in terms of money or property. The Act also establishes supporting offences, including the possession and creation of articles for use in frauds. Notably, prosecutors only need to prove the intent to commit fraud, rather than proving that a victim was deceived or suffered a loss.
The Fraud Act 2006 has helped streamline and enhance previous UK legislation, making it easier to charge and prosecute fraudsters. It has clarified the law and provided law enforcers with a flexible framework to address fraud.
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Criminal liability
The Fraud Act 2006 outlines criminal liability for fraud and obtaining services dishonestly in England, Wales, and Northern Ireland. The Act defines fraud as a breach of any of the sections listed in its subsections, which provide different ways of committing the offence. Criminal liability for fraud can result in imprisonment for up to 10 years, a fine, or both.
The Act also addresses evasion of liability by deception and cheating. It is important to note that ignorance of the law or claiming inadvertence is not a valid defence. The offence is one of strict liability, and the defence must prove an absence of dishonesty.
Fraud can take various forms, including false accounting, making off without payment, obtaining services dishonestly, computer misuse, forgery, counterfeiting, identity card fraud, and financial services and markets-related fraud. The focus of the charge is the false representation, which prosecutors must analyse to determine the appropriate offence that reflects the criminality.
In addition, the borderline between criminal and civil liability in fraud cases can be complex, especially under Section 1 of the Act. Prosecutors must consider whether civil proceedings or regulatory regimes for advertising and commercial activities are more appropriate.
Furthermore, the new Economic Crime and Corporate Transparency Act (ECCT) introduces a corporate criminal offence of 'failure to prevent fraud', holding large organisations accountable if they profit from fraud. This offence intends to encourage organisations to implement effective fraud prevention measures and foster an anti-fraud culture.
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False representation
In the UK, fraud is defined by the Fraud Act 2006. False representation is a key component of fraud offences.
A "representation" is defined as any representation of fact or law, including a representation of the state of mind of the person making the representation or any other person. This can be express or implied and can be stated in words or communicated through conduct. A representation can also be made by omission. For example, failing to mention previous convictions on an application form.
A representation is considered "false" if it is untrue or misleading, and the person making it knows that it might be untrue or misleading. This means that the person must have actual knowledge that the representation is untrue, not just an awareness of the risk that it might be untrue.
In the context of fraud, false representation refers to making a false or misleading statement or omission to gain a financial or other advantage. This could include, for example, pretending to be someone else to obtain their property or rights, or making a false claim about the quality or characteristics of a product or service to induce someone to buy it.
Prosecutors must analyse the nature of the false representation and when it was made to determine the appropriate charge. They must also consider whether civil proceedings or regulatory actions related to advertising and commercial activities might be more appropriate than criminal charges.
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Failing to disclose information
In UK law, fraud is a serious criminal offence that covers a wide range of deceptive activities carried out for personal gain or to cause loss to another party. One form of fraud that is commonly encountered is "failing to disclose information."
This type of fraud occurs when an individual or entity deliberately withholds or conceals material information that they are legally or contractually obliged to disclose. The non-disclosure of such information leads to a misrepresentation of facts, which then causes harm or loss to another party. For example, during a property sale, if the seller fails to mention a structural issue with the building that they are aware of, and this defect causes financial loss to the buyer, the seller could be guilty of fraud.
The key element that distinguishes this form of fraud from other offences is that the fraudster may not have actively lied or fabricated information but instead remained silent or omitted certain facts, thereby failing in their duty to provide full disclosure. This duty to disclose can arise from common law, statutory law, or contractual obligations.
For instance, in financial transactions, there is often a legal requirement to disclose material information. If an investor hides critical facts about a company's financial health, of which they are aware, in order to manipulate stock prices, they could be committing fraud by omission. Similarly, in insurance contracts, there is a duty of utmost good faith, which requires both parties to disclose all relevant information. Failing to mention a pre-existing medical condition when taking out health insurance could invalidate the policy and be considered fraudulent.
To prove fraud by failing to disclose information, it must be established that the defendant had a legal or contractual duty to disclose the information in question and that they deliberately withheld it, knowing that it was material to the transaction or relationship. Furthermore, it must be shown that the non-disclosure caused harm or loss to the victim, such as financial loss, damage to property, or adverse effects on their decision-making.
Penalties for fraud in the UK can be severe and include imprisonment, fines, and restitution orders. The specific consequences will depend on the value of the fraud, the level of planning and sophistication involved, and the impact on the victim(s).
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Abuse of position
In the UK, fraud is defined by the Fraud Act 2006. Under this Act, fraud by abuse of position is a criminal offence.
The offence is outlined in Section 4 of the Act, which states that a person is guilty of fraud if they occupy a position in which they are expected to safeguard or not act against the financial interests of another person. This means that the person is in a position of trust and has a legal duty to disclose certain information. This duty arises from the relationship between the defendant and the victim, which could be a fiduciary relationship such as that between a trustee and beneficiary, a company director and company, a professional person and client, an agent and principal, an employee and employer, or business partners.
The offence is complete as soon as the defendant fails to disclose information, and it does not require proof of actual loss or gain. However, the defendant must have intended to make a financial gain for themselves or someone else or to cause a financial loss to another person. This could include misusing company funds, diverting resources, engaging in deceptive accounting practices, granting contracts or discounts to associates, or removing funds from a vulnerable person's bank account.
The range of penalties for fraud by abuse of position includes fines, community orders, and imprisonment, with a maximum sentence of 10 years' imprisonment.
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Frequently asked questions
The Fraud Act 2006 defines fraud in UK law as one of three offences: fraud by false representation, fraud by failing to disclose information, and fraud by abuse of position.
A person found guilty of fraud may be liable to a fine or imprisonment of up to twelve months on summary conviction (six months in Northern Ireland), or a fine or imprisonment of up to ten years on conviction on indictment.
Examples of fraud include obtaining services dishonestly, making off without payment, false accounting, forgery, and identity card fraud.
Prosecutors must analyse the nature of the representation made and when it was made. They must also consider the public interest and whether the defendant acted dishonestly and with the intent to gain or inflict loss on another.
