RSS feedsThe Fraud Act 2006 , which establishes new criminal laws to assist in the fight against fraud, received Royal Assent in November. The Act abolishes the various offences of deception under which fraud has historically been prosecuted and, for the first time, establishes a single statutory offence of fraud. The breadth of the new offence means it is likely to have far-reaching implications.
The Fraud Act is part of an ongoing programme of reform. In the Queen’s Speech on 15 November, the government announced plans to introduce a new stanalone bill to allow for trials without a jury in cases of serious and complex fraud. In addition, the Fraud Review is currently looking at proposals to ensure greater coordination between the civil and criminal aspects of fraud cases.
Until now, there has been no single, statutory offence of fraud. Instead, fraud has generally been prosecuted under numerous very specific, and increasingly antiquated, statutory offences such as “obtaining a pecuniary advantage by deception”, as well as the vague common law offence of “conspiracy to defraud”.
Those offences are so narrow and intricate that offenders are often charged with the full range of offences in order to minimise the prospect of an acquittal on a technicality. This contributes to the complexity and cost of fraud trials, such as the high-profile Jubilee Line trial, which collapsed last year at an estimated cost to the taxpayer of £60m.
Introducing the Fraud bill in parliament, the attorney general commented that the existing offences were “too precise, overlapping and outmoded to give effective coverage over the breadth of frauds committed today”.
Streamlined offence
The Fraud Act 2006, which is expected to come into force this year, introduces a
new, streamlined offence of fraud, which can be committed in three ways:
• By false representation;
• By failing to disclose information; or
• By “abuse” of position.
In each case, the relevant conduct must have been carried out “dishonestly”, with the existing common law test continuing to apply. Although “abuse” has not been defined, senior associate Adam Vause of Norton Rose says that “the Act makes it clear that it is to be widely construed”.
The Fraud Act:
• Simplifies the law by removing the complex technicalities associated with the
deception offences and by shifting the focus away from the outcome of an
offender’s actions; and
• Makes it no longer necessary to prove either that the victim was deceived, or
that they suffered any loss, provided there was a dishonest intention to cause
loss.
According to Peter Kiernan, partner in the fraud and financial crime team at Eversheds: “One of the notable features of the new offence is that it will be sufficiently flexible to allow prosecutions where a defendant has been proved to have acted dishonestly, irrespective of the method used to carry out the offence, thus allowing for the law to keep pace with technological advances."
The new fraud offence carries a maximum custodial sentence of ten years – three years higher than the current tariff for offences of theft and false accounting.
Technology fraud
The Act will also create two new offences, mainly aimed at tackling frauds
committed via technology, which are difficult to prosecute under existing law.
The offence of “obtaining services dishonestly” will cover a situation where a credit card that has been improperly obtained is used to obtain services from the internet, or any other situation where false information is provided to a machine.
The second new offence will be “possessing articles for use in frauds”, which will cover computer programs designed to generate credit card details that are then used to commit or facilitate fraud.
In essence, the Act makes it clear that it is irrelevant what sum of money has been defrauded, which means it will become much easier to prosecute individuals and criminal gangs for high-volume, low-value frauds.
Specifically, the new offence of fraud will capture “ phishing ”. This generally involves the sending of an email to an individual falsely representing that the email has been sent by an institution where the recipient maintains a financial account. The recipient is asked to click on a link to a website masquerading as the genuine one, thus enabling the phisher to access password details for subsequent fraud.
The need to address the issue of technology in fraud is highlighted by the case of R v Preddy in 1996. In that case – a mortgage fraud – money was obtained by electronic bank transfer, which creates a debit balance in the payer’s account and establishes a credit in the recipient’s account.
Electronic bank transfers were unknown in the 1960s when the Theft Act was passed. This method of money transfer was held by the House of Lords not to be “obtaining property” under the strict wording of the Theft Act 1968, and many convictions for offences in similar circumstances were quashed.
Rosalind Wright, chairwoman of the Fraud Advisory Panel , believes that the new Act will increase the number of successful prosecutions against companies and individuals. She says: “The limitation of existing legislation is that you need to be able to prove someone was actually deceived by the fraudulent representation made – often an impossibility in an investment fraud. Where a machine, such as a computer, has been the instrument whereby money was fraudulently obtained, a charge for deception can’t currently be brought as no human was actually deceived. The new Act should change that.”
