knowledge_centre_fraud

While the word fraud has been part of everyday vocabulary there was not an offence of fraud, other than the Common Law offence of conspiracy to defraud, until The Fraud Act 2006 was brought into force in January 2007. This defined for the first time the word fraud on a  legal basis. Prior to January 2007 the Theft Acts of 1968 and 1978 were utilised to cover offences where something was dishonestly obtained or a liability evaded by deception.

The Fraud Act 2006 created a general offence of fraud that may be committed in three ways:

  1. in brief, by making a false representation;
  2. by failing to disclose information when under a duty to do so; and
  3. by abuse of position,

All three of these ways require the elements of dishonesty to be established and to be done with a view to someone gaining or intending to cause loss. Such gain or loss can be either temporary or permanent. The maximum sentence that can be imposed at the Crown Court is 10 years imprisonment. The Act also created an offence of obtaining services dishonestly, carrying a maximum sentence in the Crown Court of 5 years.

Even though the word fraud now has a legal definition, its use in the criminal justice world has far greater ambit and is a generic term to cover a considerable range of illegal activity and as such the Fraud Act is not the final word on the subject. Under the umbrella of fraud, but not exclusively, benefit fraud offences under the Social Security Administration Act 1992 are included –  the summary offence of failing to notify a change of circumstances and the more serious offence of dishonestly failing to notify a change of circumstances.

Offences relating to tax also fall to be categorised as fraud, from the Common Law offence of ‘cheating the Revenue’ to VAT frauds under The Value Added Tax Act 1994 to income tax evasion under The Taxes Management Act 1970 and offences created by the Customs and Excise Management Act 1979. Offences of money laundering and associated offences under The Proceeds of Crime Act again are included within the scope of the generic term of fraud. As specialist fraud solicitors, we have seen an increasing number of investigations and prosecutions for offences alleging fraud upon insurers from false road accidents – known as “cash for crash”.

Having set out a snapshot of the statutory background for fraud, the complexity arises by the manner and plethora of ways in which the offence can be committed. Terms such as carousel fraud – the theft of Value Added Tax from a government by a fraudster who exploits the way VAT is treated within multi-jurisdictional trading where the movement of goods between jurisdictions is VAT free;  boiler room fraud – the boiler room being a place where high-pressure salespersons use banks of telephones to call lists of potential investors in order to invite investment in suspect or fraudulent securities; Ponzi schemes – a fraudulent investment operation where the fraudster pays returns to its investors from new capital paid by new investors, rather than from profit earned by the investment; pyramid scheme is a business model that recruits investment through a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services; short/long firm frauds – an apparently legitimate business set up but with the sole intent of defrauding both creditors and suppliers (short firm) or having run a business and developed a good reputation and credit history then places large orders with suppliers then fail to pay for the goods which are then disposed of elsewhere (long firm).

It is apparent from how these fraudulent schemes operate that it is relatively easy to become involved in the fraudulent activities of others without proper and thorough investigation both on personal and business levels and how you can become both a victim but also a suspect in such complex investigations. Expert advice should always be sought before embarking upon any venture where its provenance is unknown. The complex nature of these investigations and prosecutions can be intimidating and span many months, sometime years. If you are under investigation for allegedly being involved in fraudulent behaviour, it is absolutely vital that you take specialist legal advice. Make an enquiry online or call us, we are criminal defence solicitors in London & the Home Counties.

Nb. This guide is intended to give general information only and not intended to be used as the basis upon which Advice is given nor should it be relied upon as giving advice specific to a case or individual and Lawtons do not accept liability for anyone using this guide. Should you require specific advice in connection with a real case or situation, please contact us immediately so that we can provide specific Advice