Offences under the Fraud Act, 2006:
The Fraud Act of 2006 came into force in 2007 and specifically deals with the general offence of fraud. The Act repealed various vague sections from the former Thefts Act of 1968.
According to Section 1 of the Fraud Act, 2006, fraud can be committed in any one of the following ways:
Section 2- dishonestly making a false representation (i.e. untrue or misleading) with a view to gain or with the intent to cause loss or to expose to a risk of loss;
Section 3- dishonestly (and with a view to gain or with intent to cause loss etc.) failing to disclose information when under a legal duty to disclose it; or
Section 4- dishonest abuse of a position, with a view to gain or with intent to cause loss etc.; and
Section 11 of the Fraud Act also provides that an offence of fraud can be made out by obtaining services dishonestly.
The emphasis in Fraud offences is on the conduct of the person allegedly committing the fraud, the intent of that person and the consequences of the conduct or actions.
The elements of an offence of Fraud can encompass the following, depending upon the section the prosecution have chosen to charge. The most common features found in offences of Fraud are:
Making a false representation
- Giving untrue or misleading statements or information
- Acting dishonestly
- Making a material gain or causing a loss to a victim
- Failing to disclose a information
- Abuse of a position of trust
- Possessing or controlling articles for use in fraud
- Fraudulently obtaining good and services
The intent to gain and cause loss are both the major elements. An essential element for fraud to be proved is for the prosecution to prove that the person was acting dishonestly. In criminal proceedings, the burden is always on the prosecution to prove the offence so that a jury or magistrate is sure of guilt. The standard, sometimes referred to as beyond reasonable doubt.
There is no requirement to show that there was actual loss or gain as a result of the conduct. This offence carries a maximum sentence of 10 years imprisonment.
The act also comprises of other important sections, namely s. 6, 7, 9, 11 and 12 that form an important part of the Act. These sections help describe how a particular act becomes an offence of Fraud.
- Section 6: Possession of articles for use in fraud
- Section 7: Making and supplying articles for use in fraud
- Section 9: Participation by sole trader in fraudulent business
- Section 11: Obtaining services dishonestly
- Section 12: Liability of company officer for offences by the company
What is fraud by false representation?
Section 2 of the Fraud Act, 2006 provides:
(1) A person is in breach of this section if he-
a) Dishonestly makes a false representation, and
b) Intends, by making the representation-
i) To make a gain for himself or another, or
ii) To cause loss to another or to expose another to a risk of loss
(2) Representation is false if
a) It is untrue or misleading, and
b) The person making it knows that it is, or might be, untrue or misleading.
Section 2 (3), states that the misrepresentation can either be a misrepresentation of fact or law. For example, where a person dishonestly makes use of a stolen credit or debit card for paying for services and buying goods, or he uses someone else’s bus tickets for a ride, which clearly he is not entitled to use would amount to false representation. There is no requirement that he positively makes a representation that he is entitled to use the cards or the ticket. The fact that he is using it without saying or doing anything further still means that he is impliedly giving the impression that he is authorized to use them.
Similarly an implied representation can also occur when a person is using goods and services, which he is not otherwise, entitled to such as dining at a restaurant or staying at a hotel. In such situations representation is implied and the person does not need to state that he is going to pay for the food or service.
Section 3: Fraud by failing to disclose information
A person is in breach of this section if he-
(a) Dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and
(b) Intends, by failing to disclose the information-
(i) To make a gain for himself or other, and
(ii) To cause loss to another or to expose another to a risk of loss.
This covers offences where someone has dishonestly omitted to provide information, whether is a legal obligation to provide such information. Section 3 covers a very broad range of such type of fraud. Curiously, the term “legal duty” is not explicitly defined under the Fraud Act.
There is no requirement that a defendant must be aware that he had a legal duty to provide information, however this may be highly relevant to the issue of dishonesty i.e. that the failure to disclose information was due to ignorance rather than dishonesty.
Section 4: Fraud by abuse of position
(1) A person is in breach of this section, if he-
a) Occupies a position in which he is expected to safeguard or not to act against the financial interest of another person
b) Dishonesty abuses that position, and
c) Intends by means of the abuse of that position-
i) To make a gain for himself or another or
ii) To cause loss to another or to expose another to a risk of loss
(2) A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.
Section 4 is not a free standing offence but a variation of fraud committed under section one of the fraud act. The section is intended to cover offences which occur where fraud takes place by those in a position of trust and considered to the financially responsible.
For example: A company director or a trustee and also extends to fraud committed by employees or where there is a financial relationship between the two parties
Section 6: Possession of articles for use in fraud
(1) A person is guilty of an offence if he has in his possession or under his control any article for use in the course of or in connection with any fraud.
An ‘article’ is defined as any program or data held in an electronic form. This section specifically targets the use of online and digital technology for the commission of fraud offences.
Section 6 offences are complimentary to other criminal offences such as offences under the forgery and counterfeiting act (custody or control of false instruments).
(a) On summary conviction: to imprisonment for a term not exceeding 6 months or to a fine not exceeding the statutory imprisonment (or both);
(b) On conviction on indictment: to imprisonment not exceeding 5 years or to a fine or both.
When tried on indictment, it becomes a class 3 offence.
Section 7: Making and supplying articles for use in fraud
A person is guilty of an offence if he makes, adapts, supplies or offers to supply any article-
a) Knowing that it is designed or adapted for use in the course of or in connection with fraud, or
b) Intending it to be used to commit, or assist in the commission of fraud.
Procedure, sentence and jurisdiction:
A person guilty of offence under this section is liable-
(a) On summary conviction: Imprisonment for term not exceeding 6 months, or to a fine not exceeding the statutory maximum or both
(b) On conviction on indictment: Imprisonment for a term not exceeding 10 years, to a fine or to both.
When tried on indictment, it is a class three offence.
Section 9: Participation by sole trader in fraudulent business
1) A person is guilty of an offence if he is knowingly a party to the carrying on of a business to which this section applies.
2) This section applies to a business which is carried on-
a) By a person who is outside the reach of section 993 of the Companies Act 2006 (Offence of Fraudulent Trading), and
b) With intend to defraud creditors of any person or for any other fraudulent purpose.
3) The following are within the reach of that section-
a) a company (within the meaning of the Companies Act 1985)
b) a person to whom this section applies, as if the person were a company
c) a person exempted from the application of that section
Section 12: Liability of company officer for offences by the company
(a) On summary conviction: Imprisonment not exceeding 6 months or a fine not exceeding the statutory maximum (or to both)
(b) On conviction on indictment: Imprisonment for a term not exceeding 10 years or to a fine (or both)
If tried on indictment, this offence is a classed as a Section 3 offence.
Offences under this Section apply to registered companies (including Limited liability partnerships) engaged in fraudulent trading and also applies to any other legal persons to which Section 993 of the Companies Act 2006 is applicable.
It also applies to fraudulent trading by unincorporated businesses including sole traders, partnerships, employees or any other persons connected with these types of businesses.
Section 11: Obtaining services dishonestly
A person is guilty under this section, if he obtains services for himself or another-
(a) By a dishonest act, and
(b) In breach of subsection (2)-
2) A person obtains services in breach of this subsection if-
(a) They are made available on basis of payment made, is being or will be made for or respect of them,
(b) He obtains them without any payment having been made for or in respect of them or without the full payment
(c) When he obtains them , he knows-
(i) That they are being made available on basis described in (a) or
(ii) That they might be, but intends that payment will not be made, or will not be made in full.
Procedure, sentence and jurisdiction-
3) A person is said to be guilty under this section, if:
(a) On summary conviction: Imprisonment not exceeding 6 months or to a fine not exceeding statutory maximum (or both)
(b) On conviction on indictment: Imprisonment for a term not exceeding 5 years or to a fine (or both)
This offence differs from Fraud, and in some parts, it is derived from the offence of obtaining services by deception under the Theft Act. It is a ‘result crime’ standing in contrast to the offence of fraud which is a ‘conduct crime’.
However, the new offence is broader than the old. It does not require any deception, nor indeed does it require any fraudulent representation.
Example: H may sneak into the cinema to watch a film without paying; he may commit the offence, assuming he is dishonest, and succeeds in viewing at least part of the film.
Under this section the company officers may be proceeded against for any such offence committed by the company with their consent or connivance.
The subsection (2) of this act applies to an offence committed by a corporate body’s permission or consent, such as:
a) A director, manager, secretary or other similar officer of the body corporate, or
b) A person who was purporting to act in any such capacity,
These categories of persons can be held liable to prosecution and punishment together with the body corporate. If the company’s affairs are managed by the company’s members, then subsection (2) will apply in respect of “acts and defaults” by the company member, provided it is connected with his managerial functions , acting as though he was a company director.