An Introduction to the Fraud Law Framework

There is no single law which prohibits fraud. What lawyers call ‘fraud law’ is in reality covered by a mixture of different offences and common law (evolved and established legal principles). They range from offences covered by the theft act to the new offences of the Fraud Act 2006. There are, of course, financial and company offences which do not necessarily fall into the fraud category, but which are often also present in fraud investigations and proceedings. A competent fraud lawyer will usually have a grounding in these. It is important to stress that fraud is generally a branch of criminal law. A good criminal lawyer, with the appropriate specialist resources and an awareness of the area of law, should make a good fraud lawyer.

At Mary Monson Solicitors, we have experience in fraud and complex crime cases going back to the 1980s. Much has changed in that time, but the principles of fighting for the client, showing expertise, organisation and diligence still remain. We have provided below a brief guide to the basic structure of fraud law for anyone who wishes to understand how this area of law works.

The Fraud Act 2006

Major reform in fraud law occurred with the introduction of the Fraud Act 2006. This means that on 15 January 2007 the old general offence of fraud was replaced by parts of the Fraud Act.

The Fraud Act created these new offences:

(each of the above definitions is covered in more detail – click the corresponding heading under ‘fraud act 2006 offences’ on the toolbar on the left of this screen)

A further offence of conspiracy to defraud still exists. It is very broad and is often used as a “catch-all” where the prosecution would have difficulties for technical reasons to get a conviction for one of the new offences, but the prosecution have to show that more than one person was involved. For more information on conspiracy to defraud click the button on the left hand toolbar.

Fraud Offences under The Theft Acts 1968 and 1978

The Theft Acts 1968 and 1978 created several offences of deception to deal with situations where something was dishonestly obtained by deception. Similarly the offences applied in situations in which liability was evaded in the same way. These offences can be considered to fall under the umbrella of the law of fraud. This is now considered old law, and can now only be used for allegations which date back before January 15th 2007.

The old offences are: (the more common offences are in bold)

The Dishonesty of the Defendant in a Fraud Allegation

It is a basic principle of fraud law that the prosecution must prove that the defendant was acting dishonestly when he or she did whatever has been alleged. This issue is often the key issue in many fraud trials. An example might be a situation where a defendant asks a business associate to lend him £20,000, having assured him that his or her minicab business is viable when it was actually on the edge of insolvency. The court would have to be sure that the defendant realised this and that he knew it was dishonest. The test for dishonesty is usually decided by the jury of 12 members of the public – it is a test that must be decided on the facts specific to each case.

The law says that the jury must be sure about whether the defendant has been dishonest by satisfying both stages of the legal dishonesty test (sometimes called the Gosh test).

The first stage of the test is that according to the standards of reasonable and honest people what was done must have been dishonest.

The second stage of the test is that the defendant himself must have realised that what he was doing was (by the standards of reasonable and honest people) dishonest.

The second part of this test means that even if someone does something which they believe to be justified (an example a judge once famously used is that of Robin Hood robbing from the rich to give to the poor), if they must have known that ordinary people would find it dishonest, then dishonesty is proven. In other words, it is the knowledge of the fact that the public view a type of action as dishonest, not agreement with that view, which proves dishonesty.

How Fraud Allegations Arise

Fraud investigations sometimes arise as a result of regulatory investigations or audits by regulatory bodies such as the FSA, although the reality is that allegations more often are the result of a party facing a major loss and reporting it to the authorities. Classic examples of credit card fraud conspiracies, mortgage fraud, or Missing Trader (MTIC) or other VAT frauds all come about because a person or persons (in the latter case HMRC) has lost money rapidly and suspiciously.

Practical Aspects of Fraud Defence

Every case involving fraud or other financial offences is different. A criminal solicitor who is a specialist in fraud or financial crime will not have one strategy that fits all. There are certain fundamentals that all clients should be able to expect from their lawyers: Appropriate legal and practical business knowledge, an organised and thorough approach to the evidence, and a proactive, aggressive approach to defence are all necessary. It is also worth being aware of the fact that most clients of white collar criminal solicitors have never been in trouble with the law before. Being sensitive to them and their families for this reason is especially important.

For more information on our view of what characterises a professional approach in a fraud or other financial case, click the button on the left hand toolbar marked ‘Strategy in Fraud and Regulatory Crime Cases’.

Final note

Fraud investigations or prosecutions can be a terrifying experience. The prospect of prison can punish both innocent defendants and their families.