The three classes of fraud

As we saw in the previous step, the Fraud Act (2006) which applies to England, Wales and Northern Ireland splits the offence into three classes.

We will now take a closer look at each of them:

1. Fraud by false representation

A person is in breach of this section if she/he dishonestly makes a false representation with the intention of:

  • Making a gain for herself/himself or another
  • Causing another loss or exposing them to a risk of loss

It makes no difference if the false representation is made to a machine or to a person.

What does this mean for the investigator?

This means that fraud is really ‘theft by lying’, saying something that is untrue, misleading or dishonest resulting in the fraud criminal making a gain at the expense of the fraud victim (see the diagram below).

Circular diagram outlining fraud's three major classes: Lie, Dishonesty and Gain

2. Fraud by failing to disclose information

A person is in breach of this section if she/he fails to disclose information that they are under a legal duty to disclose, with a view to:

  • Making a gain for herself/himself or another
  • Causing another loss or exposing them to a risk of loss

3. Fraud by abuse of position

A person is in breach of this section if she/he abuses a position in which they are expected to safeguard – or not act against – the financial interests of another person, with the intention of:

  • Making a gain for herself/himself or another
  • Causing another loss or exposing them to a risk of loss

Some examples of positions where an individual is expected to safeguard, or not act against, the financial interests of another person are:

  • Trustee/beneficiary
  • Director/company
  • Professional/client
  • Agent/principal
  • Employee/employer
  • Partners

Here are some possible scenarios where fraud by abuse of position have taken place.

Scenario 1 An employee copies her/his employer’s client database for the purpose of setting up a rival company
Scenario 2 A person who is employed to care for an elderly or disabled person has access to that person’s bank account and abuses their position by transferring funds to invest in a high-risk business venture of their own. This is a very common example where abuse of trust takes place.
Scenario 3 A member of staff who offers a friend cheap insurance premiums by deliberately not entering known driving convictions

References

London: Legislation.gov.uk The Fraud Act (2006) [online]. available from https://www.legislation.gov.uk/ukpga/2006/35/introduction [25th June 2019]

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This article is from the free online course:

Fraud Investigation: Making a Difference

Coventry University