UK Fraud - An Examination

Abstract

This work explores the concept of serious fraud in England, Wales and Northern Ireland. It will explain the concept of fraud with the emphasis being on the fraud, economic crime of white-collar crime, that is, financial fraud.

It will look at how the UK combats serious frauds, what treaty mechanisms are used and whether the UK derogates human rights in fighting fraud.

This article has been published previously in Policeone.com in 2004.

Introduction

The Concept Of Serious Fraud

Fraud is defined in the Oxford Dictionary as "the quality of being deceitful; criminal deception; the using of false representations to obtain an unjust advantage or to injure the rights or interests of another; a dishonest trick".

English law does not provide a definition of fraud, nor is there a substantive offence of fraud at criminal law. 'Fraud' involves the notion of detrimentally affecting or risking the property of others, their rights or interests in property, or an opportunity or advantage to which the law accords them with respect to property. Conversely it is not fraud to detrimentally affect or risk something in or in relation to which others have no right or interest or in respect of which the law accords no opportunity or advantage. Fraud, perceived by many people as 'criminal and unethical behaviour', the term 'white-collar crime' used as an alternative to the word fraud. It is sometimes classed as crimes of the rich, sometimes as organised crime, or crime of an organised and pre-meditated behaviour, whilst others might view those same as the problem arising when a business created for an honest purpose, is turned into a criminal one. All this suggests that there is no single wide field of white-collar crime or economic crime or business crime but that the word "fraud" gives a rough imagery rather than a fixed definition of this type of activity.

Examples of fraud

Examples of the most common offences that are classed as fraud are as follows:

Business activity whereby fictitious dividends are declared in order to attract personal savings; operations that favour the board of directors at the expense of social interests and of creditors; fraud relating to subsidies.

Payment by invalid cheques without funds.

The formation of companies as a means of tax evasion.

Fraudulent or culpable bankruptcies.

The falsification of documents.

Some Case-law

A look at the cases show that the case of R v Cushion, Justice Williams said that fraud really means no more than dishonesty. This upholds the broad meaning of fraud which consists of the two elements of dishonesty and deprivation but not deceit as was given in the case Scott v Metropolitan Police Commissioner .Yet the element of deceit, though not included in the Scott case, was classed as an element of fraud in the case R v Theroux when Justice McLachlin said, 'To establish the actus reus of fraud, the Crown must establish beyond a reasonable doubt that the accused practised deceit, lied, or committed some other fraudulent act It will be necessary to show that the act is one which a reasonable person would see as dishonest.

In the case of R v Zlatie it was held that non-disclosure can constitute fraud when non-disclosure is dishonesty by any reasonable person's view... Case-law supports criminal sanction of fraud when it means:- to deprive by deceit or to dishonestly deprive, negligent misrepresentation which puts the property of others at risk, and false representation to obtain an unjust advantage.

Today, the criminal law test used in fraud cases is the test for dishonesty and is the decision of the Court of Appeal in R v Ghosh .

Nearly no law reports on SFO trials

It is to be noted that there are no law reports on any of the Serious Fraud Office's trials. This is because, since the Serious Fraud Office was formed in 1987, no trials have resulted in appeals, except in the Saunders case and one more recent case appealed on the length of the sentence given but the appeal was lost.

Fraud is not classed as an offence by statute

English courts still have not ventured to lay down precisely what constitutes fraud.. The Roskill Report in 1984 recommended the formation of the Serious Fraud Office, but did not consider the offence of fraud; the Report identified, on a descriptive basis, many fraud offences the Home Office still uses today. In April 1998 the Home Secretary asked the Law Commission, as part of their programme of work on dishonesty, to consider the law of fraud and whether a general offence of fraud would improve the criminal law. The Law Commission published a consultation paper 'Legislating the Criminal Code: Fraud and Deception' as a result and came down against a general fraud offence. In 2002 the Law Commission again looked at the possibility of a fraud offence and a consultation paper was put to the public in May 2004. It remains to be seen whether the UK implements a fraud offence.

Studies done on the subject of fraud

Clinard and Yeager (1980) called it organisational crime and Farrell and Swigert (1985) studied the complex organisations in which such crimes are committed.

Such organisations usually have high reputations and the crime of serious fraud is perpetrated as an ongoing illegal activity as explained by Sutherland.

Fraud as an offence as stipulated by the Home Office

Although there is no statutory offence of fraud in the United Kingdom, the Home Office sets out the offences that it considers are offences of fraud in 'Counting Rules for Recording Crime', a Home Office Publication in April 2003 classifying the following as offences of 'fraud and forgery':-

False statements by Company Directors, etc. under Theft Act 1968 section 19

Obtaining property by deception, under section 15 Theft Act 1968

Common law offence of conspiracy to defraud

Carrying on business with intent to defraud under section 458 of the Companies Act 1985.

Insider dealing under the Criminal Justice Act 1993

Fraudulent trading under Companies Act 1985, Section 458

'business of a...