Investigative Skills (Police College) - Fraud Act 2006 PDF

Police College INV10 INV10 Investigative Skills Fraud Introduction The aim of the Fraud Act 2006 is to simplify deception related offences so that prosecuting those involved in fraud is an easier task. Dishonesty is a k...

Police College INV10 INV10 Investigative Skills Fraud Introduction The aim of the Fraud Act 2006 is to simplify deception related offences so that prosecuting those involved in fraud is an easier task. Dishonesty is a key element within the Fraud Act. In addition, the Fraud Act criminalises a number of other acts including the offence of ‘possession or control of articles for use in fraud’ and ‘obtaining services dishonestly’ which will be explored in more detail throughout this chapter. Fraud by False Representation (Section 2, Fraud Act 2006) intending by making the representation to make a gain for himself or another, cause loss or expose another to the risk of loss. Section 2 Fraud Act 2006 OFFICIAL [SENSITIVE] Page 84  Police College INV10 INV10 Dishonestly Until recently, to help determine ‘dishonesty’ in relation to fraud, the court ruling in R v Ghosh has been used. This test considered two questions based on objectivity and subjectivity. Following a ruling held in Ivey v Genting Casinos (UK) Ltd 2017, the Supreme Court concluded that the subjective element of the Ghosh test does not correctly represent the law. Therefore, the test for dishonesty should relate to the decisions reached in Royal Brunei Airlines Sdn v Tan 1995 and Barlow Clowes International v Eurotrust International Ltd 2006. This test requires the magistrates/jury to ascertain the defendant’s genuinely held belief of knowledge with relation to the facts (this does not have to a reasonable belief - the question is whether the belief is genuinely held). Once the defendant’s actual state of mind is established, the magistrates/jury will apply the objective standards of ordinary decent people to determine if the defendant’s conduct was dishonest or not. False Representation A representation is false if it is: 1. Untrue or misleading, and 2. The person making it knows that it is, or might be, untrue or misleading. OFFICIAL [SENSITIVE] Page 85  Police College INV10 INV10 Actus reus (guilty act) / The false representation The actus reus of the offence is the making of the false representation. It is irrelevant whether or not loss or gain have been made from the representation. It is the intention to make or the making of the false representation that is important. An untrue statement made in the honest belief that it is in fact true, would not suffice. The representation may be expressed or implied and can be communicated in words or conduct. There is no limit to how it is expressed so can be spoken, written or put on a website. The representation must be a representation as to fact or law, including a representation as to a person’s state of mind. Example 1 - Implied by Conduct A person dishonestly using a credit card to pay for items, hands the card to a cashier without saying a word. By handing the card to the cashier he is falsely representing that he has authority to use it for that transaction. It is immaterial whether or not the cashier is deceived by the representation as the cashier’s state of mind plays no part in the commission of the offence. When a defendant makes a false representation knowing it to be false, or might be, the offence of fraud is complete. Example 2 A representation can be made by omission, for example, by omitting to mention previous convictions or County Court Judgements on an application form. The false representation must concern a fact or law, so a broken promise is not enough. However a statement may be false if it misrepresents the current intentions or state of mind of the person making it or any other person. Example 3 D visits V’s house and tells V that he needs emergency work carried out on his roof. D states that he is in a position to do the work immediately but only if V pays him £1000 there and then. V gives D the money and D then leaves without carrying out the work; the truth of the matter was that D had never intended to carry out the work. Such a ‘promise’ by D would amount to an offence as it involved a false representation i.e. he never intended to keep the promise. The offence is complete the moment the false representation is made. OFFICIAL [SENSITIVE] Page 86  Police College INV10 INV10 The representation need never be heard nor communicated to the recipient and if carried out by post, would be complete when the letter is posted. Example 4 Phishing - a person disseminates an email to large groups of people falsely representing that the email has been sent by a legitimate financial institution. The email prompts the reader to provide information such as credit card details so that the suspect can gain access to the victim’s assets. Example 5 Machines - a representation can be made to a machine. Gain or Loss Gain and loss are defined in Section 5 of the Act. The definition is essentially the same as in the Theft Act. Gain and loss extends only to gain and loss in money or other property, whether temporary or permanent and means any property whether real or personal including things in action and other intangible property. Gain includes a gain by keeping what one has, as well as a gain by getting what one does not have. Loss includes a loss by not getting what one might get as well as a loss by parting with what one has. The defendant must intend to make the gain or cause the loss by means of the false representation. It is important to note that ‘no gain or loss has to have actually taken place’. It is the intent that matters. Use of Cheques and Cheque or Credit Cards In the case of stolen documents the false representation may be that the defendant was lawfully in possession of the cheque/credit card/ book and entitled to use it or that he was the person named on the cheque/credit card/book and entitled to use it. If the defendant is using his own credit card knowing that he has exceeded his credit limit OFFICIAL [SENSITIVE] Page 87  Police College INV10 INV10 then the false representation will be that he had authority to use the card and that the card issuer would honour the transaction (R v Lambie A.C. 449 HL). If the documents are forged then the false representation would be that the document was genuine and would be honoured. If the representation was made in a letter which was discovered during the search of the suspect’s property, then whether it was sent or not may be irrelevant to the fact that the representation was false, dishonest and intended to be sent. Further Examples of False Representation: Case 1 Adam advertises his car for sale. Eve asks to see it. As the car has a nasty scratch on the side of it Adam asks Eve to come and see it at 9pm when it is dark. She does not notice the scratch and buys the car. Adam does not commit fraud by False Representation as he has made no representation to her, whether expressly, impliedly or by conduct. The false impression she gets of the car is due to the dark rather than anything expressed or implied by Adam. The principle applicable here, to which there are exceptions, is that silence will not generally count as a representation. Case 2 A 16 year old boy tells a publican that he is 18 years old in order to get a beer in a pub. The representation is by words and as to facts, namely that he is 18. This representation is false. This statement amounts to fraud because he makes the statement ‘intending to gain for himself’ (a pint of beer). Note that the fraud is made out although there is no specific financial trickery involved and there is no loss to the bar. OFFICIAL [SENSITIVE] Page 88  Police College INV10 INV10 Case 3 A, who is emigrating to Australia at the end of the month, needs money to pay for his flight. He asks his bank manager for an overdraft, telling him that he intends to pay off the overdraft in the next 6 months. In this case an express representation is made as to A’s state of mind. This refers to his future intentions, namely to pay off the overdraft. He makes another express representation as to his state of mind, namely that he intends to stay in the country. Both these representations are false and they are both made with the intention of making a gain for himself (the overdraft). Fraud by failing to disclose (Section 3, Fraud Act 2006) dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and intends, by failing to disclose the information, to make a gain for himself or another, or to cause loss to another or to expose another to a risk of loss. Section 3 Fraud Act 2006 OFFICIAL [SENSITIVE] Page 89  Police College INV10 INV10 Points to Prove and Examples The term ‘legal duty’ has not been defined but includes duties under oral contract and written contract. The following are examples of legal duties: 1. Statue law creates a relationship such as between a government tax department and an individual. 2. Where the transaction is one of the utmost good faith - such as a contract of insurance or doctor and patient. 3. Express/implied terms of a contract - a contract between persons involved in business. 4. Custom of a particular trade or market. 5. The existence of a fiduciary relationship between parties - this relates to the responsibility of a person to look after someone else’s money in a correct way e.g. an accountant and client or solicitor and client. The legal duty to disclose will exist if: a. the defendant’s action (failure to disclose) give the victim a cause action for damages, or b. the law gives the victim a right to set aside any change in their legal position to which they may consent as a result of the non-disclosure. For example, a person in a fiduciary position has a duty to disclose material information when entering into a contract with their beneficiary, and by failing to disclose, the beneficiary can be entitled to rescind the contract and reclaim a property transferred under it. This type of fraud occurs when a defendant fails to disclose material facts. To establish this, the prosecution has the burden of proving each of the following elements by clear and convincing evidence:  The defendant failed to disclose one or more material facts about a particular matter;  The defendant had actual knowledge of the fact(s); OFFICIAL [SENSITIVE] Page 90  Police College INV10 INV10  The defendant’s failure to disclose the fact(s) caused the victim to have a false impression;  When the defendant failed to disclose the fact(s), the defendant knew the failure would create a false impression;  When defendant failed to disclose the fact(s), he intended that victim would rely on the resulting false impression. The victim did rely on the false impression and took subsequent action based on the false impression. For example, where a defendant sells a victim a car where the defendant knows the odometer had been rolled back, but the defendant does not mention to the victim that the odometer is not accurate, the defendant knows that it is highly probable that the victim would rely upon the mileage figure from the odometer in making the decision to purchase the car. It is likely that the defendant’s silence under these circumstances would support a subsequent prosecution for failing to disclose. The legal duty is not a civil or moral duty. Fraud by Abuse of Position (Section 4, Fraud Act 2006) People in positions of trust can advance their own interests or damage the interest of others without having to enlist the victim’s co-operation in order to secure the desired result. OFFICIAL [SENSITIVE] Page 91  Police College INV10 INV10 Definition occupies a position in which he is expected to safeguard, or not dishonestly abuses that position, and intends, by means of the abuse of that position - to make a gain for himself or another, or to cause loss to another or to expose another to a risk of loss. A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act. Section 4 Fraud Act 2006 Points to Prove and Examples This section applies in situations where the defendant has been put in a privileged position, and by virtue of this position is expected to safeguard another’s financial interests or not act against those interests. The Law Commission explained the meaning of ‘position’ as the necessary/relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principle, employee and employer or between parties. It may otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. The term ‘abuse’ has not been defined and in addition, the offence can be committed by an omission. The following examples provide details of ‘abuse’ and ‘omission’. OFFICIAL [SENSITIVE] Page 92  Police College INV10 INV10 Examples:  An employee of a software company who uses his position to clone software products with the intention of selling the products on would commit an offence under this section.  Another example covered by this section is where a person who is employed to care for an elderly or disabled person has access to that person’s bank account and abuses his position by transferring funds to invest in a high-risk business venture of his own.  Adam who lives with his mother who suffers from dementia collects her pension weekly and uses it against all household expenses. He also gives £5 of it to charitable causes each week.  David who is Michael’s selling agent for rugby balls also runs a coaching school for young rugby players on the side. He gives preferential credit terms with his discretion as a selling agent on rugby balls to those who sign up for his coaching school.  An estate agent values a house belonging to an elderly person at an artificially low price and then arranges for his brother to buy the house.  A person who is employed to care for a disabled person and has access to that persons bank account, abuses his position by transferring funds to invest in a high risk business venture of his own. Possession or Control of Articles for Use in Fraud (Section 6, Fraud Act 2006) 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. Section 6 Fraud Act 2006 OFFICIAL [SENSITIVE] Page 93  Police College INV10 INV10 Points to Prove Just as with burglary and theft it is also possible for a person to commit an offence if they are ‘going equipped’ to carry out a fraud, rather than actually committing the fraud itself. Possession has three parts: 1. Immediate control over the article e.g. in the pocket of some clothing. 2. Knowledge of the existence of the article. 3. The article can be used in the course of, or in connection with, a fraud or under his/her control. Control has a wider meaning than possession: 1. Physical control over an article but from a distance e.g. in a lock up garage, another room, or in the innocent possession of a person. 2. Knowledge of the existence of the article. Any article for use in the course of or in connection with any fraud: the list is not exhaustive and includes anything that can be used to carry out a fraud, e.g. clothing to imitate company representatives, documents to assume another identity, credit cards, cheque books, shopping bags, till receipts, false identity cards, passports, driving licences, skimming devices and many other objects and articles. It also includes any computer program or any data held in electronic form. These articles also fall into the three categories mentioned above in reference to the three forms of possession. Remember unlike Section 24 Theft (NI) Act 1969 (going equipped) this offence can take place ANYWHERE including when articles are located in the person’s home. OFFICIAL [SENSITIVE] Page 94  Police College INV10 INV10 Making or Supplying Articles for Use in Frauds (Section 7, Fraud Act 2006) knowing that it is designed or adapted for use in the course of or in connection with fraud; or Section 7 Fraud Act 2006 Points to Prove Making an offer to supply would not require the defendant to be in possession of the article. An ‘article’ means any article for use in fraud. It also includes any program held in electronic form such as a computer program that generates credit card numbers or a computer file that contains lists of other people’s credit card details. OFFICIAL [SENSITIVE] Page 95  Police College INV10 INV10 Obtaining Services Dishonestly (Section 11, Fraud Act 2006) A person is guilty of an offence under this section if he obtains services for himself or another by a dishonest act; and The services obtained: he obtains them without any payment having been made for or in respect of them or without payment having been made in full; and when he obtains them, he knows: that they might be, Section 11 Fraud Act 2006 This is a ‘result’ offence and requires the actual obtaining of the service. However, unlike other fraud offences, there does not need to be a fraudulent representation or deception. An example would be a person climbing over the wall of a football ground to watch the match without paying. OFFICIAL [SENSITIVE] Page 96