Writing the wrong
15 November 2004
Currently there is no statutory offence of fraud in the UK. In 1984, the Roskill Report recommended the formation of the Serious Fraud Office (SFO). The report regrettably did not at the same time consider the concept of a general offence of fraud. It did, however, identify on a descriptive basis many offences which the Home Office continues to use today.
In the Home Office publication ‘Counting Rules for Recording Crimes’ (April 2003), the following are classified as offences of fraud and forgery:
- False statements by company directors with intent to deceive members or creditors, under Section 19 of the Theft Act 1968.
- The common law offence of conspiracy to defraud.
- Carrying on business with intent to defraud under Section 458 of the Companies Act 1985.
- Fraudulent trading under Section 458 of the Companies Act 1985.
- Insider dealing under the Criminal Justice Act 1993.
- Assisting another to retain the benefit of criminal conduct under Section 93A of the Criminal Justice Act 1998, or the acquisition, possession or use of proceeds of criminal conduct under Section 93B of the Criminal Justice Act 1998.
- Fraudulent misappropriation of funds under the Proceeds of Crime Act 2002.
- Cartel offences under Sections 188 and 190 of the Enterprise Act 2002.
- False accounting under Section 17 of the Theft Act 1968.
- Engaging in a course of conduct which creates a false or misleading impression as to the market in or the price of the value of investments, contrary to Section 47(2) of the Financial Services Act 1986.
- Cheque and credit card fraud under Section 15 of the Theft Act 1968.
- Section 16 of the Theft Act 1968 (obtaining pecuniary advantage by cheque or credit card fraud), conspiracy to commit cheque or credit card fraud under Section 1 and 2 of the Criminal Justice Act 1987, Section 12 of the Theft Act 1978 (obtaining services by cheque or credit card fraud), and under Section 15A of the Theft Act 1978 (obtaining a money transfer by cheque or credit card fraud).
- Obtaining property by deception (apart from cheque and credit card fraud) under Section 15 of the Theft Act 1968.
- Frauds in connection with the sale of land under Section 18 of the Law of Property Act 1925.
- Fraud, forgery etc associated with the driving licence under Section 173(1) of the Road Traffic Act 1988, and many more.
Despite the wide-ranging definitions applied in the recording of crimes by the police, it is clear that the SFO has focused on prosecuting five types of offences since its creation – namely fraudulent trading, false accounting, theft, corruption and, of course, its favourite, common law conspiracy to defraud.
It was not until April 1998 that the Law Commission was asked to consider the law of fraud and whether a general offence of fraud would improve the criminal law. Following the issue of a consultation paper entitled ‘Legislating the Criminal Code: Fraud and Deception’, the Law Commission decided against the recommendation of a general fraud offence. The Law Commission was asked to revisit the issue of the possibility of a fraud offence in 2002, and eventually in May 2004 a consultation paper was issued.
Following government consultation, Home Office Minister Baroness Scotland announced on 19 October 2004 plans to create a new single offence for fraud.
Under the proposed Fraud Bill, fraud could be defined as an offence in three ways: by false representation; by wrongfully failing to disclose information; and by abuse of position.
The proposed new definition for fraud begs the question of whether, in the future, aggrieved complainants who have previously relied on the civil jurisdiction will now turn to the police to investigate matters. Currently such matters are regarded as civil in nature and complainants have to fund the litigation themselves.
The focus of the new offence is to be on the alleged offender’s behaviour and in particular their intentions at the time of the commission of the act.
It is disappointing to learn that, following consultation, the Home Office has indicated that it intends to retain the current offence of common law conspiracy to defraud alongside the proposed new statutory offence of fraud. This was a golden opportunity for the Government to clarify and simplify the law by including within the new statutory offence the conduct hitherto prosecuted as common law conspiracy to defraud.
The argument that this was necessary to provide flexibility in dealing with a wide variety of frauds only provides a platform for confusion.
It will be interesting to see how the police will resource this additional work. The Government has said it is going to give extra money to both the SFO and the City of London Police to tackle fraud.
From my experience of defending these matters, fraud is perpetrated and is brought to trial all over the country and is not limited to the City. What extra funding is to be provided by the Government towards the funding of a police force charged with investigating allegations of fraud outside the capital?
Is it now the intention of the Government to intervene in contractual relationships? We already have a precedent, under the Enterprise Act 2002, which made it a criminal offence for individuals to dishonestly enter into cartel agreements. The new Enterprise Act offence applies only to horizontal agreements, ie those at the same level of supply or production.
The Government has made it clear, however, that its intention is to ensure that failure to disclose information will not be fraud unless a legal duty is breached.
Interesting developments within the bill include an extension of the definition of fraudulent trading to include unincorporated traders and an intention to create a new offence of possessing equipment to commit fraud.
Despite the Government’s good intentions to clarify the law on fraud, one must put this into context. In a world where white collar criminals disregard international boundaries, is it not time to strive for an internationally accepted definition of the offence of fraud?
Gerallt Owen is a partner in the regulatory group at Eversheds