Fraud Act 2006

Fraud specialist who only defend cases look at the law from a defendant's point of view. This outline of the laws aims to set out the laws as simply as possible using the legislation itself as the guide.

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Fraud Offences

Section 1

Section 1 creates a general offence of fraud and introduces three ways of committing it set out in Sections 2, 3 and 4.

  • Fraud by false representation (Section 2 Fraud Act 2006);
  • Fraud by failure to disclose information when there is a legal duty to do so (Section 3
  • Fraud by abuse of position (Section 4 Fraud Act 2006).

In each case:

  • the defendant's conduct must be dishonest;
  • his/her intention must be to make a gain; or cause a loss or the risk of a loss to another.
  • No gain or loss needs actually to have been made.
  • The maximum sentence is 10 years' imprisonment.
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Section 2 Fraud Act 2006

Fraud by false representation

The defendant:

  • made a false representation
  • dishonestly
  • knowing that the representation was or might be untrue or misleading
  • with intent to make a gain for himself or another, to cause loss to another or to expose another to risk of loss.

The offence is entirely focused on the conduct of the defendant.

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Section 3 Fraud Act 2006

Fraud by failing to disclose information

The defendant:

  • failed to disclose information to another person
  • when he was under a legal duty to disclose that information
  • dishonestly intending, by that failure, to make a gain or cause a loss.

The focus will be on:

  • the prosecution assertion that there was a legal duty to disclose information;
  • the precise relationship that gave rise to that duty;
  • the information that it is alleged that the defendant failed to disclose;

It will be necessary to recite all three elements in the particulars of the charge or indictment which must be very precisely drawn.

Any gain or loss that occurred should not appear in the charge or on the indictment. The matter will, however, be relevant to sentence, compensation and confiscation.

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Section 4 Fraud Act 2006

Fraud by abuse of position

The defendant:

  • occupies a position in which he was expected to safeguard, or not to act against, the financial interests of another person
  • abused that position
  • dishonestly
  • intending by that abuse to make a gain/cause a loss

The abuse may consist of an omission rather than an act.

In many instances it is the fact of the gain or loss that will prove the Defendant's dishonesty beyond reasonable doubt.

The focus will be on the nature of the relationship and of the specific abuse. If there is more than one instance or variety of abuse, additional charges will be required.

The nature of the relationship and of the abusive conduct alleged must be recited in the particulars of the charge or indictment.

Any gain or loss that occurred should not appear in the charge or on the indictment. The matter will, however, be relevant to sentence, compensation and confiscation.

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Section 6 Fraud Act 2006

Possession of articles for use in fraud

The defendant:

  • had possession or control of;
  • an article;
  • for use in the course of or in connection with any fraud.

The proof required is that the Defendant had the article for the purpose or with the intention that it be used in the course of or in connection with an offence.

There is no defence of "reasonable excuse". Those who are, in particular, properly in possession of or involved in the development of computer software or other items for use to test the security of computer or security systems must rely on their lack of intention that the items or programmes are "for use in the course of or in connection with any fraud."

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Section 7 Fraud Act 2006

Making or supplying articles for use in frauds

The defendant:

  • makes, adapts, supplies or offers to supply any article;
  • for use in the course of or in connection with fraud;
  • knowing that it is designed or adapted for use in the course of or in connection with fraud (Section 7 (1) (a)) or
  • intending it to be used to commit or assist in the commission of fraud (Section 7 (1) (b).

"Knowledge" in Section 7 (1) (a) is a strict requirement. The House of Lords in Montila [2004] said:

"A person may have reasonable grounds to suspect that property is one thing (A) when in fact it is something different (B). But that is not so when the question is what a person knows. A person cannot know that something is A when in fact it is B. The proposition that a person knows that something is A is based on the premise that it is true that it is A. The fact that the property is A provides the starting point. Then there is the question whether the person knows that the property is A."

In practice, the use to which the article can be put is likely to provide sufficient evidence of the defendant's state of mind. For example, articles such as:

  • the kits that are attached to ATM machines to capture card details;
  • forged credit cards or the equipment for making them;
  • lists of credit card numbers;
  • counterfeit goods presented as genuine;
  • do not have an innocent purpose that readily springs to mind.

A person who makes an article specifically for use in fraud, for example, a software programme to create a phishing website or send phishing email, may be ambivalent about whether the person to whom it is supplied actually uses it for fraud. He will fall foul of Section 7 (1) (a) but will not have the necessary intention for Section 7 (1) (b).

For example ; The manufacturer of articles that are capable of being used in or in connection with fraud but have other innocent uses will not fall foul of this section unless he intends that it should be used in a dishonest way (Section 7 (1) (b)).

For example The makers of credit card readers are one example. The readers have an innocent purpose they are commonly used by traders who "store up" the details of all the transactions carried out during a day and submit them all together at the end of the day. The card reader merely verifies the validity of the card at the point when it is read and stores all the necessary information about the transaction. The other, dishonest, use is by point of sale staff who use the readers to "skim" credit card details either for use or sale. The dishonest manufacturer who intended a dishonest use would be guilty of Section 7 (1) (b) offence.

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Section 9 Fraud Act 2006

Participation by sole trader in fraudulent business

Section 9 makes it an offence for a person knowingly to be a party to the carrying on of a fraudulent business where the business is not carried on by a company. The offence parallels the offence of fraudulent trading in section 458 of the Companies Act 1985.

Non-corporate traders covered by the new offence include sole traders, partnerships, trusts and companies registered overseas.

A defendant may commit an offence under Section 9 (2) (b) in the following ways:

  • knowingly being party to the carrying on of a company's business;
  • with intent to defraud creditors of any person; or
  • for any other fraudulent purpose.

The phrase "to defraud creditors of any person" covers the situation where creditors are creditors of the business, but the business is not a legal person. The creditors could be creditors of individuals or of other related companies.

The term "fraudulent purpose" connotes an intention to go "beyond the bounds of what ordinary decent people engaged in business would regard as honest" R v Grantham [1984] or "involving, according to the current notions of fair trading among commercial men, real moral blame" Re Patrick & Lyon Ltd [1933]

Section 9 (3) (c) Fraud Act 2006 refers to section 718 (1) of the Companies Act 1985 which exempts certain types of bodies from fraudulent trading. That exemption also applies to section 9. The only exemption likely to concern prosecutors is that in section 718 (2) (b)

"Any body not formed for the purpose of carrying on a business which has for its object the acquisition of gain by the body or its individual members" i.e. a non profit making body cannot be guilty of fraudulent trading, though for example, the individual trustees of a charity can be guilty of offences.

What the Crown Prosecution service say,

'Prosecutors should consider charges under this section where:

  • an individual conducts a "long firm fraud";
  • a business has continued to trade and run up debts knowing that there was no reasonable prospect of those creditors ever being paid;
  • a business is being run for a fraudulent purpose, for example, rogue "cold calling" traders who regularly submit inflated bills to customers for shoddy work (and who often target the elderly or vulnerable).'
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Section 11 Fraud Act 2006

Obtaining services dishonestly

The defendant:

  • obtains for himself or another;
  • services;
  • dishonestly;
  • knowing the services are made available on the basis that payment has been, is being or will be made for or in respect of them or that they might be; and
  • avoids or intends to avoid payment in full or in part.

The defendant must have the necessary intention at the time that the service is obtained (section 11 (2) (c) Fraud Act 2006).

In many cases, the defendant will also have committed an offence under Section 2 of the Act by making a false representation that payment will be made or made in full. Prosecutors must decide which offence better reflects the criminality involved. The maximum sentence for the Section 11 offence is five years' imprisonment.

What the Crown Prosecution service say,

Section 11 Fraud Act 2006 will cover circumstances where the defendant:

  • obtains chargeable data or software over the internet without paying;
  • orders a meal in a restaurant knowing he has no means to pay;
  • attaches a decoder to his TV to enable him to access chargeable satellite services without paying;
  • uses the services of a members' club without paying and without being a member.
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Section 12 Fraud Act 2006

Liability of company officers for offences by company

This section repeats the effect of Section 18 of the Theft Act 1968. It provides that company officers who are party to the commission of an offence by the company will be liable to be charged with the offence as well as the company.

The Elements of the Offences

False representation

Section 2 (2) defines the meaning of "false" and Section 2 (3) defines the meaning of "representation".

A "representation" means any representation as to fact or law, including a representation as to the state of mind of the person making the representation or any other person (Section 2 (3)). An example of the latter might be where a defendant claims that a third party intends to carry out a certain course of action perhaps to make a will in someone's favour. It may be difficult to prove to the necessary standard that the Defendant knew the state of mind of a third party, but easier to prove that he knew what it might be.

A representation may be express or implied (Section 2 (4) Fraud Act 2006). It can be stated in words or communicated by conduct. There is no limitation on the way in which the representation may be expressed.

A representation can be made by omission, for example, by omitting to mention previous convictions or County Court Judgments on an application form.

An offence may be completed when the defendant fails to correct a false impression after a change in circumstances from the original representation (if the representation may be regarded as a continuing series of representations).

A representation can be made to a machine (Section 2 (5)), for example, where a person enters a number into a CHIP and PIN machine or a bank ATM; or gives false credit card details to the voice activated software on a telephone line; or gives false credit card details to a supermarket website to obtain groceries.

Evidence is necessary to prove that the defendant communicated the false representation to a person or to a machine. It is not relevant whether the false representation is believed or has any affect on any other person.

In some cases it will not be necessary to call evidence from a victim, but prosecutors should bear in mind that a victim who is not named on an indictment or in a TIC cannot be compensated.

Untrue or misleading

A representation is defined as "false" if it is untrue or misleading and the person making it knows that it is, or might be, untrue or misleading. Actual knowledge that the representation might be untrue is required not awareness of a risk that it might be untrue.


The definition in R v Ghosh [1982] applies:

  • was what was done dishonest by the ordinary standards of reasonable and honest people?
  • must the defendant have realised that what he/she was doing was, by those standards, dishonest?

The question of dishonesty' is one for the jury and submissions of no case to answer should not be acceded to based only on the issue of dishonesty.

Gain or loss

"Gain "and "loss" are defined in section 5 of the Fraud Act 2006. Gain and loss extends only to gain and loss in money or other property (Section 5 (2) (a) Fraud Act 2006), whether temporary or permanent (Section 5 (2) (b) Fraud Act 2006) and means any property whether real or personal including things in action and other intangible property (Section 5 (2) (b) Fraud Act 2006).

"Gain" includes a gain by keeping what one has, as well as a gain by getting what one does not have (Section 5 (3) Fraud Act 2006).

"Loss" includes a loss by not getting what one might get as well as a loss by parting with what one has (Section 5 (4) Fraud Act 2006).

The Defendant must intend to make the gain or cause the loss by means of the false representation.

The breadth of conduct to which Section 2 applies is much wider than the old Theft Act deception offences because no gain or loss need actually be made. It is the Defendant's ultimate intention that matters. If the Defendant gets information by making a false representation, intending ultimately to make a gain or cause a loss within the meaning of Section 5 by doing so, he will have committed a Section 2 offence.

Failure to disclose information

There is no requirement that the failure to disclose must relate to "material" or "relevant "information. If a Defendant disclosed 90% of what he was under a legal duty to disclose but failed to disclose the (possibly unimportant) remaining 10%, this may be a sufficient act for the offence could be complete. Under such circumstances the Defendant would have to rely on the absence of dishonesty. Such cases can be prosecuted under the Act if the public interest requires it, though such cases will be unusual.

It is no defence that the Defendant was ignorant of the existence of the duty, neither is it a defence in itself to claim inadvertence or incompetence. In that respect, the offence is one of strict liability. The defence must rely on an absence of dishonesty and the burden, of course, lies with the prosecutor.

Prosecutors must be acutely aware of the public interest in such cases, bear in mind the relative standing of the parties and pay particular regard to any explanation for the failure given by the Defendant.

In its report on fraud (No. 276 Cm 5560 2002) the Law Commission made the following comments about the circumstances in which a legal duty might arise:

7.28 ... Such a duty may derive from statute (such as the provisions governing company prospectuses), from the fact that the transaction in question is one of the utmost good faith (such as a contract of insurance), from the express or implied terms of a contract, from the custom of a particular trade or market, or from the existence of a fiduciary relationship between the parties (such as that of agent and principal).

7.29 For this purpose there is a legal duty to disclose information not only if the defendant's failure to disclose it gives the victim a cause of action for damages, but also if the law gives the victim a right to set aside any change in his or her legal position to which he or she 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 his or her beneficiary, in the sense that a failure to make such disclosure will entitle the beneficiary to rescind the contract and to reclaim any property transferred under it.

Establishing a legal duty

There are three considerations:

  • Whether the facts as alleged are capable of creating a legal duty is a matter for the judge;
  • Whether the relationship that would create any legal duty exists on the facts alleged is a matter for the jury directed by the judge;
  • Where the matter is not in issue the judge may direct the jury that a legal duty exists.

The Explanatory Notes to the Fraud Act provide the following examples of a breach of a legal duty:

  • The failure of a solicitor to share vital information with a client in order to perpetrate a fraud upon that client;
  • A person who intentionally failed to disclose information relating to his heart condition when making an application for life insurance.

Abuse of a position

The Law Commission explained the meaning of "position" as follows:

"The necessary relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise 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. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice. We see no reason, however, why the existence of such duties should be essential. This does not, of course, mean that it would be entirely a matter for the fact finders whether the necessary relationship exists. The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled on by the judge and, if the case goes to the jury, of being the subject of directions."

The "position" in Section 4 is a position of trust but falls short of one where there is a legal duty or an entitlement to single minded loyalty. It is something more than a moral obligation.

Examples of the type of conduct that would give rise to a charge under section 4 are:

  • an employee of a software company who uses his position to clone software products with the intention of selling the products on his own behalf;
  • where a person is employed to care for an elderly or disabled person and has access to that person's bank account but abuses that position by removing funds for his own personal use. (This may also be theft);
  • an attorney who removes money from the grantor's accounts for his own use. The Power of Attorney allows him to do so but when excessive this will be capable of being an offence under Section 4 Fraud Act 2006;
  • an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead;
  • an employee who abuses his position in order to grant contracts or discounts to friends, relatives and associates;
  • a waiter who sells his own bottles of wine passing them off as belonging to the restaurant R v Doukas [1978]
  • a tradesman who helps an elderly person with odd jobs, gains influence over that person and removes money from their account (This may also be theft but see the guidance on the Public Interest criteria above for the Fraud offences);
  • the person entrusted to purchase lottery tickets on behalf of others again, this will probably be theft as well.

The terms "financial interests" and "abuse" are not defined in the Act and so may be taken to have their ordinary meaning.

Note that the section refers to a person who "occupies a position in which he is expected ... ". The person who no longer occupies that position when, for example, he uses information properly gained while "in post" dishonestly, does not commit an offence. He may do so if there is a contractual obligation that extends beyond his departure from the post. He will, however, be guilty of an offence if he took steps to plan his actions while "in post" and put the plan into action after leaving the post or after the relationship ceased.

For example, an employee who transferred sensitive commercial information from his office laptop to his home computer while in employment and used it after that employment had ended will commit the offence. At that stage he will no longer be "occupying a position " but he was when the offence was committed (transferring the information intending to make a gain or cause a loss) and so can be prosecuted.

In these circumstances prosecutors must be particularly mindful that the criminal law is not invoked by complainants for purely commercial purposes.

Possession or control

The Act does not offer a definition of "possession or control".

It is probable that the case law on possession of drugs will apply. The phrase "possession or control" suggests something looser than the absolute "possession" in the Proceeds of Crime Act 2002. Under that Act "possession" means having physical custody of criminal property.

Section 37(3) of the Misuse of Drugs Act 1971 provides that for the purposes of that Act "the things which a person has in his possession shall be taken to include anything subject to his control which is in the custody of another".

Although the Fraud Act 2006 does not contain a similar section, the reference to "control" suggests that items in the possession of others but over which the Defendant retains control would qualify as being in the defendant's "possession".


"Article" has its ordinary meaning subject to Section 8 Fraud Act 2006. It is extremely wide covering anything from pen and paper to blank credit cards, credit card numbers and sophisticated computer programmes.

Section 8 provides further definition of the term "article". For the purposes of Sections 6 and 7 and the provisions listed in Section 8 (2) Fraud Act 2006 which include Section 1 (7) (b) of the Police and Criminal Evidence Act 1984 ("prohibited articles" for the purposes of stop and search powers) "article" includes any program or data held in electronic form.

If a successful Section 2 fraudster has succeeded in obtaining information held either as hard copy or in data form from those he has duped, he will also be guilty of a Section 6 offence in relation to that information.


The service must be provided on the basis that it will be paid for.

Obtains for himself or another

Section 11 Fraud Act 2006 differs from the offences under section 1 in that it requires the actual obtaining of a service (by a dishonest act).

It is not possible to commit the offence by omission alone. This avoids the situation where unscrupulous service providers might feel able to pressure anyone who had been given services they had not requested.

Evidence of spouse/partner

A person is protected from incriminating himself or his spouse or civil partner for the purposes of offences under the Act and related offences, while nonetheless being obliged to co-operate with certain civil proceedings (for example, civil confiscation) relating to property. This section goes beyond Section 31 (1) of the Theft Act 1968 in removing privilege in relation to "related offences" as well as the offence charged. "Related offences" are defined in Section 13 (4) as conspiracy to defraud and any other offence involving any form of fraud or fraudulent conduct or purpose.

The maximum penalty for offences under Sections 1, 7 and 9 and is 12 months' imprisonment on summary conviction and 10 years' imprisonment on conviction on indictment.

Section 10 of the Act increases the maximum penalty for offences contrary to Section 458 of the Companies Act 1985 to 10 years' imprisonment.

The maximum penalty for an offence under Sections 6 and 11 is 12 months' imprisonment on summary conviction and 5 years' imprisonment on conviction on indictment.

What the Crown Prosecution say - overlap with theft and other offences

In many cases fraud will also be theft. Prosecutors should bear in mind:

  • Theft carries a lower minimum sentence;
  • The actus reus requirement for fraud is far less;
  • The credit/debit status of any bank accounts debited is irrelevant to the Fraud Act offences. All that is in issue is the Defendant's right to use the account;
  • It is not necessary to prove or demonstrate any consequences of fraud (though they will clearly be material to sentence, compensation and confiscation).
  • Fraud Act offences do not require an intent permanently to deprive;
  • A charge should describe what actually happened and reflect the true criminality; and
  • The indictment should be as simple as reasonably possible.

In some cases there will be other possible offences such as False Accounting (section 17 Theft Act 1968), Obtaining Services Dishonestly (Section 11 Fraud Act 2006), offences under the Computer Misuse Act 1990, Forgery and Counterfeiting Act 1981, the Identity Cards Act 2006, the Proceeds of Crime Act 2002 or the Financial Services and Markets Act 2000.

Prosecutors must decide which offence properly reflects the criminality concerned.

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