13.1 Definition of fraud

The Fraud Act 2006 defines the criminal offence of fraud, classifying it in three ways:

• fraud by false representation
• fraud by failing to disclose information
• fraud by abuse of position.

A person is guilty of fraud by false representation if they dishonestly make a false representation with the intention of making a gain for themselves or another (or causing loss to another or exposing them to a risk of loss) (section 2(1), Fraud Act 2006). Fraud by failing to disclose information occurs when a person dishonestly withholds information which they are under a legal duty to disclose, again with the intention of making a gain for themselves or another or causing loss (or a risk of loss) to another (section 3, Fraud Act 2006).

Abuse of position occurs when a person occupies a position in which they are expected to safeguard, or not to act against, the financial interests of another person and they dishonestly abuse that position to the benefit of themselves or another or to the detriment of another (section 4(1), Fraud Act 2006). Examples of positions of trust include trustee–beneficiary, director–organisation, professional–client, agent–principal, employee–employer, and partners–spouses.

There are various examples of abuse of a position of trust, such as:

• an employee copying their employer’s client database to set up a rival organisation
• a person employed to care for an elderly or disabled person, who has access to that person’s bank account, transferring funds to invest in a high-risk business venture or for any other unauthorised purpose
• a staff member offering cheap motor insurance premiums to a friend by deliberately not entering known driving convictions as part of the quotation process.

A person holding a trusted position may be regarded as having abused it even where their conduct consisted of an omission (that is a failure to act), rather than an act itself (section 4(2), Fraud Act 2006).