Fraud is one of the oldest and most prevalent crimes that effects business, individuals, governments and state departments, and so it comes as little surprise that there are myriad laws that cover fraud in all its many forms.
Of course we can’t go into all of them here, but an overview of the main laws in the UK will give you a taste of what is protected and where – and as you will see, some have caveats that do apply to overseas trading.
Naturally, selling overseas or at home comes with many risks, including fraud, so for specific issues with specific crimes you can do worse than to go to the website of the police’s specialist fraud teams – www.actionfraud.police.uk – or the serious Fraud office.
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The Fraud Act
The main law dealing with all forms of fraud is, unsurprisingly, The Fraud Act, which made fraud a criminal offence and provides for the following ways of committing the offence:
• Fraud by false representation
• Fraud by failing to disclose information
• Fraud by abuse of position
• Carrying on a business fraudulently
• Making, supplying or possessing articles for use in frauds
• Obtaining services dishonestly
• The creation or possession of software, which has been created or adapted for fraudulent use.
The Fraud Act applies to both companies and individuals and is part of a wider initiative to combat the increasing problem of fraud. It has been loosely drafted so that it is able to capture forms of fraud using the internet and new technologies, so covers eSellers.
This Act also extends the territorial scope of previous legislation. Not all activities of the offence must take place in the UK in order for a prosecution under the Fraud Act. UK courts have jurisdiction even where the only activity to have taken place in the UK is the gain or loss of property.
The Companies Act 2006
This very old act has been subject to major reforms over the many years since it was introduced and this most recent version, Companies Act 2006, came into force in its entirety in October 2008.
It sets out a statutory statement of the general duties of directors and introduces a right for shareholders to sue directors individually for breach of these duties, either as a result of negligence or fraud.
The duties include:
• Duty to promote the success of the company
• Duty to exercise reasonable care, skill and diligence
• Duty to avoid confl icts of interest
• Duty to declare interests in proposed transactions or arrangements
• Duty not to accept benefi ts from third parties.
The Companies Act 2006 includes the offence of fraudulent trading and also creates a new offence in relation to documents to be delivered to Companies House.
Under Section 1112 of the Act, where a person knowingly or recklessly delivers or causes to be delivered a document or statement that is misleading, false or deceptive in a material particular, they will be liable to up to two years imprisonment, a fine, or both.
Serious Crimes Act
The Serious Crimes Act aims to improve the ability of law enforcement agencies to tackle fraud and other serious organised crime, and strengthen the recovery of criminal assets. It also introduces measures to prevent or disrupt serious crime, including the prevention of fraud.
The Serious Crimes Act gives certain courts in the UK the ability to issue serious crime prevention orders. These create a new form of civil injunction, the breach of which is a criminal act punishable by imprisonment and a fine.
A prevention order can be imposed where the court is satisfied that a person (including an individual, a partnership or a company) has been involved in a serious crime and where it has reasonable grounds to believe the order would protect the public by prohibiting or restricting the person’s activities, including financial holdings, business dealings, working arrangements and communications.
Serious crimes covered by this Act include attempting, committing, facilitating or encouraging serious offences such as fraud, money laundering, corruption and bribery.
With regard to additional measures, the Serious Crimes Act makes new provisions for disclosure and information sharing by public authorities to any anti-fraud organisation, in order to prevent fraud or in relation to proceeds of crime. The government is to prepare a code of practice with respect to such disclosure.
The Act also authorises certain bodies to conduct data matching exercises for the purpose of preventing or detecting fraud.
This provision puts a statutory basis around the National Fraud Initiative that has operated in the UK for some years.
Proceeds of Crime Act (POCA)
POCA allows for the civil recovery of the proceeds of crime. It consolidated existing laws on confiscation and money laundering into a single piece of legislation, in order to improve the efficiency of the recovery process and increase the amount of illegally obtained assets recovered from criminals. It applies to the confiscation of proceeds of fraud.
Under POCA, there is no minimum limit for recovery, with the act covering proceeds of any criminal conduct and not just ‘serious’ crime and there is no requirement for the activities resulting in the offence to have been conducted in the UK.
Public Interest Disclosure Act (PIDA)
PIDA is known as the whistleblowing law in the UK, as it offers protection to employees who blow the whistle in one of the ways set out in the Act. Under PIDA, employers should not victimise a ‘worker’ if they make ‘qualifying disclosures’ .
Qualifying disclosures are defined as information which, in the reasonable belief of the worker making the disclosure, tends to show one or more of the following is either happening now, has happened already or is likely to happen:
• A criminal offence
• Failure to comply with a legal obligation
• A miscarriage of justice
• Danger to the health and safety of an individual
• Damage to the environment
• Deliberate concealment of information tending to show any of the above.
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