Can the General Fraud Offence ‘Get the Law Right’?: Some Perspectives on the ‘Problem’ of Financial Crime
| Author | Sarah Wilson,Gary Wilson |
| Published date | 01 February 2007 |
| DOI | 10.1350/jcla.2007.71.1.36 |
| Date | 01 February 2007 |
| Subject Matter | Article |
‘Get the Law Right’?:
Some Perspectives on the
‘Problem’ of Financial Crime
Gary Wilson and Sarah Wilson*
Abstract
The Fraud Bill, which received Royal Assent on 8 November
2006, created an offence of fraud in English criminal law which marks a
departure of utmost significance from the approach adopted hitherto,
whereby a number of related offences cover behaviour deemed to amount
to fraud. To mark the passage of the Fraud Act 2006 into law, this article
examines the references which were made during its consideration in
Parliament to fraud as activity which is serious and which is often erro-
neously portrayed as ‘victimless’ crime. In joining these key criminal
policy-making debates with academic study of white-collar crime, it will
be suggested that as yet too little attention is being paid to ‘ambiguous’
popular perceptions of financial crimes for there to be confidence that
the fraud offence will, in the words of the current Solicitor-General, ‘get
the law right’.
In 1998 the Law Commission was instructed to ‘examine the law relat-
ing to fraud . . . and to make recommendations to improve the law . . .
with all due expedition’.1 The resulting Consultation Paper published in
1999 Legislating the Criminal Code, Fraud and Deception shows clearly the
Law Commission’s appreciation that in the 21st century, challenges
arising from the ‘problem of fraud’ owe much to the combination of its
base elements of deceit and motivation for securement of advantage or
causing loss2 with the social and economic conditions of the late 20th
century, and especially the ‘radical and multifarious advances in the use
of modern technology’.3 The Law Commission explained that this pre-
sents considerable difficulties for framing law which is able to ‘keep up’,
let alone to stay ‘one step ahead’, of fraud, as fraudulent activity can
and does evolve quickly, especially in a fast-changing world.4 It also
stressed that this is a world in which technological advances have
ensured electronic means of communication and commercial transac-
tion are commonplace across spheres of everyday life as well as business
activity.5
* School of Law, Keele University; e-mail: s.j.wilson@law.keele.ac.uk.
The Fraud Bill received Royal Assent on 8 November 2006. This article was
passed for press in late December 2006 and therefore references are to key
sections of the new Act, rather than clauses of the Bill before it received Royal
Assent.
1 Law Commission, Legislating the Criminal Code, Fraud and Deception: A Consultation
Paper, Law Com. No. 155 (1999) para. 1.1 (hereafter Legislating the Criminal Code).
2 D. Kirk and A. Woodcock, Serious Fraud: Investigation and Trial (Butterworths:
London, 1997) 1.
3 Legislating the Criminal Code, para. 1.3.
4 Ibid. at paras 1.3 and 1.5.
5 Ibid.
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Can the General Fraud Offence ‘Get the Law Right’?
Notwithstanding the regulatory challenges arising, the Law Commis-
sion was insistent that the consequences of failing to address the prob-
lem of fraud in this context would be severe. It illustrated this by
reference to the Institute of Chartered Accountants’ assessment that
‘business fraud is a growing problem that affects everyone . . . [t]he cost
to the country is huge in terms of those who have to pay for it and the
loss of reputation as a safe place to do business’.6 The Law Commission
was instructed to consider whether existing law relating to fraud was
comprehensible to juries; adequate for effective prosecution; and fair to
potential defendants, but also explicitly whether it met ‘the need of
developing transfers’, to determine whether it was sufficiently flexible
to be applicable to new scenarios.7 The accompanying instruction to
make recommendations with all ‘due expedition’ included the direct
request that it consider the merits of introducing a general offence of
fraud into English criminal law. This commenced the extensive inquiry
into the criminal law relating to fraud which culminated in the Fraud
Bill which was first introduced in Parliament in May 2005, following
recommendations made in the Law Commission’s Report on Fraud pub-
lished in 2002,8 and government consultation in 2004.9 Following fur-
ther parliamentary consideration during 2006, the Bill which stated in
its preamble that it was to ‘make provision for, and in connection with
criminal liability for fraud and obtaining services dishonestly’,10 received
Royal Assent on 8 November 2006.
For criminal lawyers, the Fraud Act’s main import lies in the way in
which it will fundamentally alter the approach to financial crime tradi-
tionally adopted in criminal law. Solicitor-General Mike O’Brien told the
House of Commons in June 2006 that the Bill is a measure which has
been eagerly awaited by prosecutors and by the police, and this was
because it ‘should improve the prosecution process by reducing the
chance of offences being wrongly charged, and provide greater flex-
ibility to keep pace with the increasing use of technology in crimes of
fraud’. In contrast Mr O’Brien also made reference to the way in which
‘strange as it may seem . . . [w]hen lawyers talk of fraud, we refer
collectively to a wide and complex array of deception and theft offences
. . . and common law, [which] compiled somewhat haphazardly, have
the task of encompassing the wide range of fraudulent conduct’.11
Alluding to the absence of any offence of fraud either under statute or at
common law, this need for a new approach was recognised by the Law
6 Ibid. at para. 1.9.
7 Ibid. at para. 1.1.
8 Law Commission, Report on Fraud, Law Com. No. 276, Cm 5560 (2002) (hereafter
Report on Fraud).
9 Fraud Law Reform—Consultation on Proposals for Legislation launched by Baroness
Scotland on 17 May 2004, and Fraud Law Reform: Government Response to
Consultations published in October 2004.
10 The full text of the Fraud Act 2006 can be found at www.opsi.gov.uk/acts/acts2006/
60035--a.htm#1.
11 Hansard, col. 534, 12 June 2006.
37
The Journal of Criminal Law
Commission in its insistence in 2002 that the law was in need of reform,
and that a ‘Fresh Approach’ was required.12
In the course of emphasising the need to thwart the ‘inexhaustible
ingenuity’ of fraudsters,13 in 2002 the Law Commission proposed that
pursuing reform through specific offences was likely to continue the
position whereby the law would be ‘always lagging behind develop-
ments in technology and commerce’.14 Following government consulta-
tion and parliamentary debate, the Fraud Act’s ‘centrepiece’ offence
mirrors closely the Law Commission’s recommendations for a statutory
general fraud offence.15 The offence seeks to capture base elements of
fraud, but to do so in a manner which is deliberately not attached to any
specific activity which might arise from the ‘modern methods by which
dishonest activity may be effected’.16 And accordingly, what are now
ss 1–5 of the Fraud Act provide that a person is guilty of fraud if he
dishonestly makes a false representation;17 fails to disclose information
while under a legal duty to do so;18 or abuses a position in which he is
expected to safeguard or at least not to prejudice the financial interests
of another,19 and in the commission of any of these matters intends to
make a gain or expose another to loss.20
The scope of the Fraud Act and its intended function
and purpose
Although this article is most interested in the fraud offence, the scope of
the Fraud Act is wider, and includes the offence of obtaining services
dishonestly which is also intended to apply widely across commercial
and everyday life activities.21 There is also liability for being in possession
of articles for use in frauds, and making or supplying articles for use in
frauds.22 The new offence of ‘Participating in a fraudulent business
carried on by a sole trader’ intends to extend liability which can already
12 This is the heading adopted in Part VI of the Law Commission’s Report on Fraud, at
57.
13 Report on Fraud, para. 7.1.
14 Ibid. at para. 7.3.
15 See Solicitor-General Mike O’Brien’s observations on the way in which most of
the changes proposed by the Law Commission had ‘found their way into the Bill’:
Hansard, col. 534, 12 June 2006.
16 Lord Falconer of Thoroton ‘Commercial Fraud or Sharp Practice—Challenge for
the Law’, Denning Lecture (14 October 1997), quoted in Legislating the Criminal
Code, para. 1.3.
17 Further illumination of false representation can be found in s 2 of the new Act,
and in the Explanatory Notes which accompanied the Bill (published by the Home
Office (29 March 2006)).
18 Further illumination of disclosure while under a legal duty can be found in s. 3 of
the Act and Explanatory Notes published in relation to the Bill.
19 Further illumination of abuse of position can be found in s. 4 of the Act, and the
Explanatory Notes.
20 According to s. 5 ‘gain’ and ‘loss’ extend only to that of money or other property,
but include gain or loss which is temporary or permanent. It explains that ‘gain’
includes a gain achieved by keeping what one has as well as gaining that which
one does not; and ‘loss’ includes a loss by not getting what one might get as well
as loss by parting with what one has.
21 See the provisions of s. 11, and the Explanatory Notes, paras 34–36.
22 Pursuant to ss 6 and 7 respectively.
38
Can the General Fraud Offence ‘Get the Law Right’?
be incurred in respect of a company, where a business is carried on with
intent to defraud creditors of the company or creditors of any other
person, or for any fraudulent purpose.23 Penalties across...
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