The Fraud Act 2006 and what it means for companies ?

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The law in the UK prior to the Fraud Act 2006 was unwieldy and unhelpful in matters of fraud, theft, and deception. A 2002 Law Commission report found it was not fit for purpose and the Act was designed to “clarify the law, and provide law enforcers and prosecutors with a modern and flexible law of fraud”. 

Fraud is a global problem. All companies, regardless of their size, sector, or country are at risk. Fraud can originate from internal or external forces or a combination of the two.  Statistics can be alarming and are even more so when we consider that a lot of fraud is believed to go undetected or unreported. 

The PwC Global Economic Crime and Fraud Survey 2020 of more than 5,000 companies found that fraud cost them “an eye-watering USD 42 billion” over the 24 months prior. Of these, “37% of frauds were committed by employees and 20% involved an employee colluding with another party”. And as far as external risk goes, the FBI’s 2020 Internet Crime Report listed business email compromise (BEC)  and email account compromise (EAC) losses to be worth USD 1.86 billion. 

The Fraud Act 2006

The Fraud Act 2006 defines fraud as a single offense that can be committed in three key ways: by false representation, by failing to disclose information, or by abusing a position of trust. These categories form the core of the Act. Notably, prosecutors no longer need to prove that a victim was deceived or suffered a loss; the crucial factor is the intent to commit fraud.

What is fraud by false representation?

Fraud by false representation is an offence under the Fraud Act 2006, committed when a person intentionally makes a false representation to gain an advantage for themselves or others, or to cause loss or the risk of loss to another. A representation qualifies as false if the individual knows it is, or could be, untrue or misleading. This legal duty applies to both expressed and implied representations, highlighting the act’s focus on preventing criminal misuse of information for personal gain.

This would include things such as making false expense or insurance claims.

What is fraud by failing to disclose information?

Fraud by failing to disclose information is similar to false representation but is committed when a person does not disclose information they are legally obliged to with the intent to gain for himself or others, or cause loss or the risk of it to another. 

An example would be selling goods claiming that they are one thing when in fact they are another, such as selling cubic zirconia and claiming they are diamonds.

What is fraud by abuse of position?

Fraud by abuse of position arises when a person, entrusted with safeguarding the financial interests of another, acts dishonestly—whether through action or omission. This offence involves an intent to gain an advantage for themselves or others, or to cause loss or the risk of loss to another.

An example would be giving discounts to friends and corruption cases with bribes.

How to protect your company against fraud

The Fraud Act 2006 helps in charging and prosecuting fraudsters, but prevention is far better than the cure. Costs can be both quantifiable and non-quantifiable. Actual losses and costs of fines, penalties and other direct costs can be added up. Others are less simple to assess. The damage incurred due to loss of reputation, market position, morale, and future earnings can only be guessed at. 

Companies should educate employees on what constitutes fraud and how to spot it. They need to know that internal fraud will not be tolerated and how to avoid becoming a victim of external fraud.

PwC’s report found that “companies that have a dedicated fraud program in place generally spent less (relative to revenue) on response, remediation and fines”. This equated to spending 42% less on response and 17% less on remediation costs than companies without dedicated fraud programs spent. 

Technology plays a crucial role in fraud prevention. Trustpair provides a comprehensive solution to manage supplier risk and detect fraud. Our platform ensures international risk management with automatic bank account ownership verification, guaranteeing payments are directed to the correct party. Continuous auditing through our vendor master file software keeps information secure and up to date, maintaining accuracy in every transaction.

Additionally, our software enhances compliance and ensures traceability of control processes. It also streamlines operations by freeing employees from repetitive, time-consuming tasks prone to human error, corruption, or bribery.

We would love to demonstrate how Trustpair software can help your company in the fight against fraud. Please contact us to request a demo and help keep your business safe.

TRUSTPAIR _ FRAUD PROTECTION SOLUTION


Key Takeaways:

  • The Fraud Act 2006 streamlines and enhances previous UK legislation.
  • Fraud can be committed through false representation, failing to disclose information or abuse of position.
  • Trustpair software provides added security and peace of mind.

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FAQ
Frequently asked questions
Browse through our different sections and find the answer to your question.

Section 11 of the Fraud Act 2006 outlines the offense of dishonestly obtaining services, one of the key Fraud Act 2006 offences. This provision criminalizes accessing or using chargeable services without full payment or with only partial payment, done with the knowledge and intent to evade full payment.

The United States does not have a single “Fraud Act 2006” like the UK. Instead, fraud is governed by various federal and state laws, such as the False Claims Act, Wire Fraud Act, and specific statutes targeting financial or identity fraud.

Section 11 of the Fraud Act 2006 addresses the offense of obtaining services dishonestly. It criminalizes the act of accessing or using services without payment or with partial payment, knowing they are chargeable, with the intent to avoid full payment.