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In
law Law is a system of rules created and enforced through social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. It has been variously descr ...
, fraud is
intentional Intention is a mental state that represents a commitment to carrying out an action or actions in the future. Intention involves mental activities such as planning and forethought. Definition Folk psychology explains human behavior on the basis of ...
deception Deception or falsehood is an act or statement which misleads, hides the truth, or promotes a belief, concept, or idea that is not true. It is often done for personal gain or advantage. Deception can involve dissimulation, propaganda and sleight ...
to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensation) or
criminal law Criminal law is the body of law that relates to crime. It proscribes conduct perceived as threatening, harmful, or otherwise endangering to the property, health, safety, and moral welfare of people inclusive of one's self. Most criminal law is ...
(e.g., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities), or it may cause no loss of money, property, or legal right but still be an element of another civil or criminal wrong. The purpose of fraud may be monetary gain or other benefits, for example by obtaining a passport, travel document, or driver's license, or
mortgage fraud Mortgage fraud refers to an intentional misstatement, misrepresentation, or omission of information relied upon by an underwriter or lender to fund, purchase, or insure a loan secured by real property. Criminal offenses may be prosecuted in either ...
, where the perpetrator may attempt to qualify for a mortgage by way of false statements. A
hoax A hoax is a falsehood deliberately fabricated to masquerade as the truth. It is distinguishable from errors in observation or judgment, rumors, urban legends, pseudosciences, and April Fools' Day events that are passed along in good faith by b ...
is a distinct concept that involves deliberate deception without the intention of gain or of materially damaging or depriving a victim.


As a civil wrong

In common law jurisdictions, as a civil wrong, fraud is a
tort A tort, in common law jurisdiction, is a civil wrong (other than breach of contract) that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. It can include intentional infliction ...
. While the precise definitions and requirements of proof vary among jurisdictions, the requisite elements of fraud as a tort generally are the intentional misrepresentation or concealment of an important fact upon which the victim is meant to rely, and in fact does rely, to the harm of the victim. Proving fraud in a court of law is often said to be difficult as the intention to defraud is the key element in question. As such, proving fraud comes with a "greater evidentiary burden than other civil claims." This difficulty is exacerbated by the fact that some jurisdictions require the victim to prove fraud by
clear and convincing evidence Burden of proof is a legal duty that encompasses two connected but separate ideas that apply for establishing the truth of facts in a trial before tribunals in the United States: the "burden of production" and the "burden of persuasion." In a lega ...
. The remedies for fraud may include rescission (i.e., reversal) of a fraudulently obtained agreement or transaction, the recovery of a monetary award to compensate for the harm caused,
punitive damages Punitive damages, or exemplary damages, are damages assessed in order to punish the defendant for outrageous conduct and/or to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. ...
to punish or deter the misconduct, and possibly others. In cases of a fraudulently induced contract, fraud may serve as a
defense Defense or defence may refer to: Tactical, martial, and political acts or groups * Defense (military), forces primarily intended for warfare * Civil defense, the organizing of civilians to deal with enemy attacks * Defense industry, industry whic ...
in a
civil action A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil action ...
for
breach of contract Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's p ...
or
specific performance Specific performance is an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract. It is typically available in the sale of land law, but ...
of
contract A contract is a legally binding document between at least two parties that defines and governs the rights and duties of the parties to an agreement. A contract is legally enforceable because it meets the requirements and approval of the law. A ...
. Similarly, fraud may serve as a basis for a court to invoke its
equitable jurisdiction In jurisdictions following the English common law system, equity is the body of law which was developed in the English Court of Chancery and which is now administered concurrently with the common law. In common law jurisdictions, the word "equit ...
.


As a criminal offence

In common law jurisdictions, as a criminal offence, fraud takes many different forms, some general (e.g., theft by false pretense) and some specific to particular categories of victims or misconduct (e.g.,
bank fraud Bank fraud is the use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution. In many insta ...
,
insurance fraud Insurance fraud is any act committed to defraud an insurance process. It occurs when a claimant attempts to obtain some benefit or advantage they are not entitled to, or when an insurer knowingly denies some benefit that is due. According to the ...
,
forgery Forgery is a white-collar crime that generally refers to the false making or material alteration of a legal instrument with the specific intent to defraud anyone (other than themself). Tampering with a certain legal instrument may be forbidden ...
). The elements of fraud as a crime similarly vary. The requisite elements of perhaps the most general form of criminal fraud, theft by false pretense, are the intentional deception of a victim by false representation or pretense with the intent of persuading the victim to part with property and with the victim parting with property in reliance on the representation or pretense and with the perpetrator intending to keep the property from the victim.


By region


North America


Canada

Section 380(1) of the
Criminal Code A criminal code (or penal code) is a document that compiles all, or a significant amount of, a particular jurisdiction's criminal law. Typically a criminal code will contain offences that are recognised in the jurisdiction, penalties that might b ...
provides the general definition for fraud in Canada: In addition to the penalties outlined above, the court can also issue a prohibition order under s. 380.2 (preventing a person from "seeking, obtaining or continuing any employment, or becoming or being a volunteer in any capacity, that involves having authority over the real property, money or valuable security of another person"). It can also make a restitution order under s. 380.3. The Canadian courts have held that the offence consists of two distinct elements: :* A prohibited act of deceit, falsehood or other fraudulent means. In the absence of deceit or falsehood, the courts will look objectively for a "dishonest act"; and :* The deprivation must be caused by the prohibited act, and deprivation must relate to property, money, valuable security, or any service. The
Supreme Court of Canada Supreme may refer to: * Supreme (brand), a clothing brand based in New York * Supreme (comics), a comic book superhero * Supreme (cookery), a term used in cookery * ''Supreme'' (film), a 2016 Telugu film * Supreme (producer), hip-hop record produc ...

Supreme Court of Canada
has held that deprivation is satisfied on proof of detriment, prejudice or risk of prejudice; it is not essential that there be actual loss. Deprivation of
confidential information Confidentiality involves a set of rules or a promise usually executed through confidentiality agreements that limits access or places restrictions on certain types of information. Legal confidentiality Lawyers are often required by law to ke ...
, in the nature of a
trade secret Trade secrets are a type of intellectual property that comprise formulas, practices, processes, designs, instruments, patterns, or compilations of information that have inherent economic value because they are not generally known or readily ascert ...
or copyrighted material that has commercial value, has also been held to fall within the scope of the offence.


United States


=Criminal fraud

= The proof requirements for criminal fraud charges in the United States are essentially the same as the requirements for other crimes: guilt must be proved beyond a
reasonable doubt Beyond a reasonable doubt is a legal standard of proof required to validate a criminal conviction in most adversarial legal systems. It is a higher standard of proof than the balance of probabilities (commonly used in civil matters) and is usuall ...
. Throughout the United States fraud charges can be misdemeanors or felonies depending on the amount of loss involved. High value fraud can also trigger additional penalties. For example, in California, losses of $500,000 or more will result in an extra two, three, or five years in prison in addition to the regular penalty for the fraud. The U.S. government's 2006 fraud review concluded that fraud is a significantly under-reported crime, and while various agencies and organizations were attempting to tackle the issue, greater co-operation was needed to achieve a real impact in the public sector. The scale of the problem pointed to the need for a small but high-powered body to bring together the numerous counter-fraud initiatives that existed.


= Civil fraud

= Although elements may vary by jurisdiction and the specific allegations made by a plaintiff who files a lawsuit that alleged fraud, typical elements of a fraud case in the United States are that: #Somebody misrepresents a material fact in order to obtain action or forbearance by another person; #The other person relies upon the misrepresentation; and #The other person suffers injury as a result of the act or forbearance taken in reliance upon the misrepresentation. To establish a civil claim of fraud, most jurisdictions in the United States require that each element of a fraud claim be pleaded with particularity and be proved by a
preponderance of the evidence Burden of proof is a legal duty that encompasses two connected but separate ideas that apply for establishing the truth of facts in a trial before tribunals in the United States: the "burden of production" and the "burden of persuasion." In a lega ...
, meaning that it is more likely than not that the fraud occurred. Some jurisdictions impose a higher evidentiary standard, such as Washington State's requirement that the elements of fraud be proved with clear, cogent, and convincing evidence (very probable evidence), or Pennsylvania's requirement that common law fraud be proved by clear and convincing evidence. The measure of damages in fraud cases is normally computed using one of two rules: #The "benefit of bargain" rule, which allows for recovery of damages in the amount of the difference between the value of the property had it been as represented and its actual value; #Out-of-pocket loss, which allows for the recovery of damages in the amount of the difference between the value of what was given and the value of what was received.
Special damages At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at l ...
may be allowed if shown to have been proximately caused by defendant's fraud and the damage amounts are proved with specificity. Many jurisdictions permit a plaintiff in a fraud case to seek
punitive , England Punishment, commonly, is the imposition of an undesirable or suffering, unpleasant outcome upon a group or individual, meted out by an authority—in contexts ranging from child discipline to criminal law—as a response and deterrent to ...
or exemplary damages.


Pacific Asia


China

Zhang Yingyu's story collection ''
The Book of Swindles ''The Book of Swindles'' (''Piàn jīng'' 騙經), also known by its longer title, ''A New Book for Foiling Swindlers, Based on Worldly Experience'' (''Jiānghú lìlǎn dùpiàn xīnshū'' 江湖歷覽杜騙新書), is said to be the first Chinese ...
'' (available here; ca. 1617) testifies to rampant commercial fraud, especially involving itinerant businessmen, in late Ming China. The journal Science reported in 2017 that fraud is rife in Chinese academia, resulting in numerous article retractions and harm to China's international prestige. ''The Economist'', CNN, and other media outlets regularly report on incidents of fraud or bad faith in Chinese business and trade practices. ''Forbes'' cites cybercrime as a persistent and growing threat to Chinese consumers.


India

In India the criminal laws are enshrined in the
Indian Penal Code The objective of this Act is to provide a general penal code for India. Though not the initial objective, the Act does not repeal the penal laws which were in force at the time of coming into force in India. This was done because the Code does not ...
. It is supplemented by the Criminal Procedure Code and
Indian Evidence Act The Indian Evidence Act, originally passed in India by the Imperial Legislative Council in 1872, during the British Raj, contains a set of rules and allied issues governing admissibility of evidence in the Indian courts of law. Importance The ...
.


Europe


United Kingdom

In 2016 the estimated value lost through fraud in the UK was £193 billion a year. In January 2018 the ''
Financial Times#REDIRECT Financial Times#REDIRECT Financial Times {{R from other capitalisation ...
{{R from other capitalisation ...
'' reported that the value of UK fraud hit a 15-year high of £2.11bn in 2017, according to a study. The article said that the accountancy firm BDO examined reported fraud cases worth more than £50,000 and found that the total number rose to 577 in 2017, compared with 212 in 2003. The study found that the average amount stolen in each incident rose to £3.66m, up from £1.5m in 2003. As at November 2017, fraud is the most common criminal offence in the UK according to a study by Crowe Clark Whitehill, Experian and the Centre for Counter Fraud Studies. The study suggests the UK loses over £190 billion per year to fraud. £190 billion is more than 9% of the UK's projected GDP for 2017 ($2,496 (£2,080) billion according to ''Statistics Times''). The estimate for fraud in the UK figure is more than the entire GDP of countries such as Romania, Qatar and Hungary. According to another review by the UK anti-fraud charity
Fraud Advisory Panel The Fraud Advisory Panel is a UK charitable organisation. Incorporated in 2001, the Panel focuses on offering advice and education to the general public on how to mitigate and avoid fraud. Panel members sometimes participate in government consultat ...
(FAP), business fraud accounted for £144bn, while fraud against individuals was estimated at £9.7bn. The FAP has been particularly critical of the support available from the police to victims of fraud in the UK outside of London. Although victims of fraud are generally referred to the UK's national fraud and cyber crime reporting centre, Action Fraud, the FAP found that there was "little chance" that these crime reports would be followed up with any kind of substantive law enforcement action by UK authorities, according to the report. In July 2016 it was reported that fraudulent activity levels in the UK increased in the 10 years to 2016 from £52 billion to £193bn. This figure would be a conservative estimate, since as the former commissioner of the City of London Police, Adrian Leppard, has said, only 1 in 12 such crimes are actually reported. Donald Toon, director of the NCA's economic crime command, stated in July 2016: "The annual losses to the UK from fraud are estimated to be more than £190bn". Figures released in October 2015 from the Crime Survey of England and Wales found that there had been 5.1 million incidents of fraud in England and Wales in the previous year, affecting an estimated one in 12 adults and making it the most common form of crime. Also in July 2016, the Office for National Statistics (ONS) stated "Almost six million fraud and cyber crimes were committed last year in England and Wales and estimated there were two million computer misuse offences and 3.8 million fraud offences in the 12 months to the end of March 2016." Fraud affects one in ten people in the UK. According to the ONS, most fraud relates to bank account fraud. These figures are separate from the headline estimate that another 6.3 million crimes (distinct from fraud) were perpetrated in the UK against adults in the year to March 2016. Fraud was not included in a "Crime Harm Index" published by the Office for National Statistics in 2016. Michael Levi, professor of criminology at Cardiff University, remarked in August 2016 that it was "deeply regrettable" fraud is being left out of the first index despite being the most common crime reported to police in the UK. Levi said "If you've got some categories that are excluded, they are automatically left out of the police's priorities." The Chief of the National Audit Office (United Kingdom), National Audit Office (NAO), Sir Anyas Morse has also said "For too long, as a low-value but high-volume crime, online fraud has been overlooked by government, law enforcement and industry. It is now the most commonly experienced crime in England and Wales and demands an urgent response."


=England, Wales, and Northern Ireland

= Since 2007, fraud in England and Wales and Northern Ireland has been covered by the Fraud Act 2006. The Act was given Royal Assent on 8 November 2006, and came into effect on 15 January 2007. The Act gives a statutory definition of the criminal offence of fraud, defining it in three classes—fraud by false representation, fraud by failing to disclose information, and fraud by abuse of position. It provides that a person found guilty of fraud is liable to a fine or imprisonment for up to twelve months on summary conviction (six months in Northern Ireland), or a fine or imprisonment for up to ten years on conviction on indictment. This Act largely replaces the laws relating to obtaining property by deception, obtaining a pecuniary advantage and other offences that were created under the Theft Act 1978.


=Scotland

= In Scots law, fraud is covered under the common law and a number of statutory offences. The main fraud offences are common law fraud, uttering, embezzlement, and statutory fraud. The Fraud Act 2006 does not apply in Scotland.


=Governmental Organisations

= The Serious Fraud Office (United Kingdom), Serious Fraud Office is an arm of the Government of the United Kingdom, accountable to the Attorney-General. The National Fraud Authority (NFA) was, until 2014, a government agency co-ordinating the counter-fraud response in the UK. Cifas is a British fraud prevention service, a not-for-profit membership organisation for all sectors that enables organisations to share and access fraud data using their databases. Cifas is dedicated to the prevention of fraud, including internal fraud by staff, and the identification of financial and related crime.


Cost

The typical organization loses five percent of its annual revenue to fraud, with a median loss of $160,000. Fraud committed by owners and executives were more than nine times as costly as employee fraud. The industries most commonly affected are banking, manufacturing, and government.


Types of fraudulent acts

Image:Workathomead.jpg, A possibly fraudulent "Work-at-home scheme, work from home" advertisement The falsification of documents, known as forgery, and counterfeiting are types of fraud involved in physical duplication or fabrication. The "theft" of one's personal information or identity, like one finding out another's social security number and then using it as identification, is a type of fraud. Fraud can be committed through and across many media including Mail and wire fraud, mail, Mail and wire fraud, wire, phone fraud, phone, and the Internet (computer crime and Internet fraud). Given the international nature of the web and ease with which users can hide their location, obstacles to checking identity and legitimacy online, and the variety of hacker techniques available to gain access to Personal identifying information, PII have all contributed to the very rapid growth of Internet fraud. In some countries, tax fraud is also prosecuted under false billing or tax forgery. There have also been fraudulent "discoveries", e.g., scientific misconduct, science, where the appetite is for prestige rather than immediate monetary gain.


Detection

The detection of fraudulent activities on a large scale is possible with the harvesting of massive amounts of financial data analysis, data paired with predictive analytics#Fraud detection, predictive analytics or forensic analytics, the use of electronic data to reconstruct or detect financial fraud. Using computer-based analytic methods in particular allows for surfacing of errors, anomalies, inefficiencies, irregularities, and biases which often refer to fraudsters gravitating to certain dollar amounts to get past internal control thresholds. These high-level tests include tests related to Benford's Law and possibly also those statistics known as descriptive statistics. High-level tests are always followed by more focused tests to look for small samples of highly irregular transactions. The familiar methods of correlation and time-series analysis can also be used to detect fraud and other irregularities.


Anti-fraud provisioning

Beyond laws that aim at prevention of fraud, there are also governmental and non-governmental organizations that aim to fight fraud. Between 1911 and 1933, 47 states adopted the so-called Blue sky law, Blue Sky Laws status. These laws were enacted and enforced at the state level and regulated the offering and sale of security (finance), securities to protect the public from fraud. Though the specific provisions of these laws varied among states, they all required the registration of all securities offerings and sales, as well as of every U.S. stockbroker and brokerage firm. However, these Blue Sky laws were generally found to be ineffective. To increase public trust in the capital markets the President of the United States, Franklin D. Roosevelt, established the U.S. Securities and Exchange Commission (SEC). The main reason for the creation of the SEC was to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting. The SEC was given the power to license and regulate stock exchanges, the companies whose securities traded on them, and the brokers and dealers who conducted the trading.


Further reading

Apart from fraud, there are several related categories of intentional
deception Deception or falsehood is an act or statement which misleads, hides the truth, or promotes a belief, concept, or idea that is not true. It is often done for personal gain or advantage. Deception can involve dissimulation, propaganda and sleight ...
s that may or may not include the elements of personal gain or damage to another individual: * Obstruction of justice * which criminalizes false representation of having been awarded any decoration or medal authorized by Congress for the Armed Forces of the United States


See also

* Bait-and-switch * Caper story, Caper stories (such as ''The Sting'') * breach of contract, Contract fraud * Political corruption, Corruption * Cramming (fraud) * Creative accounting * Crimestoppers * Deception * Electoral fraud * False Claims Act * Federal Bureau of Investigation (FBI) * Financial crimes * Forgery * Fortune telling fraud * Fraud deterrence * Fraud in the factum * Fraud in parapsychology * Fraud Squad (UK) * Friendly fraud * Front running * Geneivat da'at * Great Stock Exchange Fraud of 1814 * Guinness share-trading fraud, famous British business scandal of the 1980s * Hoax * Identity management * Impersonator * Internal Revenue Service (IRS) * Internet fraud * Interpol * Journalism fraud * Mail and wire fraud * Money laundering * The National Council Against Health Fraud * Organized crime * Phishing, attempt to fraudulently acquire sensitive information * Placebo * Police impersonation * Political corruption * Push payment fraud * Quackery * Quatloos.com * Racketeer Influenced and Corrupt Organizations Act (RICO) * SAS 99 * Scam * Secret profits * Shell (corporation), Shell company * Swampland in Florida * Tobashi scheme, concealing financial losses * U.S. Securities and Exchange Commission (SEC) * United States Postal Inspection Service * United States Secret Service * White-collar crime * Wood laundering


References


Further reading

* Edward J. Balleisen ''Fraud: An American History from Barnum to Madoff''. (2017). Princeton University Press. * Fred Cohen ''Frauds, Spies, and Lies – and How to Defeat Them''. (2006). ASP Press. * Green, Stuart P. ''Lying, Cheating, and Stealing: A Moral Theory of White Collar Crime''. Oxford University Press, 2006.
Review Fraud – Alex Copola
Podgor, Ellen S. ''Criminal Fraud'', (1999) Vol, 48, No. 4 American Law Review 1.
The Nature, Extent and Economic Impact of Fraud in the UK. February, 2007.


by Eamon Dillon, published September 2008 by Merlin Publishing * Zhang, Yingyu.
The Book of Swindles: Selections from a Late Ming Collection
'. Columbia University Press, 2017.


External links

*
Association of Certified Fraud Examiners

Immigration Marriage Fraud Amendments of 1986



U.S. Department of Justice Fraud Section
{{Authority control Fraud, Crimes Deception Tort law Property crimes Financial crimes