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English fraud law will close loopholes, says expert

Proposed changes to English fraud legislation will result in more convictions, according to a litigation specialist who says that the laws need to be updated to take account of advancing technology.24 Oct 2006

The Government has drafted a Fraud Bill which is before Parliament and could be passed this autumn. It eliminates a number of different fraud crimes and creates a new single offence of fraud. According to Sean Elson, a senior associate at Pinsent Masons, the law firm behind OUT-LAW, the changes will make convictions more likely.

"[The changes] should enable the authorities to close a number of legal loopholes that are currently open to abuse by fraudsters as well as increasing the chances of bringing charges against an individual and obtaining a successful conviction, especially in the most complex cases," said Elson. "They will ensure greater clarity and should be welcomed by the business community."

The law, if passed, will create a new offence of fraud, which it will be possible to commit in one of three ways. Making a false representation; failing to disclose information; and abuse of a position will all qualify as fraud. Existing offences such as theft, corruption, false accounting, forgery and counterfeiting will continue to be offences.

In the Regulatory Impact Assessment (RIA) carried out into the proposed law, the Home Office said that the aim of the law was to address loopholes. "The main risk is that developing technology enables fraudsters to exploit gaps in the current law, for example on fraud relating to deceiving machines and the possession, in the home, of personal financial data and computer programmes etc, to carry out frauds," said a Home Office statement on its RIA.

"The risk of changing the law is that of unforeseen consequences. In the light of reactions to the Consultation Paper, we have reduced that risk to a minimal level by retaining the wide common law offence of 'conspiracy to defraud' (contrary to the Law Commission's original recommendation). This provides a 'safety net' for any cases conceivably not caught by other charges," it said.

The redefinition of fraud will help employers to prosecute employees, particularly in incidents relating to computer and IT assisted fraud, said Elson. "Technology is at the heart of most cases of 'white collar crime' these days so a revamp of the fraud laws is long overdue," he said.

The Fraud Bill will, by closing loopholes in the existing law, increase the numbers of prosecutions, but does not provide a guarantee that cases will be successful.

"Serious fraud investigations are complex and time consuming and without additional resources for the investigating authorities such as the Serious Fraud Office, HM Customs & Excise and the police, individual cases will continue to be prioritised and a new aggressive pursuit of fraudsters is highly unlikely," said Elson. "The emphasis will naturally turn to the courts and the imposition of stiffer penalties to act as the key deterrent."

As well as clearing up definitions of fraud, the Bill proposes a reduction in the number of jury trials in favour of judge-only trials and allowing for crimes relating to the intention to commit fraud, rather than only on fraudulent outcomes.