Fraud by abuse of position
Sat 30 December 2023
Under English law, fraud by abuse of position is a criminal offence defined in Section 4 of the Fraud Act 2006.
The offender must be in a position where they are expected to safeguard or not act against the financial interests of another person. This could include roles like company director, employee, trustee or attorney under a power of attorney.
The criminal offence does not require proof of actual loss but does require intent. The accused must have abused their position for personal gain or to cause loss to another person. This could involve misusing company funds, diverting resources, or engaging in deceptive accounting practices.
The defendant must have intended to make a financial gain for themselves or someone else, or to cause a financial loss to another person.
Examples of fraud by abuse of position
- Embezzlement: Stealing money or other assets entrusted to the abuser.
- Bribery: Accepting or offering payments or favours in exchange for preferential treatment.
- Insider trading: Using non-public information to make profits on the stock market.
- Bid rigging: Colluding with others to manipulate bids for contracts or projects.
- False accounting: Misrepresenting financial records for personal gain.
Examples in practice we have advised on include where a company director siphoned off funds from for their own personal use, a care worker stealing money from an elderly client and where a financial gave misleading investment advice to a client for personal gain.
Sentences for fraud by abusing position
The range of potential penalties for fraud by abuse of position spans from fines and community orders to imprisonment, depending on the severity of the offense.
For cases heard in the Magistrates' Court, typically involving less substantial sums or isolated incidents, the maximum custodial sentence is 12 months. However, the most serious cases, often characterised by multiple offenses, large amounts of money, and protracted periods of abuse are tried by jury at the Crown Court. In these instances, prison sentences can extend up to 10 years.
It's essential to bear in mind that the specific sentence will hinge on the precise facts of each case and the current sentencing guidelines in place.
Common defences and tactics where we advise defendant clients include :-
- Lack of intention – which normally involves the element of dishonesty and/or asserting that there was a genuine mistake
- No personal gain - Your actions did not result in any financial gain for yourself or another person.
- Authorised activity - actions were within the scope of your authority and not considered an abuse of your position.
- Insufficient evidence - The prosecution's case lacks sufficient evidence to prove beyond a reasonable doubt that you committed the offense.
- Evidence was Improperly obtained - the prosecution obtained evidence through illegal means, making it inadmissible in court.
Preventing abuse of position
There are several steps that can be taken to prevent and detect fraud by abuse of position:
- Strong internal controls - companies and organizations should have clear policies and procedures in place to prevent and detect fraud.
- Whistleblower protections - encouraging employees to report suspected wrongdoing without fear of retaliation is crucial.
- Regular audits and reviews - independent audits and reviews can help to identify red flags and potential fraud.