What legislation covers Fraud by Abuse of Position?
This offence is covered by Section 4 of the Fraud Act 2006.
What is Fraud by Abuse of Position?
The offence occurs if a person:-
- occupies a position in which he was expected to safeguard, or not to act against, the financial interests of another person
- abused that position
- intending by that abuse to make a gain/cause a loss
It is important to note that, in terms of this legislation, the abuse of position may mean an omission as opposed to an act.
Also, it should be noted that the terms ‘dishonestly’, ‘gain’ and ‘loss’ have legal definitions which are outlined within the Act.
What does the Act mean, when it refers to the ‘abuse of position’?
The Law Commission has given a lengthy explanation for the term ‘position’, as referred to in Section 4 of the Act but, in brief, this means a position of trust and one which carries more than a moral obligation.
As such, it could include company directors, trustees, business partners or employees.
Interestingly, the term ‘abuse’ is not defined in the Act, so its ordinary meaning applies.
Is this legislation focused on the offence, or the offender?
As with other Section 1 offences, Fraud by Abuse of Position is offender focused.
It does not matter if a person is successful in their attempt, or whether an actual gain or loss is made.
The offence is complete once the abuse of position (act) is carried out.
What types of conduct would constitute this offence?
The CPS gives the following non-exhaustive list of behaviours, which would give rise to a charge under Section 4:-
- an employee of a software company who uses his position to clone software products with the intention of selling the products on his own behalf;
- where a person is employed to care for an elderly or disabled person and has access to that person’s bank account but abuses that position by removing funds for his own personal use. (This may also be theft);
- an attorney who removes money from the grantor’s accounts for his own use. The Power of Attorney allows him to do so but when excessive this will be capable of being an offence under Section 4;
- an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead;
- a trustee who dishonestly acts outside the terms of a trust deed in order to produce a gain or loss for himself or others;
- a director of a company who dishonestly makes use of knowledge gained as a director to make a personal gain;
- an employee who abuses his position in order to grant contracts or discounts to friends, relatives and associates;
a waiter who sells his own bottles of wine passing them off as belonging to the restaurant R v Doukas 1 All E.R. 1071.;
- a tradesman who helps an elderly person with odd jobs, gains influence over that person and removes money from their account (This may also be theft but see the guidance on the Public Interest criteria above for the Fraud offences);
- the person entrusted to purchase lottery tickets on behalf of others again, this will probably be theft as well.
If the success of the enterprise has no bearing on whether an offence has taken place, why is this outcome still important?
In line with all other Section 1 offences, the success (or otherwise) of the act, the fact that there are consequences, and the reach of such consequences, are important factors in terms of sentencing, compensation and confiscation. This is why evidence relating to same is tracked and collated.
It is often the evidence relating to gain (or loss) which proves beyond reasonable doubt that a person has committed the offence.
How is a charge drafted for this offence?
The important factors when drafting the charge are:-
- the nature of the relationship; and
- the nature of the specific abuse of position which took place
Both of the above should be detailed in the particulars of the charge, or the indictment.
If the abuse happened on more than one occasion, or different types of abuse of position took place, then additional charges should be drafted.
Is the gain or loss, which occurred as a result of the abuse of position, mentioned in the charge?
No. There is no mention made in the charge, or the indictment.
Gain or loss is, however, taken into account for the purposes of sentencing, compensation and confiscation.
What factors are taken into account when sentencing for this offence?
The first step is assessing the offence category.
This is done by establishing culpability by establishing the following factors: the offender’s role; the extent to which the offence was planned; and the sophistication with which it was carried out.
In addition, the degree of harm caused is also established by assessing actual, intended or risked loss (in financial terms).
Then a further assessment is made, this time in relation to the impact of the offence on the victim. This takes account of any degree of detrimental effect on the victim – financial or otherwise – plus victim’s vulnerability (if applicable).
What are the sentencing powers for this offence?
The maximum penalty for Fraud by Abuse of Position is a 12 month custodial sentence (on summary conviction) or 10 years’ imprisonment on conviction on indictment.