Fraud by Abuse of Position

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.

Examples of where there can be an abuse of position relationship can include :-

• company directors - examples include misusing company funds for personal expenses, diverting business opportunities to personal ventures or setting up hidden arrangements with suppliers/customers for personal benefit.

• trustees - whether charity trustees or trustees for example of a family trust.

• executors - examples include false estate accounts, undervaluing assets or misappropriating funds from the estate.

• charity trustees - examples include diverting charitable donations to personal accounts, claiming inflated expenses, creating false charitable activities or setting up shell companies to provide 'services' to the charity.

• attorneys under a power of attorney.

Other examples we have advised on include where a care worker stole money from an elderly client and where a financial advisor gave misleading investment advice to a client for personal gain.

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.

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 offences, 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.

Potential defences

Common defences and tactics include :-

• Lack of intention – including asserting that there was a genuine mistake

• No personal gain - the actions did not result in any financial gain for the accused.

• Authorised activity - actions were within the scope of authority and not an abuse of 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 organisations should have clear policies and procedures in place to prevent and detect fraud.

• Whistleblower protection - 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.

We have dealt with many abuse of position cases, often representing defendant clients. We also sometimes advise clients who suspect abuse of position and can advice on the investigation or a civil claim or private prosecution.

Please do get in contact to discuss your situation in the strictest confidence.