Course: Criminal Law
In criminal law, fraud refers to the act of dishonestly deceiving someone for personal gain, typically acquiring money, property, or services.
Let’s look more closely at fraud, a white-collar crime. White-collar crimes are offenses committed by individuals, often in business settings, and do not involve violence. Fraud is one such crime. You might think of it as tricking or deceiving someone else to get something valuable.
There are countless ways that people can commit fraud. It might involve lying about something significant, not telling the whole truth when it’s needed, or taking advantage of a position of trust. The goal of the fraudster is always the same: to get something valuable that doesn’t rightfully belong to them.
The Elements of Fraud
Fraud isn’t a simple act. It usually includes several steps or elements. Understanding these can help us identify when fraud is happening.
First, there’s the material misrepresentation of facts. That’s a fancy way of saying someone lied about something important or didn’t share important information. For example, if someone sells a car but doesn’t mention that it has a major engine problem, that’s a misrepresentation.
Next, there’s the intent to deceive. This means the person committing fraud knows they’re lying or not telling the full truth. They’re doing it on purpose to trick someone.
Thirdly, the victim of the fraud has to rely on the false information. This means they must make a decision based on the lie or the incomplete truth that the fraudster provides.
Lastly, there needs to be a financial or property loss. This means that the victim of the fraud ends up losing money or property because of the fraudster’s deception.
Types of Fraud
Fraud can take on many forms. Here are some examples:
- Ponzi Schemes are when fraudsters convince people to invest money, promising high returns. The fraudster uses new investors’ money to pay previous investors, creating an illusion of profit.
- Identity fraud involves stealing another person’s personal information to commit theft, usually of money or credit.
- Investment fraud tricks people into investing in false or misleading investment opportunities.
- Insurance fraud involves false insurance claims to receive undeserved insurance money.
- Bank fraud happens when someone uses illegal means to receive money or assets from a bank or its customers.
- Credit card fraud includes unauthorized use of someone’s credit card information.
- Healthcare fraud involves false claims to health insurance providers to get unearned benefits.
The consequences of fraud can be severe. They vary based on the location, how serious the crime is, and how much loss the victim suffers. Consequences can range from fines to spending a long time in prison.
Fraud as Per the Model Penal Code
The Model Penal Code (MPC), while not a law itself, provides a uniform set of guidelines that many jurisdictions use to construct their own laws. The MPC offers clear definitions and parameters for many crimes, including fraud.
Under the MPC, fraud isn’t described as a single crime but is spread across various offenses. However, some common elements are shared by these offenses, which give us a comprehensive understanding of what constitutes fraud.
The first element is “deception”. Deception could mean creating or reinforcing a false impression, preventing someone from acquiring information that could affect their judgment or failing to correct a false impression when there is a duty to do so. For example, if a car salesman knows there’s a fault with a vehicle and doesn’t disclose this to the buyer, he’s using deception.
Secondly, fraud requires “purpose”. The individual committing the act must have a specific intent to deceive or defraud. This implies that the action is not accidental but is done with the aim of causing harm or loss to another party.
The third element is that there must be “reliance” on the deceptive act or information by the victim. This means the individual who is being deceived must act on the deceptive information in a way that leads to harm or loss. For example, if the buyer purchases the faulty car believing it to be in perfect condition, they have relied on the salesman’s deception.
Lastly, the fraudulent action must result in a “loss”. The loss could be financial or involve property. Using the same example, if the buyer later discovers the fault and has to pay for repairs, they have suffered a loss.
Each jurisdiction may have varying definitions and requirements, but these fundamental elements defined by the MPC form the core of what constitutes fraud.