The Fraud Act 2006 was introduced to set out how a business should deal with fraud. Business owners will need to ensure that they have a policy in place which explains the procedures when faced with fraudulent activity. You can save a lot of time and money by having a fraud policy put in place when you start your business if you do happen to become a victim of fraud. A fraud policy will allow you to act quickly and efficiently to deal with the problem.
The definition of fraud is any dishonest act which is undertaken to gain something or cause a loss to someone else. The Fraud Act 2006 defines three main types of business fraud;
The first is fraud by false representation. False representation is the act of making false statements that are created in order to deceive the person receiving them. A false statement can be made orally or in writing. In terms of the effect that this has on businesses, this Act generally means that they cannot publish material that is misleading, dishonest or deceptive with the intent of gaining from its publication. An example of this would be to make misleading statements about winning awards for the services that the company in question provides.
The second type of fraud is fraud by failing to disclose information. In business law all companies are legally required to disclose details about their share dealings, any contracts that are intended to be shared amongst the directors of the company, information for the company’s investors; such as profits and losses and any kind of knowledge that would normally be expected to be shared in a fiduciary capacity with the company.
The third type of business fraud is fraud by abuse of position. This focuses on the act of those in charge of the company using their power dishonestly in order to gain something whether that be gaining more money or sealing business deals. This section of the Act puts forward that those in charge of companies should work in the company and shareholder’s best interests. They should also not start a transaction which would gain them significant financial benefit while affecting the rest of the company negatively. It is also against the law to use insider information or to manipulate the market in their favour.
All companies must comply with The Fraud Act. If you own a company, the easiest way to make sure that you comply is to put in place a Fraud Prevention Policy. The policy should include you companys’ commitment to combating fraud and corruption wherever it may be found. It should detail what steps will be taken if fraud is found within your company including how to recover any funds and the right to dismiss those that acted fraudulently. You should ensure that your fraud prevention policy is updated regularly and that all staff are made fully aware of it.
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