Fraud
In law, fraud is intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate civil law or criminal law, or it may be an element of another civil or criminal wrong despite itself causing no loss of money, property, or legal right. The purpose of fraud may be monetary gain or other benefits, such as obtaining a passport, travel document, or driver's licence. In cases of mortgage fraud, the perpetrator attempts to qualify for a mortgage by way of false statements.
Terminology
Fraud can be defined as either a civil wrong or a criminal act. For civil fraud, a government agency or person or entity harmed by fraud may bring litigation to stop the fraud, seek monetary damages, or both. For criminal fraud, a person may be prosecuted for the fraud and potentially face fines, incarceration, or both.Civil law
In common law jurisdictions, as a civil wrong, fraud is considered a tort. While the precise definitions and requirements of proof vary among jurisdictions, the requisite elements of fraud as a tort generally are the intentional misrepresentation or concealment of an important fact upon which the victim is meant to rely, and in fact does rely, to the detriment of the victim. Proving fraud in a court of law is often said to be difficult as the intention to defraud is the key element in question. As such, proving fraud comes with a "greater evidentiary burden than other civil claims". This difficulty is exacerbated by the fact that some jurisdictions require the victim to prove fraud by clear and convincing evidence.In cases of a fraudulently induced contract, fraud may serve as a legal defence in a civil action for breach of contract or specific performance of a contract. Similarly, fraud may serve as a basis for a court to invoke its equitable jurisdiction. The remedies for fraud may include rescission of a fraudulently obtained agreement or transaction, the recovery of a monetary award to compensate for the harm caused, punitive damages to punish or deter the misconduct, and possibly others.
Criminal law
In common law jurisdictions, as a criminal offence, fraud takes many different forms, some general and some specific to particular categories of victims or misconduct. The elements of fraud as a crime similarly vary. The requisite elements of perhaps the most general form of criminal fraud, theft by false pretense, are the intentional deception of a victim by false representation or pretense with the intent of persuading the victim to part with property and with the victim parting with property in reliance on the representation or pretense and with the perpetrator intending to keep the property from the victim.Types of fraud
The falsification of documents, known as forgery, and counterfeiting are types of fraud involved in physical duplication or fabrication. The "theft" of one's personal information or identity, like finding another's social security number and then using it as identification, is a type of fraud. Fraud can be committed through and across many media including mail, wire, phone, and the Internet.Given the international nature of the web and the ease with which users can hide their location, obstacles to checking identity and legitimacy online, and the variety of hacker techniques available to gain access to PII have all contributed to the very rapid growth of Internet fraud. In some countries, tax fraud is also prosecuted under false billing or tax forgery. There have also been fraudulent "discoveries", e.g., science, where the appetite is for prestige rather than immediate monetary gain. A hoax is a distinct concept that involves deliberate deception without the intention of gain or of materially damaging or depriving a victim.
Internal fraud
Internal fraud, also known as "insider fraud", is fraud committed or attempted by someone within an organization such as an employee.Commodities fraud
The illegal act of obtaining a certain amount of currency in accordance with a contract that promises the later exchange of equated assets, which ultimately never arrive, is a type of fraud, known as commodities fraud. Alternatively, the term can relate to the failure of registering in an exchange, the act of deliberately providing falsified information to clients, the action of executing transactions with the sole purpose of making a profit for the payee, and the theft of client funds.Detection
The detection of fraudulent activities on a large scale is possible with the harvesting of massive amounts of financial data paired with predictive analytics or forensic analytics, the use of electronic data to reconstruct or detect financial fraud. Using computer-based analytic methods in particular allows for the surfacing of errors, anomalies, inefficiencies, irregularities, and biases which often refer to fraudsters gravitating to certain dollar amounts to get past internal control thresholds. These high-level tests include tests related to Benford's Law and possibly also those statistics known as descriptive statistics. High-level tests are always followed by more focused tests to look for small samples of highly irregular transactions. The familiar methods of correlation and time-series analysis can also be used to detect fraud and other irregularities.Cost
Participants of a 2010 survey by the Association of Certified Fraud Examiners estimated that the typical organization loses five per cent of its annual revenue to fraud, with a median loss of $160,000. Fraud committed by owners and executives was more than nine times as costly as employee fraud. The industries most commonly affected are banking, manufacturing, and government.By region
Asia
China
In China, according to the Criminal Law of the People's Republic of China, the Crime of Fraud refers to the "criminal act of deceiving and obtaining public or private property". According to Article 266 of the Criminal Law:- Those who commit fraud involving a "relatively large amount" of public or private property shall be sentenced to fixed-term imprisonment of not more than three years, criminal detention, or injunction control with community correction, and may additionally or solely be fined.
- If the amount involved is "large" or there are other serious circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and shall also be fined.
- If the amount involved is "particularly large" or there are other particularly serious circumstances, the offender shall be sentenced to fixed-term imprisonment of over ten years or life imprisonment and shall also be fined or have their property confiscated.
India
In India, the criminal laws are enshrined in the Indian Penal Code, supplemented by the Criminal Procedure Code and Indian Evidence Act.Europe
United Kingdom
Since 2007, fraud in England and Wales and Northern Ireland has been covered by the Fraud Act 2006. The Act gives a statutory definition of the criminal offence of fraud, defining it in three classes: fraud by false representation, failure to disclose information, and by abuse of position. It provides that a person found guilty of fraud is liable to a fine or imprisonment for up to six months on summary conviction, or a fine or imprisonment for up to ten years on conviction on indictment. This Act largely replaces the laws relating to obtaining property by deception, obtaining a pecuniary advantage and other offences that were created under the Theft Act 1978.As of 2025, the UK has a number of government agencies and services for the detection, prevention and management of fraud, working with a variety of private and public sector bodies to share information and formulate policy. These include the primary enforcement authorities: the National Crime Agency, HM Revenue and Customs, the Financial Conduct Authority, the Serious Fraud Office and the Crown Prosecution Service, together with agencies such as the UK Financial Intelligence Unit, City of London Police, the National Fraud Intelligence Bureau, and the National Cyber Crime Unit. The National Economic Crime Centre exists to coordinate the UK’s response to economic crime overall.
Statistics
Scotland
In Scots law, fraud is covered under the common law and a number of statutory offences. The main fraud offences are common law fraud, uttering, embezzlement, and statutory fraud. The Fraud Act 2006 does not apply in Scotland.North America
Canada
Section 380 of the Criminal Code provides the general definition of fraud in Canada:In addition to the penalties outlined above, the court can also issue a prohibition order under s. 380.2. It can also make a restitution order under s. 380.3. The Canadian courts have held that the offence consists of two distinct elements:
The Supreme Court of Canada has held that deprivation is satisfied on proof of detriment, prejudice or risk of prejudice; there does not have to be actual loss. Deprivation of confidential information, in the nature of a trade secret or copyrighted material that has commercial value, has also been held to fall within the scope of the offence.