The Fraud Act 2006: A Comprehensive Guide

The Fraud Act 2006 provides a clear legal framework to prevent, detect, and address fraudulent activities. We guide you through it by unpacking what the Act covers and how to protect your business from fraud.

Key takeaways:

• Fraud carries big risks for businesses if they’re found guilty of committing it or failing to prevent it, including fines and jail time
• The Fraud Act 2006 provides L&D teams with a clear framework to understand, define and recognise fraudulent activity
• Compliance professionals and L&D teams need to demonstrate they have measures in place to prevent fraud, including clear policies and employee training to recognise it.

When it came into force, the Fraud Act 2006 consolidated and modernised related laws in England and Wales, making it easier for prosecutors to bring fraud cases to trial and deter people from committing it.

“Corporate fraud significantly damages confidence in UK companies and ultimately costs the taxpayer. The publication of this guidance means that time is running short for corporations to get their house in order or face criminal investigation.”

Understanding the Fraud Act 2006

New Failure to Prevent Fraud guidance also came into effect on September 1st 2025, making it a punishable crime if businesses don’t put preventative measures in place.

As a result, compliance professionals and learning and development (L&D) teams have a big responsibility to recognise and prevent workplace fraud. Below, we cover the following:

• What is the Fraud Act 2006?
• Making or supplying articles for use in fraud
• What is the sentencing for fraud?
• How to protect your company from fraud
• Fraud Act 2006: FAQs

What is the Fraud Act 2006?

The Fraud Act 2006 came into effect on January 15th 2007, providing businesses with a clear framework to help them prevent, detect and address fraudulent activities. It also consolidated and modernised existing fraud laws in England and Wales, making it easier for prosecutors to bring cases to trial and prevent people from committing it. The law covers three ways of committing fraud: false representation, failing to disclose information and abuse of position.

The Act also clarifies what fraud is – a dishonest action, intended to gain a financial advantage or cause a loss to another person. However, victims don't need to have suffered a loss for a prosecution to be brought.

The three main offences in the Fraud Act 2006 in more detail:

1. Fraud by false representation

Fraud by false representation occurs when a person dishonestly makes a false representation to another person with the intention of gaining for themselves or someone else, causing loss to another or exposing them to a risk of loss. The false representation can be made in writing, orally or by conduct.

Examples of fraud by false representation include:

• Making a false claim on an insurance policy
• Selling a stolen item
• Obtaining a loan by providing false information about your income or credit history

2. Fraud by failing to disclose information

Fraud by failing to disclose information occurs when you have a legal duty to disclose information to another person and dishonestly fail to do so, intending to gain for yourself or someone else, cause loss to another or expose them to a risk of loss.
Examples of fraud by failing to disclose information include not:

• Divulging your criminal record when applying for a job
• Revealing you have a serious medical condition when applying for life insurance

3. Fraud by abuse of position

Fraud by abuse of position occurs when a person in a position of trust dishonestly abuses it to gain for themselves or someone else, cause a loss to another person or expose them to a risk of loss.

Examples of fraud by abuse of position include:

• A director using company money to pay for personal expenses
• A bank employee transferring money from a customer's account to their ow

Making or supplying articles for use in fraud

It’s also an offence to make or supply articles (any programme or data held in electronic form) knowing they’ll be used in a fraudulent activity. It targets those who knowingly provide the tools or resources used to perpetrate fraudulent activities.

Examples of making or supplying these articles include:

• False passports, driving licences, or other identification documents
• Fake branded products, such as luxury watches or handbags
• Software or hardware used to gain unauthorised access to computer systems

Obtaining money or property by deception

The Fraud Act 2006 makes it a criminal offence to trick others into giving you money or property. This can be done in a variety of ways, including making false statements, concealing information, or abusing a position of trust.

Examples of obtaining money or property by deception include:

• Getting a loan by providing false information about your income or credit history
• Using someone else's identity to obtain credit cards, loans, or other financial benefits
• Sending fraudulent emails or messages to trick people into revealing personal or financial information

Obtaining services by deception

As the name suggests, this offence occurs when a person obtains services by lying about their intent or ability to pay. The deception can occur through false representation, failure to disclose information or an abuse of position.

Examples of obtaining services by deception include:

• Using a stolen credit card to pay for a hotel room
• When a company director knows their business is trading insolvently and cannot pay bills

False accounting

This offence occurs when a person makes an entry in a book or account that’s false or misleading, or omits to record something – for example, falsifying a company's accounts to hide a loss or making an incorrect entry in a cash book to conceal a theft.

What is the sentencing for fraud?

The maximum prison sentence for fraud under the Fraud Act 2006 is 10 years. However, the actual punishment depends on the seriousness of the offence. If you’re convicted of fraud, you may also be ordered to pay a fine or make restitution to the victim.

Fines vary depending on the type of fraud. As of April 2025, Companies House issued 234 penalties amounting to just £58,500 under the Failure to Prevent Guidance.

For larger businesses found guilty of committing fraud, the amount may be significantly higher, depending on how serious it is and its impact.

For example, a Birmingham-based waste packaging director was fined over £470,000 in 2025 after being found guilty of committing fraud by false representation. If he couldn’t pay, he faced three years in prison.

Criteria addressed during fraud cases

To be found guilty under the Fraud Act 2006, prosecutors must prove the following:

Proving the “Mens Rea” of the offence:
This refers to the mental element of the crime. In other words, the intention of the person who commits the fraud. The prosecution must prove the defendant acted dishonestly and intended to gain a financial advantage or cause a loss to another person.

Proving the causal link between the fraud and the loss:
The prosecution must also prove the fraud caused loss to the victim. This can be difficult, especially when multiple factors contribute.

Identifying the victim of the fraud:
In some cases, it’s hard to identify the victim of fraud. This often happens when fraud is committed against a company or other organisation.

Quantifying the loss caused by the fraud:
The prosecution must also quantify the loss caused by the fraud. This can be tricky when the loss isn’t easily measurable.

How to protect your company from fraud

Before implementing protective measures, it's crucial to identify the specific risks your company faces via a fraud risk assessment. For example, consider how you share personal information such as names, addresses and debit card details, which cybercriminals often target, and think about factors like the industry, business size, and the nature of your operations.

You should also establish a fraud risk management framework to ensure accountability and provide a roadmap across all levels of the organisation.

Once you’ve carried out a fraud risk assessment and identified and evaluated potential risks, below are pointers to keep in mind when reviewing your existing fraud protection measures.

1. Implement robust internal controls

Ensure no single individual has complete control over financial transactions (segregation of duties), monitor and review continuously, and restrict access to sensitive information and systems to authorised personnel only.

2. Employee training and awareness

Educate employees about common fraud schemes and how to recognise and report suspicious activity. Emphasise the importance of ethical behaviour and compliance with company policies.

Training should be ongoing and tailored to different roles and departments. Embedding a culture of awareness through staff training is fundamental, because it supports other fraud minimisation strategies.

3. Third-party risk management

Conduct thorough due diligence on suppliers, vendors and business partners, and incorporate strong contractual terms to protect your company's interests.

4. Invest in software solutions

Implement fraud detection software and use automated tools, artificial intelligence and data analytics to:

• Monitor transactions for unusual patterns
• Detect high-risk activities in real time
• Identify anomalies that may indicate fraud
• Protect sensitive information by encrypting it at rest and in transit.

5. Regular audits and reviews

Conduct regular internal audits to assess the effectiveness of your controls and procedures and identify potential vulnerabilities and anomalies, and consider engaging external auditors for an independent evaluation.

6. Incident response plan

Develop a comprehensive plan for responding to fraud incidents, and establish clear communication protocols for reporting and investigating incidents. For example, whistleblowing hotlines and anonymous systems allow employees to raise concerns without fear of retaliation.

Fraud Act 2006 FAQs

What is a summary of the Fraud Act 2006?

The Fraud Act 2006 is legislation that clearly defines fraud, helping businesses recognise, prevent and address it. It also makes it easier for prosecutors to bring cases to trial, because it’s measured against three main offences: fraud by false representation, failing to disclose information and abuse of position.

What evidence is used in fraud cases?

To find a person guilty of fraud, prosecutors must prove the offence and the loss it caused the victim. They can use documents like bank statements, accounting records, messages, witness statements and more to prove it.

What’s the difference between fraud and bribery?

Fraud generally involves dishonestly obtaining a gain or causing a loss, while bribery involves offering, promising, giving, requesting or accepting an improper advantage.

Why is Fraud Act 2006 training important?

Fraud awareness training helps employees recognise common risks, understand their responsibilities and know how to report suspected cases.

Want to learn more about Fraud Prevention?

If you’re looking for focused training, our Fraud Prevention Training Hub offers a complete solution for your compliance programme. Courses include:

• Fraud Prevention Training Course
• Identity Fraud Training Course
• Understanding Failure to Prevent Fraud Training Course

Our e-learning courses are designed to engage employees, including our microlearning, which supports knowledge retention.

Our Compliance Portal also features a range of tools to digitise and automate your compliance learning. These include our:

• Learning Management System (LMS)
• Policy Hub
• Compliance Registers
• Compliance Surveys
• Compliance Declarations
• Aida by Skillcast

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