Managing Fraud Risk: A Practical Guide for Directors and Managers

Fraud and the Law

Introduction

Fraud is a crime in most jurisdictions around the world. It will also be a civil law violation. We look at the different aspects of the criminal law and the civil law as they relate to fraud in Chapter 9. It is vital of course that directors and managers understand the detailed legislation that applies in their own jurisdictions when considering measures to combat fraud and, in particular, when involved in fraud events leading to considerations of dismissing and prosecuting any staff members involved. Indeed, one of my priority points at the outset of any fraud investigation is to consult a suitably skilled and experienced lawyer.

However, the law is not the most helpful place to look when trying to explain to delegates or to clients the meaning of fraud. Generally, the law will define fraud around the terms of intentional deception that we saw when we looked at the auditing standards, and an action that is undertaken for personal gain or to damage another party. The specifics of the definition will vary from one legal jurisdiction to another, however, and the details can sometimes be difficult for the non-resident to grasp. As an example, the position in the US is complicated by the dual system of American federalism whereby the federal law (the supreme law of the land) is supplemented by state law which can, and often does, vary greatly from one state to the next.

The other relevant point about the law is that from time to time it changes. This ...