Fraud, Forgery and Identity Offences

The new additions to the Crimes Act 1900 NSW

Overview

• 11 new offence provisions– 4 new offences relating to Fraud– 3 new offences relating to Identity Information– 4 new offences relating to Forgery – I will not be focusing on

these new offences. They very closely replicate the existing make/use false instrument charges under the old s300 offences. Section 256 creates new offences of possessing implements for the making of false instruments – a credit card skimmer is a good example. Those new offences carry a three year term.

• Over fifty previous sections repealed• New sections are broader and less specific Note that

the new definitions are technical and very specific

• Penalties have risen significantly

New Section 4B – Dishonesty

1.Dishonesty means dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to the standards of ordinary people.

2.In a prosecution for an offence, dishonesty is a matter for the trier of fact.

The Dishonesty Test• Test comes from R v Ghosh [1982] 3 WLR 110, at 118-

119• This is the test in the Criminal Code (e.g. 130.3)and

parts of the Corporations Law (e.g. 1041G)• It was criticised by the High Court in R v Peters [1998]

HCA 7 and R v Spies [2000] HCA 43• They pointed out that the subjective limb of the test

requires an analysis of both what the defendant knew and what the defendant thought about what they knew I.e. Did they realise that the ordinary person would consider what they were doing was dishonest?

• - Consider what this means – NOT ‘Is my act dishonest?’ BUT ‘Would the ordinary person consider my act to be dishonest?’

• This is what the HC said in Peters by Toohey and Gaudron at par.16– ‘There are also practical difficulties involved in the Ghosh test. Those difficulties arise

because, in most cases where honesty is an issue, the real question is whether an act was done with knowledge or belief of some specific thing or with some specific intent, not whether it is properly characterised as dishonest.’

– Further at par.17 ‘…the test is likely to confuse rather than assist in deciding whether an act was or was not done dishonestly.’

– McHugh described what he considered to be dishonest (par.84)• ‘Intention to prejudice the rights or interests of another’• ‘Making or taking advantage of representations which are known to be false’• ‘Concealing facts that they had a duty to disclose’• ‘Engaging in conduct that they had no right to engage in’

• Practically, there is a need to identify the act which is said to be dishonest. I’ll return to how we find the dishonest act later.

• What evidence could the prosecution rely on to show that an individual knew that an ordinary person would consider their actions to be dishonest? The answer is not easy.– A British Case study (www.honestylab.com) found that there is very little consistency in determining what people

consider to be dishonest.

• One would expect that this tougher definition ought to assist the accused. But it probably won’t.• The evidence the prosecution can rely upon is actually expanded by this definition. If a person has

been previously had their actions scrutinised or received punishment for previous actions, then they may have become aware that their actions were dishonest.– E.g. A paperboy gets paid for how many pamphlets he delivers. So he attends a high rise

apartment building and dumps hundreds of them in the foyer. His boss finds out and tells him that isn’t allowed and he has to deliver each pamphlet to a mailbox.

– He does it again and gets caught.– Whether his actions were dishonest according to the ordinary standards and knowingly so the

first time is unclear, but having been specifically told by his boss how he must behave, there is little doubt that his actions the second time are dishonest, and that he must know that they are dishonest because his boss has told him so.• This is an example of him engaging in conduct which he had no right to engage in.

• This example could be extrapolated to many employment situations, where a great number of frauds occur. An individual’s personnel file will now be relevant. Any discipline they’ve previously received will be relevant. Is the person in touch with community standards?

• Similarly, in a Cth matter we used an individual’s previous failed directorships of companies to show that he understood the effects of trading whilst insolvent on creditors. That charge was under s184(2) of the Corporations Act.

• The fact that an individual was otherwise a good or bad employee or businessman would be irrelevant normally but can now be used to show that they have become aware of the higher standards expected of them.

• The effect of this is more than just esoteric. Magistrates and jurors inevitably use a natural synthesis to determine whether a person has acted dishonestly, and inevitably they’ll misunderstand the test they must apply.

• So as practitioners it will be important to only allow in evidence which is strictly relevant, and not allow the trier of fact to make value judgements based on material which should only be used to establish whether they were aware of the standards of ordinary people.

192C Obtaining property belonging to another

(1) For the purposes of this Part, a person obtains property if:(a) the person obtains ownership, possession or control of the property for himself or herself or for another person, or(b) the person enables ownership, possession or control of the property to be retained by himself or herself or by another person, or(c) the person induces a third person to do something that results in the person or another person obtaining or retaining ownership, possession or control of the property.

Definition of Obtaining Property• This definition is now used in the three major fraud offences

192E-G• Very similar to the definition in the Commonwealth Criminal

Code – s134.1• Generally replicates common law understanding of what

transfer of property is for other larcenies• Subsections (2) and (4) codify the existing understanding that

there must be an intention to permanently deprive but that intention is manifested if the person treats the property as if it were their own

• Subsection (b) is broadly designed for situations which would have previously attracted s178A.

• Subsection (c) covers innocent agencies like deceiving a real estate agent into transferring money from a property sale to the wrong person

192D Obtaining financial advantage or causing financial disadvantage(1) In this Part, obtain a financial advantage

includes:(a) obtain a financial advantage for oneself or

for another person, and(b) induce a third person to do something that

results in oneself or another person obtaining a financial advantage, and

(c) keep a financial advantage that one has,whether the financial advantage is permanent or temporary.

(2) In this Part, cause a financial disadvantage means:

(a) cause a financial disadvantage to another person, or

(b) induce a third person to do something that results in another person suffering a financial disadvantage, whether the financial disadvantage is permanent or temporary.

•This definition also comes from the Cth Code•Similar in effect to s192C – obtain property•Can obtain directly, induce another, or simply retain property•Subsection (2)(b) - Financial advantage can be temporary – this reflects existing law – deception which buys someone time to repay a debt will count Matthews v Fountain [1982] VR 1045

192E Fraud(1) A person who, by any deception,

dishonestly:(a) obtains property belonging to another, or(b) obtains any financial advantage or causes any financial disadvantage,

is guilty of the offence of fraud.

Maximum penalty: Imprisonment for 10 years.(2) A person’s obtaining of property belonging

to another may be dishonest even if the person is willing to pay for the property.

(3) A person may be convicted of the offence of fraud involving all or any part of a general deficiency in money or other property even though the deficiency is made up of any number of particular sums of money or items of other property that were obtained over a period of time.

Apparently a very simple section.

Possible break up of the elements of the new Fraud offence:

1. The accused commits an act of deception; and by that act;

2. obtains property belonging to another, or obtains a financial advantage or causes financial disadvantage.

3. The obtaining of that property or advantage or causing of that loss is dishonest (as defined)

• The element of dishonesty may now be separated, as it is in similar Commonwealth Legislation (s184(2) Corporations Act, s134.1 Criminal Code) – although bear in mind the use of physical/fault elements in the Cth Code.

• It is useful to separate out the dishonesty for analysis purposes given its greater complexity now

Comparison with old sectionsSection 178BA

• It always required a deception, dishonesty and a causal link between the obtaining and the deceptive conduct. R v Ho (1989) 39 A Crim R 145

• This coincides with s192E if the first limb of the definition of ‘obtains property’ is used.

• If they could be convicted under s178BA before, then they probably can be convicted under s192E. (but see further discussion of dishonesty below)

•Elements1.The accused, by a deception2.Dishonestly obtained for the accused or another;3.Money, valuable thing or financial advantage

It doesn’t look very different. The new definition of dishonesty is the big difference.

Comparison with old sectionsSection 178A

• Elements1. The accused collected or received the

money or valuable security2. Upon terms that he or she should

deliver, account for, or pay, the whole or some part of such money.

3. The accused fraudulently misappropriated the money or failed to account for it in violation of the terms upon which he collected or received it.

• This looks completely different• Misappropriation cases will need to rely

on s192E(1)(b), being obtaining financial advantage or causing financial disadvantage

•This section had very particular and specific requirements. Andrews v The Queen 126 CLR 198

•The section existed for situations in which money was legally obtained and fraudulently kept or spent.

•This kind of offending will now often be caught as a case of dishonest obtaining of a financial advantage or causing of a financial disadvantage.

•The old offence required specific particularisation of the terms of receipt. This will not be lost entirely. In order to establish deception, it may well be necessary to establish that terms existed, and were deliberately ignored. (DPP v Ray [1974] AC 370 and R v Hamilton (1991) 92 Cr App R 54)

Draft Charge

The[ accused] on [date] at [place] in the State of New South Wales, by a deception, namely [describe deception], dishonestly obtained property belonging to another/obtained a financial advantage /caused a financial disadvantage, namely [describe the property or advantage obtained/retained]

Initial dishonest conduct

Obtaining of property

Old s178BAThis is a s192E using the first This is a s192E using the secondlimb of the ‘obtain property’. limb of the obtain property – ‘retains

property’ or keeping a financial advantage

Care should be taken with the use of ongoing offences and between dates. They should not overlap the period of the obtaining because different definitions of ‘obtain property’ would be used at different times, which cannot be acceptable.

Old s178A

Subsequent dishonest conduct

• The Prosecution will need allege specifically whether the property was obtained or retained as found in the definition of ‘obtaining property’.

• This distinction is important because there needs to be a causal link between the obtaining and the deception and dishonesty. If the first limb is used and property has already passed from the victim to the accused, and then there is subsequent dishonest conduct which the prosecution is seeking to rely upon, how can it be causally connected to the obtaining?

• Also, the risk of a scattergun approach to dishonest conduct is that Magistrates and juries may be overwhelmed by suspicious behaviour and make their decision without genuinely considering the relevant dishonest conduct.

• Cases like this are very often grey – and the accused has often displayed sharp business practices to find themselves accused of a crime.– E.g. Telco salesperson is paid on commission for every phone line rental he signs up. But

he only gets a commission on phone lines which are activated (because the telco makes their money based on usage, so they only want to pay commissions on active lines, not dormant ones). So every time he signs up a customer he tells them to activate the line even if they aren’t going to use it, so that his commission ticks over. Is it dishonest?

Example One1. Investment Advisor offers an investment in a specific property development in to a client.2. Client invests funds with Advisor, transferring the money to the advisor’s account.3. A few days later the advisor discovers he cannot invest the client’s funds into this development because it has

fallen through due to no fault of his own.4. Advisor has a new nearly identical opportunity and invests funds into different property development without

telling the client.5. The development goes bust and client loses their money.

Need to identify the conduct which is alleged to be criminal. • The advisor obtained property at step 2, under the definition in subsection 192C(1)(a)– But he was not deceptive or dishonest at this stage• The advisor caused a financial disadvantage at step 4, which could be charged under s192E(1)(b)– This must be the act which is alleged to be deceptive and dishonest– He could be said to have made an ongoing representation as to where the funds would be deposited,

and it would be deceptive not to tell the client of the change (DPP v Ray [1974] AC 370). Query whether the client would have agreed to the alternative investment anyway, so the deception was not causative of the financial disadvantage

– The terms upon which the property was exchanged remain relevant and will need to be clearly defined – When the property is retained and dishonesty is alleged, it is inevitable that the exact terms upon which the property is retained will remain relevant just as it was under s178BA.

– Was it dishonest? • Old test? Probably – see McHugh in Peters – Engaging in conduct he had no right to engage in.• But maybe not under the new test – Advisor must have known he was being dishonest according to

ordinary standards. Need to get inside the mind of the advisor more so than before. He knew the deals were near identical and risks were the same. He knew the client wasn’t very picky with his investment choices. He couldn’t have foreseen the loss.

Example Two1. Investment Advisor offers secured investments in a specific International Bank with higher than normal

returns. There is evidence that the advisor never intended to invest the money this way, for instance because the facility being offered was a fabrication.

2. Clients pay money to advisor for this specific investment3. Advisor invests funds in other high risk ventures and uses capital to pay interest payments, along with

sending false account reports to clients4. Eventually the money runs out

• There are two sets of dishonest behaviour disclosed, at step 1 and 3. Step 1 would have amounted to a s178BA, step 3 would have amounted to a 178A. This individual is in trouble regardless, but if the evidence at steps 1 or 3 were weaker the case could easily have turned on the whether the crown had charged under the correct subsection.

• Under s192E there are a multitude of ways the Crown could charge this conduct, and each different way will affect what is alleged to be deceptive and dishonest, and what evidence is relevant.

• If the charge relates to step 1, the obtaining of property at the start, then query the evidentiary relevance of step 3. The money has exchanged hands and the offence is complete. The evidence of continued dishonesty can only be used to show the advisor’s dishonest intent from the outset. In this way the expanded definition of dishonesty has the potential to make more damaging evidence relevant.

• If the charge is one of obtaining a financial advantage (as opposed to obtain property), the prosecution can rely on the extended definition under s192D(1). The Crown would need to specify whether they were relying on s192D(1)(a) relating to step 1, of the example above, s192D(1)(c), relating to step 3 of the example above, or some attempt to argue that it was an ongoing offence in which all of the dishonest conduct can form part of the specific deceptive and dishonest acts establishing the fraud.

How will it work?

• The single offence of s192E has perhaps a dozen different formulations applying to different criminal behaviours.

• Whilst it is a broad provision like s178A, it would be expected that the charge be properly drafted, carefully particularised and explained to a jury (R v McQueeney (1989) 39 A Crim R 56)

• In complex business cases, it will be essential to identify exactly what conduct the prosecution alleges was deceptive and what act was dishonest and not allow into evidence which shows that the accused was dishonest at an unrelated time.

• Will the prosecution be able to call on other disgruntled clients to suggest that the accused knew he was being dishonest. How better to become aware that you’re being dishonest than to have people tell you?

• Then it becomes almost credibility evidence. Jurors and Magistrates will be influenced by evidence of poor business practice – www.honestylab.com

• Expect a moveable feast during hearings and trials as the charge evolves with the changing evidence.

• Take note also that a conviction for fraud can be an alternative to any larceny and vice versa. Take the Telco salesperson above. If he was paid directly by customers and took his commissions from them, an alternative embezzlement by clerk charge could be leveled against him, even if he wasn’t charged with it, a Magistrate could find it. In practice the Prosecutor would need to allege this from the outset – R v Cameron [1983] 2 NSWLR 66 at 71.

Other Fraud Offences

Section 192 F – Intention to defraud by destroying or concealing accounting records• This will be difficult to prove and rarely used. The old s175 offence carried ten years but only

applied to directors/officers (only three recorded cases between 2001-2008). This offence carries five years.

• Corporations Act has similar but less serious provisions under s1307 and they are rarely used also.

Section 192G – Intention to defraud by false or misleading statement• This offence is not markedly different to the old s178BB taking into account the modernised

definitions addressed above.

Section 192H – Intention to deceive members or creditors by false or misleading statement of officer or organisation

• Not dissimilar to the old section 176 – which only has three recorded cases between 2001 and 2008. Can’t see it being regularly used.

• The comments in relation to s192E and the interaction of the broader definitions will apply to each of these sections

Identity Offencesidentification information means information

relating to a person (whether living or dead, real or fictitious, or an individual or body corporate) that is capable of being used (whether alone or in conjunction with other information) to identify or

purportedly identify the person, and includes the following:

(a) a name or address,(b) a date or place of birth, marital status, relative’s

identity or similar information,(c) a driver licence or driver licence number,(d) a passport or passport number,(e) biometric data,(f) a voice print,(g) a credit or debit card, its number or data stored or

encrypted on it,(h) a financial account number, user name or

password,(i) a digital signature,(j) a series of numbers or letters (or both) intended

for use as a means of personal identification,(k) an ABN. entification Information

• Identification Information is defined extremely broadly.

Section 192J – Dealing with Identification Information

Prosecution must prove intention to commit an indictable offence

• It will be difficult for prosecution to establish an intention to commit an indictable offence unless there is evidence of offences having already been committed.

• Anticipate it being charged in conjunction with other offences such as fraud, money laundering and false instruments.

• Also will have application for professional information thieves who sell the information – but it will be difficult to show that they knew it would be used for the commission of an indictable offence. Advertisers sell subscriber lists legitimately.

• Heavy overlap between s192J and the new offence of Using false document (s254) if the document is identification information

• You can commit this offence even if you deal in your own identification information (like creating multiple identities)

Sections 192K & L – Possession of ID information or equipment

• Under s192K mere possession with intent is an offence. Similar difficulties with proving intention to commit the indictable offence when there are so many legitimate uses or only minor offences they may be intending to commit.

• Query whether the mere possession of large quantities of identification information without an obvious excuse will be sufficient to persuade Magistrates and juries that the person must have had the necessary intent.

• Useful to be aware that there are many legitimate uses for ID information - advertising/marketing/identifying customers in genuine commercial transactions.

• Also, many summary offences like fake ID’s for buying alcohol or getting a driver’s licence, see schedule at the back – sorry no schedule – but examples include ss.22 & 32 Road Transport Driver Licensing Act (20 pu’s) – false statement to get license and improper reproduction of license photo.

Victim’s Certificates• Section 309A Criminal Procedure Act

– Can be made upon application by the victim or on court’s own initiative (s309A(7))

– Test is only on balance of probabilities that an identity offence has been committed against the new part 4AB

– Most likely will be requested by Police/prosecutors on behalf of victims when charges are laid

– Practitioners may find people seeking private applications– It is already in use in Queensland, Victoria and South Australia.