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The Differences Between Criminal and Civil Fraud

Author: Nicola Sharp  22 June 2023
3 min read

Fraud comes in various guises and has even been described as “infinite in variety” (Reddaway v Banham [1896] AC 199). But there is a distinction between the actions brought in civil courts and criminal causes of action. Which route a claimant chooses can affect the recovery of their stolen funds, and the length of time it takes to get justice.

Examples of Actions in Civil Fraud

There is no single cause of action in English law that is known as ‘civil fraud’. It’s more accurately described as an umbrella term that covers a number of actions that involve dishonest conduct, such as:

  • Fraudulent misrepresentation.
  • Unlawful means conspiracy.
  • Deceit.
  • Fraudulent breach of fiduciary duties.

The biggest hurdle in proving a claim in any of these actions is usually establishing dishonesty. Claimants somehow need to prove the defendant’s actual state of knowledge or belief as to the facts. The element of dishonesty has been subject to much case law, but the Supreme Court has established a helpful test, namely: “was their conduct dishonest by the objective standards of ordinary decent people?” (Ivey v Genting Casinos (UK) Ltd t/a Crockford [2017] UKSC 67)

A Summary of Criminal Fraud

Criminal fraud, on the other hand, relates to scams or cons. While there might be some overlap with actions in civil fraud, these are a few examples of the offences that fall into the category of criminal fraud:

  • Bribery.
  • Money laundering.
  • Embezzlement.
  • Tax evasion.
  • Fake investment opportunities (particularly in the cryptocurrency sphere).
  • Identity theft.
  • Cyber crime and hacking.

Who Brings the Action?

An action in civil fraud is brought privately by the individual or a company. While it’s possible to bring a claim against ‘persons unknown’ (see, for example, AA v Persons Unknown [2019] EWHC 3556) these cases are more frequently brought against known individuals.

Cases in criminal fraud are often brought by the Serious Fraud Office (SFO) or in tax-related cases (tax evasion, for example) by Her Majesty’s Revenue and Customs (HMRC).

Victims of criminal fraud may not know the identity of the fraudster. Instead, they report the incident to Action Fraud, which is run by the City of London Police working alongside the National Fraud Intelligence Bureau (NFIB). Working together, the police and NFIB identify serial offenders and organised crime groups and they spot types of emerging crime.

Differences in the Burden of Proof

One of the key differences between civil and criminal actions is the standard of proof. In civil actions the victim of fraud must prove that the defendant committed the fraud “on the balance of probabilities.” The judge must be persuaded that the evidence shows that it is more likely than not that the elements of the fraud are made out.

In a criminal fraud, the prosecution must prove that it is “beyond reasonable doubt” that the defendant committed the fraud. It’s a much higher standard of proof. The jury must be able to say that they are sure of the defendant’s guilt.

Recourse: Different Sanctions Available

The other key difference is the sanctions available. In a civil action, the sanction is compensatory. The defendant can be ordered to repay the stolen funds by way of damages. In a criminal action, the sanction is punitive. The punishment for the fraudster is a fine or imprisonment and compensation orders to recover the losses are few and far between.

For those reasons, corporate entities tend to pursue civil actions, in which they can recover damages for their losses.

Bringing a Civil Claim and a Criminal Claim Together

It is possible to bring a criminal claim alongside a civil claim in some cases. They are not mutually exclusive routes to justice.

If you are a victim of fraud and you want to get your money back, then you need to go down the civil route. But bear in mind, you will spend money on legal fees to recover your stolen assets and the nature of litigation means that there is no guarantee of success at the end of it. If you are successful, however, you will receive damages to compensate you for the losses you suffered.

There is nothing to prevent you from reporting the crime to Action Fraud or the police at the same time as going down the civil route. One advantage of the criminal route is that you do not have to pay the legal fees. However, you may not be able to recover the stolen funds, unless there is a compensation scheme available).

Police investigations can take significantly longer than the civil route, and there is also no guarantee that they will investigate your case and pursue it to its conclusion. You have more control over civil litigation: you can make the decisions regarding how to manage your case, with personal advice from your lawyers who are professionally bound to act in your best interests.

Nicola Sharp C 09983

Nicola Sharp

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nicola.sharp@rahmanravelli.co.uk
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Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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