Fraud

Fraud is the unlawful and intentional making of a misrepresentation which causes actual prejudice or which is potentially prejudicial to another.

There are four elements of the crime of fraud, namely:

1. A misrepresentation;
2. Prejudice or potential prejudice;
3. Unlawfulness and;
4. Intention.

The crime of fraud is originally known in Roman law as stellionatus and crimina falsi. Stellionatus was the criminal-law equivalent of the delict dolus, and developed from the actio de dolo in private law. It involved intentional misrepresentations resulting in harm or prejudice to others. Crimina falsi was the collective term for a number of crimes relating to falsification, almost all of which were derived from the rex Cornelia de Falsis. These different forms of falsification were, however, never unified into one generic crime. Examples of the crimina falsi are the falsification of will, of weights and measures, and of evidence. In the crimina falsi it was not required that somebody should necessarily have been prejudiced by X’s conduct. In stellionatus there seems to have been some form of prejudice in most of the examples mentioned in the sources, but it doubtful whether the prejudice necessarily had to be actual or of a proprietary nature: potential or non-proprietary prejudice seems to have been sufficient.

Roman-Dutch writers did not differentiate clearly between stellionatus and crimina falsi. At the beginning of this century the distinction between these two crimes became blurry; the courts combined stellionatus and crimina falsi and formed a new crime known as fraud. In fact, fraud has sometimes even been referred to as falsitas or “falsiteit”. The most important result of this merging has been that fraud may now be committed even where there is no actual proprietary prejudice: even non-proprietary or potential prejudice may be sufficient to result in a conviction.

Because the prejudice need not necessarily be proprietary in a character it follows that the interest protected by the crime is not exclusively property; it may sometimes be an interest of another nature, such as legal certainty.

1. Misrepresentation:

The form of misrepresentation can be in writing, the spoken word, or any gesture like the nodding of the head.

The conduct of the perpetrator will also imply the misrepresentation by his action.

When a person books into a hotel, he thereby implies that he will be/or is in a position to pay for accommodation. When he disappears without paying, his conduct by booking in, was a misrepresentation by implication.

The misrepresentation can be made by either the commission or omission.

Another form could be a promise about the future. When a person pays for goods with a post dated cheque, and there is good faith that he would have sufficient funds by then, it would not be a misrepresentation. But if a person was fired from his workplace and he is without income, then it would be a misrepresentation.

2. Prejudice or potential prejudice:

There must be real or potential prejudice. The mere telling of a lie would be the difference when as result of the lie could lead to the harm of another. The lie would be the misrepresentation, and the harm would be the prejudice. An example of prejudice would be when you buy goods with a stolen cheque, and get away with it.

Potential prejudice is when the harm was avoided by any type of intervention. When there was a possibility that you could have suffered any loss, but it did not manifest, that is when it is a potential loss or prejudice. An example of potential prejudice would be when you buy goods with a stolen cheque, and the store owner verifies the validity of the cheque, and you did not obtain any benefit.
The question is not if someone would suffer any loss, but rather if someone could suffer any loss.

3. Unlawfulness:

In the case of fraud, unlawfulness means making a misrepresentation with the intention of prejudicing another person. The state must prove this element beyond reasonable doubt. Here one should ascertain what the law prescribes. “Fraud is the unlawful and intentional…” To profit from someone by means of a misrepresentation is unlawful.

4. Intention:

The perpetrator must be aware of the fact that that the representation is false. The investigator must make sure that the intention was to defraud and not to deceive.
Negligence can not be equated with intention.

The intention will always be to profit from another by means of a misrepresentation.

5. Casualty:

Casualty is the relationship of cause and effect between two incidents: if one incident leads to another, there is a “casual relationship” between the two. In the case of fraud, the misrepresentation must cause actual or potential prejudice, in other words there must be a casual relationship between the misrepresentation and the prejudice.

Perjury

Perjury consists in the unlawful and intentional making of a false statement in the course of a judicial proceeding by a person who has taken the oath or made an affirmation before, or who has been admonished by, somebody competent to administer or accept the oath, affirmation or admonition.

There are six elements of the crime of perjury, namely:

1. The making of a declaration;
2. Which is false;
3. Under oath or in a form equivalent to an oath;
4. In the course of a juridical proceeding;
5. Unlawfulness and;
6. Intention.


Perjury can only be committed when;

• The statement is false. The deponent must be aware that his statement is not the truth.

• Statement need not to be material. The statement can be in the form of verbal evidence. Since 1935 it is no longer necessary for the prosecution to allege or proof the materiality of the statement. .must have been administered by a person who is competent to administer the oath or in a form equivalent to an oath

• The statement must form part of a judicial proceeding. The judicial proceeding could either be in a criminal matter or civil matter.

• Court need not have jurisdiction. No decision could be found that perjury can only be committed before a court having jurisdiction. One can accept that if a false statement is made before a ‘tribunal’ which does not have the same powers of a court of law, no perjury is committed.

• On oath, affirmation or admonition. The deponent must be under oath or in a form equivalent to an oath.

• Unlawfulness: It is unlawful to make a false statement in the course of a judicial proceeding. The norm will be to prosecute witnesses who falsely testify to mislead the proceedings. When the accused has made a false statement in order to benefit him, but he is convicted on the original charge against him, he would not be charged for perjury. His conviction and sentence would generally deem to be sufficient punishment for the perjury itself.

• Intention: The deponent must have the intention in the form of mens rea to mislead the judicial proceeding by giving a false statement.

Culpability

The Latin expression mens rea means “guilty mind”. The Latin expression culpa means “punishable”. If you take the two Latin expressions in mind it could ascertain what the intentions of the perpetrator was.
The whole question of culpability may be reduced to one simple question namely “could one in all fairness have expected X to avoid the wrongdoing?”
Culpability arises only once it has been established that there was an unlawful act. It would be nonsensical to attach blame to lawful conduct.

The unlawfulness of the act is determined by the criteria which are applicable to everybody in society, whether rich or poor, young or old, clever or stupid. The law also refers to these criteria as “the reasonable man”. This is the reason why it is just as unlawful for somebody who is poor to steal as for somebody who is rich and why it is just as unlawful for psychopaths, who find it very difficult to control their sexual desires, to commit sexual offences as it is for normal people. Criteria employed to determine unlawfulness do not relate to the perpetrator’s personal characteristics.


However, when the question of culpability arises, the picture changes, the focus now shifts to the perpetrator as a person and as an individual, and the question here is whether a particular person, in the light of his personal aptitudes, gifts, short comings and knowledge, and of what the legal order may fairly expect of him, can be blamed for his wrongdoing. If this is the case, it means that the wrongdoing can be attributed to X personally, he is charge with the account arising from the wrongdoing. The question to be asked is what the reasonable man would do in the same circumstances.

Culpability could be simply described as the punitive consequences when committing an offence.

Unlawfulness

The mere fact that there is an act which complies with the definitional elements does not mean that the person who performs the act is liable for the particular crime. Satisfying the definitional elements is not the only general requirement for liability. The next step in the determination of liability is to enquire whether the act which complies with the definitional elements is also unlawful.

An act which complies with the definitional elements is not necessarily unlawful. This will immediately become clear if one considers the following example:
The definitional elements of murder: Nevertheless a person is not guilty if he/she kills somebody in self-defense; the act is then justified and therefore not unlawful.

It is a common phenomenon that an act which presumably falls within the letter of the law (in other words, which corresponds to the definitional element) proves upon closer scrutiny not to be contrary to the law as The Law tolerates the violation of the legal norm, because the law does not consist merely of commands and prohibitions contained in the definitional elements but also of rules or criteria which is contrary to such command or prohibition. An act is unlawful if it is in conflict with the rules or criteria of the legal order as a whole, and not merely with the particular definitional elements.

In Criminal Law the definition of a crime normally comprises of the following introduction “…the unlawful and intentional…” It is clearly defined in the act that a certain transgression is punishable due to the action of a perpetrator.

Conduct

The unlawfulness of an act will be the conduct of the perpetrator. It will either be the positive conduct “commission” or negative conduct “omission” that would be a transgression of the law. Commission is when you act willfully in a positive manner against a certain law that prohibits your action. You will be guilty of contravening the law when your commission is unlawful. We can use assault as a good example, or theft of cash. Omission is your conduct where you fail to act when you were supposed to act as set out in a specific law. This means it is to neglect a prescribed act of the law. Here we can think of a mother neglecting to care for her sick child, or a person failing to submit his revenue to SARS when it is obligated to do so.

The act of your conduct means the type of act described in the definitional elements.
Criminal law does not prohibit a mere act in /abstract to /. Put differently, there is no rule of law declaring “you may not act”. At every conscious moment of a person’s existence he/she performs some act or another, such as walking, opening a door, or simply sitting and staring etc.

It stands to reason that “act” as the word is use in criminal law does not refer to the “events” just mentioned, it refers only to the type of act mentioned in definition of the crime with which X is charged, an more specifically the type of act set out in the definitional elements of the relevant crime. The law does not concern itself with any other possible “act” committed by X (i.e. an act other than the one mentioned in the definitional elements). Thus if X is charged with arson, the act required- is setting a fire to a certain type of structure.

The difference between intention and negligence

In crimes of intention the accused is blameworthy because he knew or foresaw that his conduct was forbidden and that is was unlawful but nevertheless proceeded to engage in the conduct. In crimes of negligence, on the other hand, the accused is blameworthy because he did not know or foresee something or did not do something, although according to the standards of the law he should have known or foreseen something or should have performed an act.


Intention therefore always has a positive character: the accused willed or knew or foresaw something. Negligence, on the other hand, always has a negative character: the accused did not will or know or foresee something, although according to the standards of the law he should have known or foreseen it.

Roles of the different disciplines involved in fraud investigations

The auditor/accountant:

The auditor plays a vital role in fraud prevention with regard to fraud risk assessments, surprise audits and other auditing-related activities.

The role of the auditor in the fraud detection process is even more wide-ranging. Studies have concluded that internal auditing and internal controls are responsible for the majority of fraud detection. In forensic investigation process the auditor is the one likely to end up on the witness stand to present testimony on his/her findings.

In fraud and other economic crime that often involve complex financial transactions the auditor’s role is to analyze and investigate these transactions and to reach certain conclusions about them.

The auditor gathers documentary evidence that is relevant to the investigation and the auditor’s report, forms part of the case docket that is ultimately prepared for the criminal trail. Auditors usually testify about facts only gain on their findings on relevant transactions.

The role of the forensic auditor is to gather evidence. They deal almost exclusively with facts. The forensic auditor must therefore remain objective and allow the facts to lead to the correct conclusions. For a forensic auditor to perform his/her function properly, it should have certain skills and knowledge that auditors would not necessarily have. The ability to draft a proper affidavit is an example a workable knowledge of law. Be familiar with law of evidence and rules pertaining to admissibility.

The legal specialist:

The role of the legal specialist is to ensure that the teams function within the parameters of the law and to ensure that fundamental rights remain protected. He must be aware of the complexity of the criminal and civil process that contains many pitfalls.


He must ensure that the case is prepared within the parameters of the law and that the evidence is obtained in a manner that will not render it inadmissible in a court of law. He should be accessible to all other team members for any assistance they may require.

He should review all working papers and other documents in order to ensure that it complies with legal requirements. He is the watchdog, who has to ensure total compliance by the team with all relevant rules, regulations, legislation, ethical boundaries etc. It is of utmost importance that the legal specialist should ensure throughout the investigation that the team operates within the terms of reference.

The investigator:

He brings the investigative skills learned from being a former or current member of the SAPS or other investigative agencies. He will typically conduct the interviews, take down the witness statements, gather documentary and physical evidence, and keep the investigation diary update an compile the case docket and/or working papers.

Most of the physical field work is conducted by the forensic investigator, who will also conduct background searches and checks, do tracing of persons, compile warrants and subpoenas etc.

An unlimited number of other experts may also be included in a forensic auditing team. Examples are computer specialists, handwriting and contested document specialists, independent consultants of various disciplines, valuators, engineers, medical experts etc.. The nature of the investigation and the particular industry in which the audit is conducted will dictate the special skills that are required. In some cases these specialists may be required to give expert testimony with regard to their findings in court.