Fraud offences - Fraud by abuse of position

Learning Outcomes

This article examines fraud by abuse of position under s 4 of the Fraud Act 2006, including:

• clarifying the statutory structure of the offence and how it fits within the wider Fraud Act scheme relevant to SQE1 criminal law;
• identifying what amounts to occupying a position of financial trust or responsibility, and how objective expectations of safeguarding another’s financial interests arise;
• analysing the concept of “abuse” of position by act or omission, with emphasis on how omissions can constitute criminal conduct rather than mere negligence;
• explaining how statutory wording and leading authorities, such as R v Valujevs and R v Pennock, shape the scope of qualifying relationships and contexts;
• applying the Ivey v Genting Casinos dishonesty test, contrasting subjective beliefs with the objective standard of ordinary decent people in fraud cases;
• detailing the requirement for an intention to make a gain, cause a loss, or expose another to a risk of loss, even where no loss occurs;
• distinguishing fraud by abuse of position from fraud by false representation (s 2) and fraud by failing to disclose information (s 3) on exam-style problem questions;
• evaluating how betrayals of trust in professional, employment, business, and family settings can trigger concurrent regulatory breaches and criminal liability under s 4.

SQE1 Syllabus

For SQE1, you are required to demonstrate practical and theoretical knowledge of fraud by abuse of position under s 4 of the Fraud Act 2006, with a focus on the following syllabus points:

• Understand the structure and elements of fraud by abuse of position (s 4 Fraud Act 2006)
• Identify and explain what constitutes a ‘position’ in which a person is expected to safeguard financial interests, including both formal and informal relationships
• Analyse the meaning and scope of ‘abuse’ of such position—by act or omission—and appraise how the courts approach this question
• Apply the correct mens rea: the objective test for dishonesty (Ivey v Genting Casinos (UK) Ltd), and the requirement for an intention to make a gain, cause a loss, or expose another to the risk of loss
• Discriminate between this mode of fraud and other routes to liability under the Fraud Act 2006 (notably s 2 and s 3)
• Critically apply the law to various factual scenarios, with attention to professional conduct considerations, regulatory breaches, and wider ethical implications

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which section of the Fraud Act 2006 deals with fraud by abuse of position?
   1. Section 1
   2. Section 2
   3. Section 3
   4. Section 4
2. For fraud by abuse of position, must the defendant be in a formal fiduciary relationship with the victim?
   1. Yes, a formal fiduciary relationship is always required.
   2. No, the position can arise from informal relationships where trust is placed.
   3. Yes, but only if the position involves managing finances directly.
   4. No, the position relates only to employment contexts.
3. Which case established the current test for dishonesty in fraud offences?
   1. R v Ghosh
   2. Ivey v Genting Casinos (UK) Ltd
   3. R v Valujevs
   4. DPP v Ray

4. True or False: For fraud by abuse of position, the defendant must actually make a gain or cause a loss for the offence to be committed.

Introduction

Section 4 of the Fraud Act 2006 creates the offence of fraud by abuse of position. This provision was designed to address the increasing range of dishonest conduct that had emerged in professional, commercial, and even domestic settings, where individuals exploit a position of trust for personal financial advantage or to cause detriment to others. What differentiates this form of fraud is its focus on the betrayal of trust in specific relationships, including (though not limited to) fiduciary duties, employment contexts, positions of responsibility in charities, voluntary arrangements, or familial settings.

Appreciating the precise scope of 'occupies a position,' as well as the breadth of 'abuse' (which can be an act or an omission), is important for assessing liability in practice. The mental requirement is equally stringent, ensuring that only intentional and dishonest betrayals of such positions are caught, as opposed to innocent, negligent, or well-intentioned failures.

Key Term: Fraud by Abuse of Position
Fraud by abuse of position is committed where a person who is expected (objectively, by virtue of their role or relationship) to safeguard, or at least not act against, the financial interests of another, instead dishonestly exploits that position, with intent to make a gain for themselves or another, or to cause (or risk causing) loss to another. Liability arises irrespective of whether the abuse is by positive conduct or omission, and even if no gain or loss actually results.

The Offence: Section 4 Fraud Act 2006

Section 4(1) provides:

A person is in breach of this section if they—
(a) occupy a position in which they are expected to safeguard, or not to act against, the financial interests of another person,
(b) dishonestly abuse that position, and
(c) intend, by means of the abuse of that position
(i) to make a gain for themself or another, or
(ii) to cause loss to another, or to expose another to a risk of loss.

Section 4(2) stipulates that the offence may be committed by an act or omission.

This section is especially broad and is intended to cover situations where the breach of trust arises not simply from clear contracts or formal legal duties, but also where the defendant is objectively expected—in the eyes of society or the reasonable person—to protect another's financial interests and instead dishonestly undermines those interests for an improper benefit.

Actus Reus

The actus reus comprises:

• Occupying a relevant position
• The position being one where the defendant is expected to safeguard, or not act against, another's financial interests
• Dishonest abuse of that position (by act or omission)

Position of Trust

To be caught by s 4, the defendant must occupy a position in which they are expected to protect, or not act against, the financial interests of another. This expectation is assessed objectively: it is the outlook of the reasonable person, not the subjective view of the defendant, the victim, or their employer.

Key Term: Position of Trust
A position of trust for s 4 is any relationship in which, objectively, one party is reasonably expected to protect the financial interests of another (or at least not to place those interests at risk), whether due to formal legal obligations (such as fiduciary duties), contractual terms, employment arrangements, or the circumstances of voluntary or informal relationships built on reliance and dependence.

Such positions include—

• Trustees and beneficiaries
• Company directors and their company
• Employees and employers (especially those entrusted with access to finances or assets)
• Professional advisers and their clients (e.g. solicitors, accountants)
• Family members in caring or power-of-attorney roles
• Carers with financial access to vulnerable dependents
• Friends managing another's finances, or co-trustees

It is not necessary that the position arises solely from law (e.g. fiduciary status in equity); the question is always whether the reasonable person would expect the defendant, in context, to safeguard (or at least not act against) specific financial interests.

In R v Valujevs [2014] EWCA Crim 2888, the Court of Appeal confirmed that 'position' is not limited to formally recognised fiduciary relationships. In that case, unlicensed gang-masters responsible for managing and paying migrant workers occupied a position of financial trust, even though they were not technical trustees or agents.

The expectation is set not only by the law of trusts, company law, or contract but also by the practical realities of dependency, vulnerability, or ongoing reliance. Family arrangements, employment in positions of responsibility, voluntary club roles (such as treasurers), and broader community relationships can also meet this requirement.

Factors indicating a relevant position

• The degree of power, discretion or autonomy entrusted to the defendant regarding another’s assets or finances.
• The victim’s dependency or vulnerability.
• Whether society (not just the alleged victim or defendant) would recognise a legitimate expectation of safeguarding in the specific context.
• Whether, if the defendant acted dishonestly, significant financial risk or harm could flow from their conduct.

Worked Example 1.1

Anika is employed as a personal assistant to Brian, an elderly man. Her duties include managing his household bills and accessing his bank account for this purpose. Anika uses Brian's bank card without his permission to pay for her personal shopping. Does Anika occupy a relevant position under s 4?

Answer:
Yes. As Brian's personal assistant entrusted with managing his finances and accessing his bank account, Anika occupies a position where she is expected to safeguard his financial interests. This employment relationship involves trust and confidence regarding financial matters.

Abuse of Position

Once it is established that the defendant occupies a relevant position, the prosecution must show that the defendant 'abused' that position. Not every breach of duty will suffice; abuse, for these purposes, means conduct that undermines the core expectation of trust—either by positive dishonest action or by dishonest omission.

Key Term: Abuse of Position
Abuse of position means using the position in a manner contrary to the expectation to safeguard the financial interests of another, in a way made possible by that position, and in a manner society regards as improper or wrongful—an objective standard. This includes dishonest failures to act where action is required (omissions), as well as active misappropriation of advantage.

The breadth of 'abuse' is significant. It covers:

• Dishonest misappropriation of property entrusted by virtue of the position.
• Dishonest misuse of information or access for personal benefit.
• Dishonest omission: for instance, failing to act to prevent a loss or risk to financial interests where a positive duty to intervene exists.
• Acting to benefit a friend, relative, or other third party—personal enrichment is not required so long as the abuse serves some improper purpose.
• Breaching internal rules, policies, or informal understandings, if the conduct is objectively dishonest in context.

In R v Pennock [2014] EWCA Crim 598, a husband and wife were held to have abused their position by using an elderly relative's funds (held in a joint account) for their own purposes, when trust and expectation dictated that those funds would be protected.

Section 4(2) expressly provides for abuse by omission. This is significant: liability arises where a person, being in a position of financial trust, stands by and allows harm, loss or risk of loss, or fails to act to prevent it, in circumstances where an objective duty to act is reasonably expected.

Worked Example 1.2

David is a company director. He learns of a profitable contract opportunity that would benefit his company. Instead of presenting the opportunity to the company, he diverts it to another business owned by his friend, intending his friend to gain. Has David abused his position?

Answer:
Yes. As a director, David owes fiduciary duties to the company, including the duty to act in its best interests and avoid conflicts of interest. By diverting a corporate opportunity for the benefit of his friend (and potentially himself indirectly), he has acted against the company's financial interests, thereby abusing his position.

Abuse by Omission

Where the position is one in which the law or the practical circumstances create an obligation to act, a dishonest failure to act—leading to actual loss or exposing another to the risk of loss—may amount to an abuse. Examples include a professional not reporting or rectifying a discovered loss, a carer remaining silent while another accesses funds without authority, or an employee with knowledge of a developing fraud failing to intervene.

The dividing line between criminal and merely civil or regulatory misconduct centres on dishonesty: only dishonest breaches of duty or failures to act, intended to result in gain or cause loss or risk, are criminal.

Omissions, however, are not as broad as all possible negligence or inaction. There must be an actual expectation of action, arising from the position occupied and the circumstances.

Worked Example 1.3

Chen is a trustee managing a trust fund for young beneficiaries. He invests trust money in a high-risk scheme owned by his brother, hoping his brother's scheme will succeed, even though he knows this type of investment is unsuitable for the trust and exposes the fund to significant risk. He does not personally gain, but intends his brother to gain financially. Is Chen potentially liable under s 4?

Answer:
Yes. Chen occupies a position of trust as a trustee. Investing trust funds in an unsuitable high-risk scheme for the benefit of his brother constitutes an abuse of that position. If this conduct is deemed dishonest under the Ivey test, and he intended, by this abuse, to make a gain for his brother (another person), he satisfies the mens rea elements. It is irrelevant that he did not intend personal gain or that no actual loss occurred (or even if the investment unexpectedly succeeded). The exposure to risk of loss is also sufficient.

Mens Rea

The mens rea for fraud by abuse of position consists of two requirements: dishonesty and intention to make a gain, cause a loss, or expose another to a risk of loss, by means of the abuse.

Dishonesty

The defendant must have acted dishonestly. The current test for dishonesty is set out by the Supreme Court in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67, and is now the governing standard in criminal law, including for all Fraud Act offences.

Key Term: Dishonesty (Ivey Test)
The Ivey test is a two-stage analysis:

• First, ascertain the defendant’s actual state of knowledge or belief as to the facts (subjective).
• Second, assess whether the conduct, in light of those facts, was dishonest according to the objective standards of ordinary decent people.

The defendant's own (subjective) beliefs about the morality or honesty of their conduct are irrelevant in the second stage; the test is wholly objective in outcome. Ignorance of the standards of ordinary people is no defence.

Dishonesty is often the key battleground in cases of abuse of position, especially where the defendant believed they had some justification (e.g. 'I'm underpaid, so I took a little extra') or that the victim would not mind. These are not defences unless they negate the requirement for dishonesty according to the objective test.

Specific exceptions from the theft context (such as s 2 TA 1968) do not apply in the fraud offences. However, evidence that the defendant believed they were entitled to act as they did, or did not know they occupied a relevant position, may be relevant to the jury's assessment of dishonesty.

Application of Dishonesty

When considering if the defendant was dishonest, juries must look at all the contextual factors: the nature and scope of the defendant’s role, any explanations given, the circumstances surrounding the breach, and the societal expectations placed upon persons in such roles.

Where the boundaries between acceptable and dishonest conduct are uncertain, professional codes, internal policies or relevant regulations may inform the objective standard, but the ultimate test is that of ordinary decent people.

Intention to Make a Gain or Cause Loss

The defendant must intend, by their dishonest abuse, to make a gain for themselves or another or to cause loss, or expose another to a risk of loss.

Key Term: Gain / Loss (s 5 Fraud Act 2006)
Under s 5, 'gain' and 'loss' include—

• Gain: Obtaining what you do not have, or keeping what you already have.
• Loss: Parting with what one has, or not obtaining what one might get.
• The gain or loss must relate to money or other property (including things in action and intangible property), and need not be permanent; temporary changes suffice.
• Loss or gain actually occurring is unnecessary—intention alone is sufficient.

It is notable that the intention is formed at the time of the abuse (i.e. at the time of acting or omitting to act in breach). Proving motive or after-the-fact rationalisations is not enough—there must be an actual intention, by means of the abuse, to achieve the gain, loss, or risk in question.

Exposure to Risk of Loss

It is not necessary that any loss or gain actually materialises; the offence is committed upon the dishonest abuse of position with the requisite intent. Exposure to the risk of loss (even if loss is averted or never eventuates) is within scope.

Third Party Gain

The gain or loss can be intended for any person—not just the defendant. Thus, abuse of position to benefit friends, relatives or associates (e.g. by diverting contracts, funds, or business opportunities) is within the remit of s 4.

Worked Example 1.4

Mandy is a caretaker for an elderly resident, Mrs Jones. She has access to Mrs Jones’s chequebook to pay household bills. Discovering that Mrs Jones is often confused, Mandy starts to write cheques to herself, arguing that Mrs Jones would have agreed—and occasionally gives cash to Mrs Jones’s grandson. Mandy’s conduct is not known to Mrs Jones. Is Mandy liable under s 4?

Answer:
Yes. Mandy occupies a position where she is expected to safeguard Mrs Jones’s financial interests and not act against them. Writing cheques to herself without authorisation is a dishonest abuse of that position, regardless of her assumptions about consent, if her conduct is judged dishonest by ordinary standards. Giving cash to Mrs Jones's grandson at her own initiative would also likely amount to dishonest abuse unless it could be shown by Mandy to be genuinely authorised or for Mrs Jones’s benefit.

Distinguishing from s 2 and s 3 Fraud

The key distinction is that s 4 focuses on the improper use of a position of trust, not on making false representations (s 2), nor on failing to disclose information under a legal duty (s 3). In many cases, more than one section could apply; prosecutors choose the most appropriate route depending on the factual matrix. S 4 should be selected where the breach of relationship and expectation of safeguarding is central.

Exam Warning

The Ivey objective test for dishonesty is now authoritative and must be applied in all fraud offences. Do not revert to the old Ghosh test. Consider only what ordinary decent people, knowing the facts as the defendant did, would regard as dishonest, not the defendant's own standards or belief that their conduct was honest.

Revision Tip

Pay particular attention to practical situations involving power over vulnerable adults (e.g., financial abuse of the elderly), employer/employee access to assets, professional-client relationships, and informal care arrangements. Always consider whether the position is one in which there is a clear, objective expectation to safeguard finances, not merely a practical ability to do so.

Key Point Checklist

This article has covered the following key knowledge points:

• Fraud by abuse of position is established under s 4 Fraud Act 2006 and targets betrayals of financial trust.
• The actus reus requires occupying a position in which there is an objective expectation to safeguard, or at least not act against, another’s financial interests, and dishonestly abusing that position—by act or omission.
• The notion of 'position' encompasses fiduciary and quasi-fiduciary roles in law, employment, voluntary, domestic, and community arrangements—what matters is the objective expectation of trust and reliance.
• 'Abuse of position' is interpreted widely to include any dishonest exploitation, misuse, or failure to perform a required action, made possible by virtue of the role held.
• The offence can be committed either by positive acts (such as misappropriation, diversions of opportunity) or by dishonest omissions (such as failing to act where intervention is reasonably expected because of the role).
• The mental element comprises dishonesty (using the Ivey objective standard) and intention, by means of the abuse, to make a gain for any person, or cause loss (or risk of loss) to another.
• Actual gain or loss are not prerequisites for liability—intention and dishonest abuse are sufficient.
• The scope of s 4 is broader than s 2 (false representation) and s 3 (failing to disclose) and overlaps with professional, employment, and family duties, but is confined by the requirement for dishonest intent.
• 'Gain' and 'loss' under s 5 FA 2006 include both temporary and permanent changes in the defendant's or victim's financial position, whether by getting something new or retaining what is already held, and cover exposure to risk.
• In practice, fraud by abuse of position is engaged in cases of dishonest financial exploitation of vulnerable persons, misappropriation in employment or directorial offices, and breaches of fiduciary-type accountability, including by omission where a duty to act is clear.

Key Terms and Concepts

• Position of Trust
• Abuse of Position
• Dishonesty (Ivey Test)
• Gain / Loss (s 5 Fraud Act 2006)
• Fraud by Abuse of Position