## Introduction

Fraud by failing to disclose information under section 3 of the Fraud Act 2006 covers dishonest omissions where there is a legal duty to tell another person something, with an intention to make a gain or cause a loss (or risk of loss). It is not about false statements; it is about silence or partial silence where the law requires disclosure.

The offence sits alongside section 2 (false representation) and section 4 (abuse of position). Section 3 matters because the law does not impose a general duty to volunteer information in ordinary dealings. Liability arises only where a specific duty exists. As a result, the reach of section 3 depends heavily on civil and regulatory rules that create disclosure duties.

Key features:

- Prosecution must prove a legal duty to disclose, a failure to disclose, dishonesty, and intent to make a gain or cause a loss or risk of loss.
- There is no need to prove that anyone was actually deceived or that loss in fact occurred.
- The maximum sentence for fraud under the Act is 10 years’ imprisonment on indictment.

This guide explains the elements, where duties come from, how courts assess dishonesty after Ivey v Genting Casinos, and real-world applications.

## What You'll Learn

- The elements of fraud by failing to disclose under Fraud Act 2006 s.3
- How to identify when a legal duty to disclose exists
- The current test for dishonesty from Ivey v Genting Casinos
- What counts as a “gain” or “loss” under s.5 Fraud Act 2006
- Common contexts: insurance placements, directors’ conflicts, financial advice
- Practical steps for charging, defending, and compliance

## Core Concepts

### Elements of the offence under s.3

To prove fraud by failing to disclose information, the prosecution must show:

- A legal duty to disclose the information to another person
- A failure to disclose that information
- Dishonesty
- An intention by that failure to make a gain for oneself or another, or to cause a loss to another, or to expose another to a risk of loss

Further points:

- The duty must be a legal duty (arising from statute, contract, fiduciary law, or regulation), not just a moral or social expectation.
- Actual gain or loss is not required; the intent is enough.
- The failure to disclose can be a complete silence or not correcting a position where there is a duty to update.

### What counts as a legal duty to disclose

There is no catch-all duty to volunteer information in standard contracts. A legal duty to disclose tends to arise from identifiable sources:

- Statute
  - Company directors: duties to declare interests in proposed or existing transactions (Companies Act 2006, including ss.175–177 and s.182).
  - Regulated activities: rules requiring information to be given to clients or customers (for example, FCA Conduct of Business rules).
- Contract
  - Express notification clauses (e.g., duty to report a “material adverse change”, ongoing warranties, or conditions precedent in finance documents).
  - Settlement agreements with continuing disclosure undertakings.
- Fiduciary and agency relationships
  - Trustees, agents, and partners may have duties to tell beneficiaries or principals about conflicts and material facts.
- Insurance
  - Business insurance: duty of fair presentation under the Insurance Act 2015 (disclosure of every material circumstance or enough to put a prudent insurer on notice).
  - Consumer insurance: duty to take reasonable care not to make a misrepresentation (Consumer Insurance (Disclosure and Representations) Act 2012). While framed in terms of misrepresentation, it often includes answering questions honestly and completely; non-disclosure in response to questions can still be relevant.

Important cautions:

- If civil law says there is no duty to disclose, section 3 will not apply.
- Duties can be specific and narrow. Identify clearly what had to be disclosed, to whom, and by when.
- Some statutes create separate criminal offences for non-disclosure (for example, anti-money laundering reporting). Those regimes can sit alongside, or may be more appropriate than, a section 3 charge.

### Dishonesty: the Ivey test

The test for dishonesty is now set by the Supreme Court in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67, which applies across criminal law:

- First, find the defendant’s actual state of mind as to the facts (what they believed or knew).
- Then, judge their conduct against the standards of ordinary decent people.
- There is no further requirement that the defendant must appreciate that ordinary people would view the conduct as dishonest.

Practical markers that often indicate dishonesty:

- Concealing conflicts of interest or secret commissions
- Deliberately avoiding written records or rewriting records after the event
- Selective disclosure that implies all relevant points have been covered
- Inconsistent explanations compared with contemporaneous documents

An honest belief that no duty existed, or that the information had already been disclosed in substance, may weigh against dishonesty, but the jury applies an objective standard to the conduct in light of the defendant’s actual beliefs.

### Gain or loss under s.5 Fraud Act 2006

Section 5 defines “gain” and “loss” in relation to money or other property:

- Gain: includes gain by keeping what one has, as well as getting something new. It can be temporary or permanent.
- Loss: includes loss by not getting what one might otherwise get, as well as parting with what one has. It can be temporary or permanent.

For section 3, it is enough that the defendant intended by the non-disclosure to:

- Make a gain for themselves or someone else; or
- Cause a loss to another; or
- Expose another to a risk of loss

The prosecution does not have to prove that a loss happened. However, the intent must exist at the time of the failure to disclose.

### How s.3 relates to s.2 and s.4

- Section 2 (false representation): can capture silence where there is a continuing representation that has become false (e.g., renewing an earlier assurance). If the conduct involves renewing or implying a fact that is no longer true, s.2 may be more suitable.
- Section 4 (abuse of position): often used where a person in a position of trust (employee, carer, director) acts against the interests of the person to whom they owe duties. If the gravamen is exploiting the position, s.4 may be more appropriate.
- Section 3 focuses on a distinct legal duty to disclose information. If that duty cannot be shown, consider whether s.2 or s.4 fits the facts.

## Key Examples or Case Studies

- Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67
  - Point: Established the modern test for dishonesty used in fraud cases, replacing the earlier Ghosh approach. Courts first determine the defendant’s actual belief about the facts and then apply the objective standard of ordinary decent people.

- Insurance duty to disclose: Banque Keyser Ullman SA v Skandia (UK) Insurance Co Ltd
  - Point: In insurance law, failure to disclose material circumstances can make the policy voidable (subject to inducement and the current statutory framework). This civil duty illustrates the type of legal obligation that may support a section 3 charge if the omission is dishonest and aimed at gain or avoiding loss.

- Fraud by omission in practice (pre-2006): R v Firth [1990] 90 Cr App R 326
  - Point: A doctor failed to tell the NHS that private patients were being treated using NHS facilities, obtaining services without payment. Though prosecuted under earlier deception laws, the case shows how a failure to disclose in the face of a duty can be criminal. Under the modern law, section 3 could capture similar conduct if a legal duty to disclose existed and the omission was dishonest with intent to gain.

- Business sale and continuing obligations: Banks v Cox (No 2)
  - Point: In a civil context, a seller failed to disclose a material change affecting the business during a transaction, which was treated as fraudulent non-disclosure. While that case concerns civil liability, it demonstrates how contractual duties to update or notify can arise. Where such a duty exists, a dishonest omission aimed at gain could amount to an offence under section 3.

- Worked example: undisclosed commission by an adviser
  - Scenario: A financial adviser must disclose fees and conflicts under contract and FCA rules. They steer a client into a product paying a secret commission and omit to disclose the payment despite a clear duty to do so. If done dishonestly with intent to gain commission and risk loss to the client, section 3 is likely to be engaged.

## Practical Applications

- For prosecutors
  - Pin down the source and scope of the duty: statute, regulation, contract, fiduciary law.
  - Prove the specific information that had to be disclosed and to whom.
  - Gather documentary evidence: policies, engagement letters, board minutes, conflict registers, emails.
  - Evidence dishonesty using Ivey: concealment, inconsistent accounts, steps to hide commissions, timing.
  - Link the omission to an intent to gain or to cause loss or risk of loss (s.5 definitions).
  - Consider alternatives (s.2 or s.4) if the duty to disclose is doubtful.

- For defence teams
  - Challenge whether any legal duty existed at the relevant time.
  - Argue that the information fell outside the duty or was already disclosed in substance.
  - Advance honest belief: that disclosure was not required or was going to be made by another person.
  - Contest intent to gain or cause loss; highlight lack of motive or benefit.

- For compliance and risk teams
  - Map disclosure duties across business lines (contractual, statutory, regulatory, fiduciary).
  - Keep clear records of disclosures made to clients, insurers, counterparties, and boards.
  - Maintain conflict-of-interest registers and document declarations.
  - Review templates to include explicit “notify” and “update” obligations where appropriate.
  - Train staff on when silence is not an option and who must be told.

## Summary Checklist

- Confirm a clear legal duty to disclose exists (source and scope identified).
- Specify what information had to be disclosed, to whom, and by when.
- Show a failure to disclose (silence or partial disclosure) at the relevant time.
- Apply Ivey v Genting: identify the defendant’s actual beliefs, then the objective standard.
- Prove intent to make a gain or cause a loss or risk of loss (Fraud Act 2006 s.5).
- Record evidence of concealment or selective disclosure (emails, minutes, drafts).
- Consider whether s.2 (false representation) or s.4 (abuse of position) is a better fit.
- Note sentencing: fraud is triable either way; up to 10 years on indictment.

## Quick Reference

| Point                 | Source/Case                           | Short note                                                  |
| --------------------- | ------------------------------------- | ----------------------------------------------------------- |
| Offence elements      | Fraud Act 2006 s.3                    | Duty to disclose, failure, dishonesty, intent to gain/loss  |
| Dishonesty test       | Ivey v Genting Casinos [2017] UKSC 67 | Objective standard after finding defendant’s actual beliefs |
| Gain/loss definitions | Fraud Act 2006 s.5                    | Includes keeping what one has; risk of loss is enough       |
| Typical duty sources  | Contract, fiduciary, statute, FCA     | No general duty to volunteer information                    |
| Max sentence          | Fraud Act 2006 s.1                    | Up to 10 years’ imprisonment on indictment                  |


Fraud: Non-Disclosure, Fraud Act 2006 s. 3