Section Title Page number
1 Introduction 5
2 Executive summary 8
3 Australia 11
4 Canada 30
5 France 46
6 Germany 62
7 Ireland 79
8 United States of America 90
9 International comparisons 107
10 Conclusion 124
11 End notes 126
12 Bibliography 132
Title Page number
Summary of predominant types of fraud in each
2 Cost of predominant types of fraud in Australia 12
Predominant areas of fraud in Australia’s public and
4 Cost of predominant types of fraud in Canada 31
Fraudulent offences listed in part five of the Canadian
International conventions against corruption ratified by
7 Cost of predominant types of fraud in France 47
Predominant areas of fraud in France’s public and
Predominant areas of fraud in Germany’s public and
Number of fraud cases detected by the Federal Bureau
of Criminal Investigations (BKA)
11 Cost of predominant types of fraud in Ireland 80
Predominant areas of fraud in Ireland’s public and
13 Predominant types of fraud in the USA 92
14 Estimated cost of fraud in each country 108
Types of fraud measured in each country
divided by sector
Sentences imposed for fraud and fraud-related
I am very pleased to contribute a Foreword to this international comparative report of
counter fraud strategies and action. The report provides essential knowledge for those
seeking to design effective policies in their own country or organisation.
It is also representative of a growing body of thought which recognises that entirely
bespoke strategies, designed purely to serve the supposedly different interests of a
particular organisation, are likely to fail. The new, professional approach to counter fraud
work recognises that there are fundamental common elements needed in any effective
counter fraud strategy, but that best practice in implementation requires a detailed and
continuing study of what is happening both across the national economy and
When reading this report for the first time, I was struck by the similarities of approach
that lie just beneath the necessarily different languages used to describe them.
In other areas of professional life, such as the law, the commonalities between different
countries have long been recognised alongside the specific historical differences. Work
to counter fraud is now maturing in a similar way and the common strategic framework
which is emerging allows information about the detailed work taking place in different
countries and organisations to be absorbed, organised and analysed in a useful manner.
I hope this report will provide a useful source of information to those who want to learn
and develop what is happening in their own organisations. We should never forget that
in the 21st century, it is essential to progress, develop and move forward, ever more
quickly – not to do so is increasingly to fall behind.
Chief Executive, NHS CFSMS
Director of Counter Fraud Services, Department of Health
This report intends to provide a brief overview of the strategies employed by six
countries across three continents to counter fraud and corruption. This will be dissected
into the following sub-headings: National definition of fraud; Nature and scale of the
fraud problem; Main areas of fraud (in private and public sectors); Does a national fraud
strategy exist?; Legislation; Countering fraud in the private and public sectors.
Information is drawn from many sources, the main source being the internet.
This report was written by Samantha Ankrah. Thanks are due to the dedicated team of
NHS CFSMS researchers comprising Duncan McDougall, Elisha Tymms and Josephine
Ofili. The report was edited by Alex Smith (NHS CFSMS). Thanks are also due to Laura
Davies (NHS CFSMS), Joseph Halligan (HM Treasury and Head of the Fraud Review
Team) and the Fraud Review Team for their contributions to the report.
“There is no reliable data on the scale and extent of fraud. Some
elements of fraud have been measured reasonably accurately. And a
number of estimates of overall fraud have been made by various
research organisations [. . .]. But none of these studies are
considered reliable and comprehensive by anyone, including their
1.1 The citation above provides an indication of the current problems in measuring
losses to fraud. In the UK at present, there is no legal definition of fraud as an
offence in itself. Attempts to measure the cost of fraud have been made by
various organisations and government departments; however, there is a lack of
consistency in the methodologies applied.
1.2 In an effort to address the situation, the British government has commissioned a
review into the detection, investigation and prosecution of fraud. The Fraud
Review began on 11 October 2005 and addresses the following areas: the
nature and scale of the fraud; the appropriate role for government in dealing with
fraud; and how resources could be best spent to maximise value for money
across the system.
1.3 The Fraud Review is being led by a steering group consisting of representatives
from the Department for Constitutional Affairs (DCA), Home Office (HO), HM
Treasury (HMT), Department for Trade and Industry (DTI), Department of Health
(DH), Fraud Advisory Panel (FAP), City of London Police, Serious Fraud Office
(SFO) and the Financial Services Authority (FSA).
1.4 The NHS Counter Fraud Service (NHS CFS) conducted a number of projects
that contributed to the Fraud Review, the main outcome being this report.
1.5 Many different types of fraud will be covered in this report; however, a brief
description of the predominant types of fraud in the countries considered is
Identity fraud: An identity fraud is generally perpetrated to facilitate
other crimes, such as credit card fraud or benefit
fraud. When a person’s identity is stolen, it can be
used to open new accounts in the name of the victim,
or to withdraw funds from existing accounts.
Telemarketing The most common example of this type of fraud
or consumer fraud: involves a company, of legitimate or illegitimate status,
contacting a person to offer a false or fraudulent
product or service. In some cases, the person is asked
to provide their personal bank account details to
guarantee receipt of the product or service, which is
never received by the ‘customer’.
Insurance fraud: This type of fraud usually involves a person making a
fraudulent insurance claim. The industries it affects
vary from country to country; for example, health
insurance is compulsory in France, although not in the
UK. Another main area of insurance fraud is that of
injuries and compensation.
Healthcare fraud: This type of fraud also varies from country to country,
depending on how the healthcare system is financed.
The main types of healthcare fraud are fraudulent
billing or upcoding, unbundling, pharmaceutical fraud
and prescription fraud.
Benefit fraud: Benefit fraud, which is referred to as ‘social welfare
fraud’ in some countries, involves a person falsely
claiming benefits to which they are not entitled, having
supplied fraudulent information to obtain that benefit.
1.6 The main body of this report contains information on six countries: Australia,
Canada, France, Germany, Ireland and the United States of America (USA).
The areas that will be explored are as follows:
• national definition of fraud – whether there is one in existence or not
• nature and scale of the fraud problem
• national fraud strategy – whether there is one in existence or not
• legislation relating to fraud and corruption
• organisations with a counter fraud remit – in both the public and private
1.7 The main body of the report also contains a chapter on international
comparisons, which highlights points of interest and examples of best practice,
and identifies commonalities between the proposals of the Fraud Review Team
and initiatives already in place in other countries.
1.8 The objective of this report is to give the reader a current picture of fraud and
counter fraud activity in the six selected countries. The majority of figures on the
cost of fraud for 2005 could not be found. Therefore, in order to maintain
consistency, figures for 2004 are quoted where possible throughout the report
as all figures were available for this period. All estimates contained within this
report should be treated with caution, given the questionable reliability and
validity of the methodologies used to produce them.
2 Executive summary
2.1 National definition of fraud
The definition of criminal fraud varies slightly from country to country. However,
the main common elements that constitute an offence of fraud are dishonesty,
deceit, deception and intent.
2.2 Nature and scale of the fraud problem
The overall cost of fraud varied from £378 billion in the USA2 to £2.3 billion in
Australia. However, the cost of fraud in Germany equated to the highest
percentage of gross domestic product of all the six countries. The predominant
types of fraud in each country are displayed in the table below:
Table 1: Summary of predominant types of fraud in each country
Types of fraud Australia Canada France Germany Ireland USA
Financial services fraud
(e.g. credit card, cheque)
Identity fraud is the most common type of fraud in all the countries researched; it
is, however, a by-product of other types of fraud. For example, someone who
takes another person’s identity to claim a benefit to which they are not entitled is
using identity fraud as a tool to commit benefit fraud.
Three out of the six countries examined have a legal definition of criminal fraud.
The remaining countries have provisions for fraud-related offences although not
for the offence of fraud per se. The longest maximum sentence of imprisonment
imposed for a fraud offence is that of 14 years in Canada, if the subject matter of
the offence is greater than £2,500.
2.4 Countering fraud in the private and public sectors
Anti-fraud culture and deterrence
‘Project kNOw Fraud’ (USA) is a large consumer protection effort, whose
partners are key federal government consumer protection agencies and private
sector organisations. Its aim is to raise awareness amongst the public of
The Fraud Prevention Forum (Canada) comprises private sector bodies,
government agencies, law enforcement agencies, and consumer and volunteer
groups. Its aim is to prevent Canadians from becoming victims of fraud. The
Federation of German Industry (Bundesverband der Deutschen Industrie – BDI)
set up an internet portal – named Corporate Social Responsibility Germany – to
serve as a facility for data-sharing between two private sector bodies and act as
a preventative measure in countering corruption.
The Data Matching Programme Protocol (Australia), entitled Pay as You Go
(PAYG), was created by the Australian government to focus on the detection of
customers failing to declare or falsifying details of their income. RECOL –
Reporting Economic Crime Online (Canada) – is a public sector body,
incorporating an integrated partnership between federal and provincial law
enforcement agencies and private sector organisations, which receives copies
of economic crime complaints.
The Garda Bureau of Fraud Investigation (GBFI) of Ireland is the Garda
Síochána’s dedicated fraud unit, whose remit includes the investigation of fraud
on a national basis as well as collating information and fraud intelligence.
Sanctions and redress
The Sarbanes Oxley Act 2002 (USA) was designed to review legislative
requirements to improve the accuracy of financial reporting of public companies.
France has established a number of Economic and Financial Crime Centres
containing civil servants with specialist knowledge or experience in economic
and financial issues. France has two types of court in its legal system – judicial
and administrative. The national audit function is included in its court system.
• Population (2004): 20.1 million3
• Gross domestic product (GDP)4 in 2004: £3.4 trillion (AUD $8.4 trillion)5
• Total cost of fraud in 2004: £2.3 billion (AUD $5.8 billion)6
• Total cost of fraud as percentage of GDP: 1.3%
The Commonwealth of Australia was established as a democratic federal state in
1901. Federalism divides the Australian government into three distinct levels:
federal, state and local government. Powers are distributed between the federal
government (commonwealth), the six states of Australia (New South Wales,
Queensland, Victoria, Western Australia, South Australia and Tasmania) and their
respective local authorities. As in the United Kingdom, the Prime Minister is the
leader of the party holding the majority in the House of Representatives and,
alongside the cabinet ministers, is the centre of executive power.
3.1 National definition of fraud
3.1.1 In Australia, the criminal definition of fraud is ‘dishonestly obtaining a benefit by
deception or other means’.7 The definition covers a number of behaviours that
are deemed fraudulent:
• obtaining property, a financial advantage or any other benefit
• creating a loss, or avoiding or creating a liability by deception
• providing false or misleading information to the commonwealth
• making, using or possessing forged or falsified documents
• bribery, corruption or abuse of office
• relevant bankruptcy offences
• any offences of a like nature to those listed above.
3.2 Nature and scale of the fraud problem
3.2.1 The overall cost of fraud in Australia was estimated by KPMG in 2005 at around
£2.3 billion (AUD $5.8 billion).8 However, this figure is not consistent with the
estimates of different types of fraud by other organisations shown in the table
below. It has proven difficult to find details of the methods used to arrive at
these figures; therefore, they should be read with a degree of circumspection.
3.2.2 The costs of the predominant types of fraud in Australia are presented in the
Table 2: Cost of predominant types of fraud in Australia
Type Cost Estimated by Date
Australian Institute of
Benefit/welfare fraud £2.8–5.9 billion
New South Wales Crime
Identity fraud £1.5 billion
Insurance Council of
Insurance fraud £0.9 billion
3.2.3 As indicated above, welfare/benefit fraud is estimated to cost the commonwealth
the largest sum of money. A report on identity fraud by the Australian Attorney
General’s Department notes: ‘As stated by … the AIC, ‘the figures do not exist’
when it comes to considering the significance and cost of identity related fraud
for the Australian government and the community.’12 This view on the lack of
national statistics and costing in this area is supported by the Australian National
Audit Office and the National Crime Authority.
3.2.4 Public sector fraud takes many forms. The most common are:
• individuals claiming benefits to which they are not entitled
• individuals evading payments owed to the government
• individuals who contract with the government to provide
goods or services failing to act as they have been contracted to.
3.2.5 As government agencies such as the Australian Tax Office and Centrelink deal
in such large sums of money, the potential losses to fraud are considerable.
The Australian National Audit Office’s 2000 survey of fraud control
arrangements in public sector agencies, for example, found that £58.2 million
(AUD $145,862,000) was reported to be lost to fraud by 106 agencies in 1998–
99. There is no doubt that Australian governments have become increasingly
susceptible to fraud.
3.3 Main areas of fraud (in private and public sectors)
3.3.1 The predominant areas of fraud in Australia’s public and private sectors are
presented in the following table:
Table 3: Predominant areas of fraud in Australia’s public and private sectors
Private sector Public sector
Financial services fraud
(e.g. credit card, cheque)
Insurance fraud Welfare fraud
Telemarketing fraud Healthcare fraud
3.4 Does a national fraud strategy exist?
3.4.1 The Attorney General's Department13 is responsible for coordinating fraud
control policy and works closely with the Australian Federal Police on all fraud
control issues. The department's national fraud control policy work includes:
• implementing the Commonwealth Fraud Control Guidelines
• promoting the use of risk management techniques within commonwealth
departments and agencies to minimise fraud against their programmes
• promoting best practice in fraud control, including the development of fraud
• providing advice on fraud control to the government and reporting on the
extent and nature of fraud against the commonwealth.
3.4.2 The Australian government issued a fraud control policy in May 2002 in the
form of regulations made under the Financial Management and Accountability
Act 1997. However, this act only covers budget-funded agencies and small
parliamentary departments, as other agencies – mainly those with quasi-
commercial status – are covered by the Commonwealth Authorities and
Companies (CAC) Act 1992. Nevertheless, there are shortfalls in the CAC Act.
Firstly, its one-fit-for-all approach disregards the size of the agency. Secondly,
the CAC Act’s opt-in facility means agencies that receive more than 50% of
their funding from the government are under pressure from the Minister for
Justice and Customs to comply. Thirdly, on a practical note, determining which
agencies receive more than 50% of their funding from the government is
somewhat difficult. Lastly, there is a shortage of mechanisms by which
agencies can report compliance with the policy.
3.4.3 The fraud control policy was a revision of a similar policy issued in 1994. The
major changes to the policy were as follows:
• ‘A greater emphasis upon fraud control for outsourced functions;
• elevating the fraud investigation competencies as a basis for mandatory
• shifting the responsibility for fraud control away from the central
• attempting to remedy the unworkable fraud reporting requirements in the
1994 policy; and
• reliance upon a legislated basis for the policy.’14
A note on Australian legislation
The Australian legal system is based on English common law.15 The
main criminal law powers rest with the states and territories, while
commonwealth legislation is generally restricted to criminal activity
against commonwealth interests, commonwealth officers or
commonwealth property. At a national level, the Australian Federal
Police (AFP) enforces most commonwealth criminal law.
3.5.1 Money laundering and other fraud is dealt with at both the federal and state
level. In Australia’s federal criminal law system, there are nine separate
jurisdictions, each of which has its own common law and legislative offences
Commonwealth (federal) legislation
3.5.2 The Trade Practices Act 1974 gives consumers protection against fraud on the
part of Australian companies. For example, Section 75AZC imposes civil
penalties, with a maximum fine of 10,000 penalty units, on corporations that
make false or misleading representations in trade or commerce. Section 6A
establishes the Australian Competition and Consumer Commission (ACCC),
whose function is to ensure compliance with the act.
3.5.3 Australia has recently legislated against spamming and ‘phishing’ – the sending
of fraudulent emails to gather recipients’ personal information, often their bank
details. The Spam Act 2003 makes this an offence punishable by hefty fines.
Since the act’s introduction, Australia has lost its position as one of the top 10
spamming countries.16 The offence of phishing is contained in the Fraud Bill,
which has continued to be debated in the UK parliament since its introduction in
3.5.4 The Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences)
Act 2000 is concerned with fraudulent activity perpetrated against
commonwealth entities which requires some element of dishonest or deceptive
conduct. Examples include Section 134 (1): obtaining property by deception,
Section 134 (2): obtaining a financial advantage by deception and Section 135
(4): conspiracy to defraud. These sections impose criminal sanctions of 10
years’ maximum imprisonment.
Commonwealth (federal) fraud guidelines
3.5.5 The government has issued Fraud Control Guidelines under Regulation 19 of
the Financial Management and Accountability Regulations 1997. Under
guideline two, fraud is defined as ‘dishonestly obtaining a benefit by deception
or other means’. These guidelines apply to all agencies covered by the
Financial Management and Accountability Regulations 1997 and organisations
falling under the scope of the Commonwealth Authorities and Companies Act
1997 (CAC Act) that receive at least 50% of their funding for operating costs
from the government or a government agency. Agencies and organisations
include departments of state or parliament, banks and commonwealth
3.5.6 The Crimes Act 1958 (Vic) has the same fraud-related provisions as the
Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Act
2000, namely Section 82 (obtaining financial advantage by deception) and
Section 83 (obtaining property by deception). Both these offences attract
criminal sanctions – a 10-year maximum term of imprisonment. However, the
Crimes Act is broader in scope, applying to individuals.
3.5.7 Australian commonwealth and state fraud legislation both contain similar
provisions to the Theft Act 1968 (UK); for example, the Theft Act contains a
provision concerning obtaining property or services by deception, which is
strikingly similar to Sections 82 and 83 of the Crimes Act and Section 143 of the
3.5.8 The Crimes Amendment (Computer Offences) Act 2001 of New South Wales
creates new offences for the commission of computer-based crime. The types
of fraud that will be prevented include credit or financial institution fraud, social
security fraud and rebirthing17 of stolen vehicles.
3.5.9 The only Australian state with jurisdiction to announce proposed legislation to
target identity theft specifically (i.e. to make it a crime) is South Australia.
3.5.10 In regard to civil legislation, New South Wales and South Australia are the only
two states in Australia that retain the common law approach to fraud regulation.
This is based on the offence of larceny, which is modified and supplemented by
a large number of statutory offences (which in New South Wales are contained
in the Crimes Act 1900 (NSW)).
3.5.11 The six broad categories of offences classified as fraud are:
• conflict of interest
• false statements and false claims
• fraudulent conversion (for example, of public funds or property)
3.5.12 The Independent Commission Against Corruption (ICAC) is a New South
Wales government body which regulates the performance of public officials in
order to control and penalise corruption. The Independent Commission Against
Corruption Act 1988 (NSW) defines corruption in Sections 7 and 8 as ‘conduct
that could involve the dishonest or partial exercise of official functions, or a
breach of public trust, or the misuse of information or material acquired in the
course of official functions’18. Like Australia’s criminal definition of fraud, this
definition involves some element of dishonesty.
3.5.13 There are both criminal and civil sanctions available for breaches of the act. For
instance, Section 91 deals with fraud practised on witnesses called before the
Commission. A breach of this section involves practising any fraud or deceit on,
or knowingly making or exhibiting any false statement, representation or writing
to, any person required to act as a witness before the Commission. The offence
attracts a maximum fine of 200 penalty units or a maximum term of five years’
3.5.14 South Australia has legislated to protect those who uncover and report corrupt
conduct of public officials. The Whistleblowers Protection Act 1993 (SA) is
therefore designed not only to punish corrupt conduct but also to facilitate its
disclosure. Under this act, the definition of corrupt conduct extends further than
it does under the Independent Commission Against Corruption Act 1988 to
encompass both a dishonest act and a reckless act. This is evident in Section
10, which states that a person who makes a disclosure of false public interest
information knowing it to be false or being reckless about whether it is false is
guilty of an offence. This attracts a 10-year maximum term of imprisonment or,
alternatively, a civil sanction by way of a Division Five fine.
3.5.15 Commonwealth – as well as state and territory – authorities have legal powers
for gathering evidence and compelling production of documents, as well as a
wide range of special investigative techniques. These include the use of
undercover police officers, electronic interception and surveillance.
3.5.16 The Proceeds of Crime Act 2002 provides for both criminal and civil-based
forfeiture of proceeds. Competent authorities have a wide range of powers to
identify and trace property, including the Financial Transactions Reports Act
3.5.17 The Anton Pillar Order ‘is an order made by the court to search and seize in a
civil action and is used by a would-be plaintiff as a precursor to instituting
proceedings. Anton Pillar applications are not public applications, as the
purpose is to conceal from the other side the intention to seize property in order
to avoid any property being destroyed by that party.’19
3.6 Countering fraud in the private and public sectors
Anti-fraud culture and deterrence
3.6.1 The Corporate Crime Liaison Group (CCLG) was formed in 2003 to ‘foster a
spirit of cooperation between the police and the private sector’.20 Meetings are
held between the CCLG and large legal accounting firms. The CCLG runs a
number of roadshows, seminars and other events to create and increase fraud
awareness. It has received formal recognition from the Victoria Police.
3.6.2 The fraud control policy of the commonwealth outlines the principles of fraud
control and defines national standards. Although the policy relates only to
commonwealth government departments and does not encompass any
enforcement function, it provides a consistent set of guidelines and directions to
assist departments in carrying out their responsibilities for fraud prevention,
reporting of fraud information, fraud investigations case handling and training of
agency fraud investigators.
3.6.3 Significant advances have been made by various state and territory
government departments in developing fraud control policies. The Australian
Capital Territory Government Service Fraud Prevention Unit established a fraud
control policy that is in line with the ‘Public Sector Management Standards’ on
fraud prevention21. The policy ‘sets out the responsibilities of managers and
employees in relation to fraud control, describes the investigatory functions of
the Fraud Prevention Unit and details the procedures for reporting fraud and
corruption’.22 Section 9(t) of the Public Sector Management Act 1994 calls for
public sector employees to report suspected fraud; alongside this, the Public
Interest Disclosure Act 1994 provides protection against reprisals for people
who report fraud and corruption ‘in good faith.’23
3.6.4 The design of financial systems can be an important means of fraud prevention.
The introduction of a requirement for recipients of public funds to have an
account with a financial institution in which the funds can be deposited
automatically has dramatically reduced the risk of lost or stolen cheques, or
fraudulent claims. Automated payment also reduces clerical costs.
3.6.5 Initiatives have also been introduced to prevent fraud in the private sector. This
means that private sector organisations are potentially subject to criminal or
civil penalties if they fail to put effective fraud prevention systems in place. This
requirement is reinforced by the Australian Standard No. AS 3806-98
‘Compliance Programs’, which provides guidelines for public and private sector
organisations on implementing effective prevention measures. Additionally,
BHP Billiton – a global resources company with headquarters in Australia –
published the Guide to Business Conduct in 2004, which outlines guidelines for
employees on the use of company funds, reporting of expenditure, details of
gross misconduct in relation to fraud, maintenance of company financial
transactions, and the use of company goods/equipment.
3.6.6 The Australian Bankers’ Association (ABA) has joined with its member banks to
form a partnership with the Australasian Consumer Task Force to provide
information to clients on preventing ‘scams’ such as pyramid schemes,
‘amazing offer schemes’, investment scams, medical scams and internet scams
– to name but a few.
3.6.7 An important strategy introduced in the early 1990s to control revenue fraud
involved the establishment of an extensive database by the federal
government. The database sought to reduce taxation and social security fraud
by identifying individuals who make claims for benefits from government funds
to which they are not entitled. The Parallel Data-Matching Program (PDMP),
which was introduced in 1991 by the Data-Matching Program (Assistance and
Tax) Act 1990, makes use of tax file numbers and permits income records to be
compared with payment records held by various benefit providing departments.
3.6.8 The first barrier to the criminal prosecution of an alleged fraudster is the
difficulty of encouraging those who have suffered loss at the hands of offenders
to report their complaint to the authorities. Some, however, such as those who
fall prey to bogus charitable solicitations, may never realise that they have been
defrauded. Where individuals are aware that they have been defrauded, the law
requires, in certain circumstances, that they bring this fact to the attention of the
3.6.9 Despite this requirement, there are powerful reasons why individuals may not
wish to report offences of dishonesty to the authorities. In its survey of
businesses in 1999, KPMG found that one third of organisations surveyed
failed to report frauds to the police, many preferring to deal with the matter
internally, possibly by dismissing the individual in question. An Ernst & Young
study in 1998 found that, although nearly half of the organisations surveyed had
a fraud-reporting policy in place, fewer than half of these said that their staff
were aware of the policy. Other surveys have identified a variety of reasons for
organisations’ failure to report offences: belief that the matter was not serious
enough to warrant police attention, fear of consumer backlash, fear of bad
publicity, inadequate proof, and a reluctance to devote time and resources to
prosecuting the matter. Various inducements may be needed to enhance the
reporting of fraud. These may include guarantees of anonymity where this is
necessary to protect a business reputation, and assistance in reducing the
personal costs and time associated with the investigation and prosecution of
3.6.10 The use of fraud-reporting ‘hot lines’ may be another way of persuading
employees to report fraud to management, although in Ernst & Young’s 1998
survey24, more than 50% of respondents were opposed to the idea, with most
opposition coming from company directors.
3.6.11 The Australian government’s Fraud Tip-off Line provides people with a means
of reporting suspected fraud against Centrelink, Medicare, the Pharmaceuticals
Benefits Scheme and the Child Support Agency. The Department of Health and
Ageing (DOHA) is responsible for the policy development of Medicare and the
Medicare benefits schedule. Medicare Australia is responsible for ensuring that:
• Medicare benefits are paid to eligible healthcare consumers for services
provided by eligible medical practitioners
• assessment and payment of Medicare benefits for a range of medical
services, whether provided in or out of hospital, are based on a schedule
of fees determined by DOHA in consultation with professional bodies.
3.6.12 Medicare Australia is involved in detecting and preventing fraud and abuse of
the Medicare system and registering and recording details of medical
practitioners. These include those eligible to have Medicare benefits paid for
their services and those who are not entitled to have Medicare benefits paid for
their services but able to raise valid referrals or requests for specialists’
services for Medicare benefit purposes. As of 30 June 2005, there were more
than 20.5 million people registered for Medicare benefits and over 236 million
services were processed in the July 2004–June 2005 period.
3.6.13 Some examples of suspected fraud against Medicare Australia programmes are
• making Medicare claims for services that were not provided
• using someone else’s Medicare card
• using an invalid concession card
• forging prescriptions for Pharmaceutical Benefits Scheme (PBS) items
• making PBS claims for pharmaceutical benefits that were not provided
• swapping PBS prescription items for other pharmacy items or goods
• an individual taking or sending overseas PBS medicine that is not for
their personal use or the use of someone travelling with them.
3.6.14 Centrelink fraud is committed when a person knowingly gives false and
misleading information, or provides false statements or false identification, to
obtain a payment or payments they are not entitled to, or when they fail to give
Centrelink information that they are obliged to disclose.
3.6.15 Centrelink detects fraud in a variety of ways:
• Using information from the public – the public has always been a valuable
source of information about alleged fraud. Members of the public contact
Centrelink with information about people who they think are receiving a
payment from Centrelink to which they are not entitled. All information
from the public is checked and followed up if necessary.
• Regular payment checks – Centrelink can regularly check whether a
customer continues to be eligible for the payment they receive.
• Data-matching – Centrelink can detect incorrect payments by matching its
data with that of a number of other agencies, such as the Australian
Taxation Office (ATO), Department of Veterans’ Affairs, Department of
Immigration and Multicultural and Indigenous Affairs, Department of
Corrective Services and the Registrar-General’s Office.
3.6.16 Information is provided by members of the public to Centrelink in a number of
• reports made to the Centrelink call centre (this is the most common way
of reporting a case of suspected fraud)
• reports made by employers to a Centrelink employer contact
• reports made to a Centrelink customer relations unit
• letters sent to Centrelink customer service centres
• letters to the minister(s) or Prime Minister.
3.6.17 Through the PBS, the Australian government makes a range of necessary
subsidised prescription medicines available at affordable prices to all Australian
residents and those overseas visitors eligible under reciprocal healthcare
3.6.18 The Australian Transaction Reports Analysis Centre (AUSTRAC) has a dual
role as both a financial intelligence unit and AML/CFT (anti-money
laundering/combating the financing of terrorism) regulator. AUSTRAC was
established in 1989 as an independent authority within the Australian
government's Attorney General’s portfolio. AUSTRAC collects financial
transaction reports information from prescribed cash dealers, including the
financial services and gaming sectors, as well as from solicitors and members
of the public.
3.6.19 Australia has a comprehensive system for reporting cross-border movements of
currency above £3,990 (AUD $10,000) to AUSTRAC. However, there is no
corresponding system for declaration or disclosure of bearer-negotiable
3.6.20 Australia has a mandatory system for reporting all international fund transfer
instructions to AUSTRAC. The reports contain the ordering customer’s name,
location (i.e. full business or residential address) and account number. These
reports are maintained in AUSTRAC’s database and are a useful source of
3.6.21 Australia has a functional approach to financial sector supervision. AUSTRAC’s
regulatory role includes an ongoing monitoring programme to ensure cash
dealer compliance with the requirements of the Financial Transactions Reports
Act 1988. The Australian Prudential Regulatory Authority is the prudential
supervisor and regulator of the Australian financial services sector. The
Australian Securities and Investment Commission, the financial market and
conduct regulator, enforces and regulates company and financial services laws
in order to protect consumers, investors and shareholders.25
3.6.22 To be effective, public and private sector bodies that engage in the
investigation of fraud are required to liaise closely with law enforcement
personnel and prosecutors in order to ensure that evidence is obtained in such
a way as not to prejudice its use in criminal trials or otherwise result in critical
evidence being lost or damaged. Such cooperation already occurs in many
agencies, such as the Australian Securities and Investment Commission
3.6.23 Recently, initiatives have been taken to establish comprehensive training
programmes for those involved in the investigation of fraud. Both the Victoria
Police Major Fraud Group and the New South Wales Police Service’s
Commercial Crime Agency have fraud investigators’ courses – conducted by
tertiary educational institutions – that are now being made available to non-
police investigators. This will help to ensure that all those involved in the
investigation of fraud and forensic accounting, from both the public and private
sector, understand each other’s role and duties and conduct investigations in a
3.6.24 Centrelink, for example, investigates fraud in many ways, depending on the
information and the circumstances. Letters may be sent to financial institutions,
employers, real estate agents and local governments to confirm current
customer details. Centrelink may contact family members, friends or
neighbours to confirm information that the customer has provided. Customers
may be interviewed at a Centrelink customer service centre, at home or at
another suitable place. Income details can be checked with a customer’s
last/current employer by sending a letter directly to the employer or through the
Australian Taxation Office.
3.6.25 Centrelink can use many external information sources to check whether
customers are receiving the right type and amount of payment. This involves
checking names and addresses, redirection information and post office box
information through Australia Post, as well as contacting local councils to verify
who owns property, dates of purchases and locations of properties. If an
incorrect payment or a fraud of some kind is detected, the customer will be
contacted and asked for an explanation.
3.6.26 Since February 2000, the Australian Bureau of Criminal Intelligence (ABCI) has
been providing investigators all over Australia with stage one of a new counter
fraud project – the National Fraud Desk. The project is a secure intranet
website which gives up-to-date information on emerging trends and new
techniques in fraud26 and will cover areas such as plastic card fraud, identity
fraud, e-commerce fraud, computer crime, tax and Goods and Services Tax
fraud and proceeds of crime.
3.6.27 The Australian Government Investigations Standards (AGIS) replaced the
Commonwealth Fraud Investigations Standards Package (CFISP) in
September 2003. AGIS has been developed to help all Australian government
agencies further enhance their investigative practices. All Australian
government agencies required to comply with the Commonwealth Fraud
Control Guidelines27 must also comply with the minimum standards for
investigations set out in AGIS. Agencies may use AGIS as a set of best
practice standards for all investigations of offences under commonwealth
3.6.28 Private organisations that become victims of fraud ‘may retain their own in-
house investigators, or may engage specialised fraud investigators residing in
the private sector.’28 The private investigators are able to conduct an
investigation from start to finish and then hand the case over to the police for
prosecution. This is particularly common in the insurance industry.
3.6.29 KPMG offers various services to assist private sector bodies in countering fraud
– particularly in detecting, investigating and instigating sanctions against
fraudsters. Its services include quantifying loss (insurance), interviewing
suspects and witnesses, sending briefings to the police, supporting civil action,
creating fraud detection strategies and searching for assets. This last service is
conducted through a ‘number of methods such as using the Public Record, the
victim’s own bank, surveillance, telephone records, [and/or] detection through a
3.6.30 KPMG has created a fraud control plan, which includes a definition of fraud, a
statement of attitude, and fraud control responsibilities. It also contains
documented policy and procedures, such as a fraud policy (including how to
report fraud), an internal audit strategy, guidelines on fraud risk assessment
and pro-active fraud detection by line management, and information on internal
Sanctions and redress
3.6.31 Dishonest and fraudulent behaviour is dealt with using a variety of legal
responses in addition to informal sanctions such as dismissing an employee
who has defrauded a business, or what is known in the dispute resolution
literature as ‘exciting’ a problematic situation (Hirschman 1970). Often, an
organisation that has suffered loss through fraud may be unwilling to incur
further time and expense in pursuing legal remedies, be they in the civil or
3.6.32 Some may view the benefits which follow from reporting fraud to other
regulatory agencies as inadequate and take no action at all. By refraining from
taking legal action, the potential benefits to an organisation – as well as to the
wider community – in terms of individual and general deterrence will be lost,
leaving the offender free to repeat the dishonest conduct at the same or
another place of employment, and providing no signal to the rest of the
community that fraudulent behaviour is unacceptable.
3.6.33 Criminal fraud has traditionally been dealt with through the legal channels of
investigation, employing publicly funded police services, prosecution agencies,
trial in the criminal courts (often employing juries) and punishment in the state-
administered correctional system.
3.6.34 In recent times, however, many of these functions have been taken over by
privately funded agencies, usually working in conjunction with their publicly
funded counterparts. Financial considerations have meant that only the most
serious cases involving substantial monetary losses are likely to be fully
investigated and tried, with the attendant possibility of convicted offenders
receiving the most severe sanction – a term of imprisonment. The legal
response to fraud control has, therefore, been severely restricted, although the
possibility of criminal prosecution and sanctions has always remained open.
3.6.35 Australia’s Department of Foreign Affairs and Trade (DFAT) maintains one
consolidated list of individuals and entities to which the asset-freezing sanctions
apply. The list is available on the DFAT’s website. It contains over 500 names.
3.6.36 AUSTRAC’s powers include criminal sanctions for non-compliance and an
injunctive power. The regulatory sanctions available in the broader Australian
financial supervisory and regulatory environment include criminal, civil and
3.6.37 After a case of serious fraud has been investigated, the evidence must be
presented to the relevant prosecution agency. It is at this point that serious
fraud cases often flounder, as prosecutors may believe that the evidence
presented to them is inadequate or that the chances of success are insufficient
to justify the time and expense involved in a lengthy trial.
3.6.38 In 1992, in the case of Dietrich v the Queen ((1993) 67 ALJR 1), the High Court
of Australia ruled that, unless exceptional circumstances exist, if a genuinely
indigent accused person is unrepresented by counsel at a trial for a serious
offence, the trial will be considered unfair and should be adjourned until legal
representation is made available.
3.6.39 Few individuals are able to afford the costs associated with a long and complex
criminal trial. Defendants charged with serious fraud are often able to arrange
their financial circumstances in such a way as to make themselves appear
indigent and thus take advantage of the Dietrich ruling. The effect may well be
that a long and complex investigation will be stayed indefinitely. The federal
Attorney General’s Department has stated that there are many other
implications and challenges for law enforcement agencies grappling with fraud,
• the need for better collation of data
• the finite amount of law enforcement resources available
• the high costs involved in investigating fraud
• the limited role of law enforcement agencies in fraud prevention.
3.6.40 Legal aid is provided to people charged with committing social security fraud
and in corporate fraud cases. However, legal aid budgets are restricted and
there is some concern about the quality of the representation provided: ‘The
quality of representation for the impecunious (or even moderately well-off)
citizen [has its] own deficits from the prosecution’s view point.’ 30
• Population (2004): 31.9 million31
• Gross domestic product (GDP) in 2004: £481 billion (CAD $980 billion)32
• Total cost of fraud in 2004: £10 billion (CAD $20 billion)33
• Total cost of fraud as percentage of GDP: 2.1%34
Canada is a federal state and its government is a confederation of 10 provinces
and three territories. It is a parliamentary democracy. Government services are
provided on three levels: federal, provincial (consisting of 10 provincial and three
territorial governments) and local (consisting of municipalities, school boards,
special agencies and commissions). The constitutional head of state is the Queen,
who is represented in Canada by the governor general. The House of Commons is
elected by direct popular vote to serve five-year terms. The Senate members are
appointed by the governor general to serve until they reach 75 years of age, and
are selected on the advice of the Prime Minister.
4.1 National definition of fraud
4.1.1 A fraudster is defined under Section 380 of the Canadian Criminal Code as:
‘Everyone who, by deceit, falsehood or other fraudulent means, whether or
not it is a false pretence within the meaning of this Act, defrauds the public
or any person, whether ascertained or not, of any property, money or
valuable security of any service’. 35
4.1.2 In regard to civil law, if an act involves misrepresentations or misleading non-
disclosures, the alleged victim has common law rights to action for
misrepresentation or fraud on the basis that the victim relied on the
misrepresentation when deciding to purchase or sell a product or service.
4.2 Nature and scale of the fraud problem
4.2.1 There is a lack of information available regarding an overall estimate of national
fraud in Canada. However, there are a number of estimates of the cost of types
of fraud in Canada, which have been calculated by specialist agencies.
Table 4: Cost of predominant types of fraud in Canada
Type Amount Estimated by Date
£2.8 billion+ Canadian Council of Better
Identity fraud 2003
(CAD $5.6 billion) Business Bureaus36
£7.6 billion Canadian Health Care Anti-
Healthcare fraud 2003
(CAD $15.3 billion) Fraud Association37
Insurance fraud Insurance Bureau of Canada38 2003
(CAD $1.4 billion)
Financial £266 million Regulatory Impact Analysis
services fraud (CAD $539 million) Statement39
Financial Transactions and
Reports Analysis Centre of
Money £1 billion+
laundering (CAD $2 billion)
government agency) 40
Telemarketing £403 million USA Immigration and Customs
fraud (CAD $817 million) Enforcement41
4.2.2 Additionally, Ernst & Young fraud investigator Don Holmes estimated that ‘white-
collar crime’ costs Canadians £10 billion (CAD $20 billion) a year in increased
taxes and prices for goods and services.42 However, the exact cost of goods and
services tax (GST) fraud remains unknown.
4.3 Main areas of fraud (in private and public sectors)
4.3.1 Reporting Economic Crime Online (RECOL) is a fraud-reporting initiative in
Canada which incorporates an integrated partnership of federal and provincial
law enforcement agencies. RECOL is administered by the National White Collar
Crime Centre of Canada and is supported by the Royal Canadian Mounted
Police. The number of complaints registered by RECOL provides an indication of
the different types of fraud that occur in Canada43:
1. identity fraud (approximately 1,200 complaints)
2. counterfeit fraud (approximately 250 complaints)
3. investment fraud (approximately 200 complaints)
4. corruption (approximately 100 complaints)
5. health fraud (approximately 50 complaints)
6. property fraud (approximately 50 complaints)
7. ‘other’ fraud (including telemarketing fraud) (approximately 3,550
4.4 Does a national fraud strategy exist?
4.4.1 Public Safety and Emergency Preparedness Canada (PSEPC) – a Canadian
government department – has a number of key components of federal action to
combat economic crime. These include:
A multidisciplinary approach
Federal, provincial and territorial (FPT) ministers responsible for justice combine
to commit governments to fight organised crime, including economic crime, fraud
and money laundering.
Royal Canadian Mountain Police (RCMP) efforts to fight economic crime
The RCMP has established an Economic Crime Branch which is staffed by
investigators specialising in areas such as accounting, law, finance, economics,
computer science and business. The branch also created the Fraud Reporting
Centre RECOL (as described in paragraph 4.3.1).
Strengthening legislation and enforcement for capital market fraud
The federal government announced the creation of integrated market
enforcement teams in 2003. These teams enforce serious capital market fraud
offences. The federal government has introduced draft Criminal Code
amendments to create new offences, facilitate evidence-gathering and
strengthen sentencing for capital markets fraud offences.
The government works with both the public and private sectors to increase public
awareness of the various aspects of economic crime.
Federal strategy for private sector fraud
4.4.2 The Canadian government has established various fraud strategies specific to
different types of fraud and the sectors they affect. One such strategy is the
federal strategy for countering ‘serious capital market fraud’, also known as
‘corporate fraud’. In Canada, enforcement of laws governing corporate and
securities activities is a shared responsibility, involving the federal and provincial
governments, and securities regulators. In this context, the federal government
works closely with the provinces, market regulators, law enforcement and
industry to ensure the integrity of Canada's financial markets. The federal
government's coordinated strategy to strengthen enforcement and legislation to
counter serious capital market fraud is based on the following proposals:
1. Expand resources dedicated to investigating serious cases of capital
market fraud. Integrated market enforcement teams (IMETs) are to be
established in key Canadian financial centres.
2. Provide additional resources to support prosecutions of capital market
fraud offences under the Canadian Criminal Code.
3. Make legislative amendments to the Canadian Criminal Code that will
create new offences and evidence-gathering tools, toughen sentencing and
establish concurrent jurisdiction with the provinces in the prosecution of
serious cases of this type of fraud.
A note on Canadian legislation
Canada has a bijural legal system – unusual in Western democracies –
drawing on both English common law and French civil law. The
majority of the legal system is based on English common law, except
in Quebec, where there is a civil law system based on French law.
4.5.1 In Canada, the power to make criminal law is exclusively federal, but provinces
can create offences as necessary for matters over which they have jurisdiction.
This includes ‘property and civil rights’, which most provinces have used to
regulate local commerce and deceptive trade practices. Canadian provinces
have no power to enact criminal law, but may create offences dealing with
‘property and civil rights’, which includes many commercial activities. Eight of the
10 provinces have enacted offence and regulatory provisions dealing with unfair
or deceptive trade practices.
4.5.2 These are minor in comparison with the Criminal Code fraud offences and
punishments, but are also subject to a lower procedural standard under the
Canadian Charter of Rights and Freedoms, which makes these acts easier to
prosecute. They are punishable by a fine of between £1,000 and £50,000 (CAD
$2,000–100,000), a prison sentence of up to three years, or both. Conduct such
as inflating prices or taking advantage of particularly vulnerable consumers – not
usually elements of fraud – are included in several offences.
4.5.3 One major section of the Criminal Code is Section 380, which sanctions those
who defraud the public or any person of any property, money, valuable security
or service. Under this section, fraud is defined as an act involving an element of
‘deceit’ or ‘falsehood’. If the value of the subject matter of the offence is greater
than CAD $5,000 (£2,500), a 14-year prison sentence may be imposed. If the
value is less than this, imprisonment must not exceed two years.
4.5.4 Many other fraudulent practices are prohibited by part five of the act, and are
sanctioned by varying terms of imprisonment:
Table 5: Fraudulent offences listed in part five of the Canadian Criminal Code
Section Type of crime Sentence (max.)
Fraudulent manipulation of stock exchange
382 10 years
382 (1) Insider trading 10 years
Property (land) offences such as the fraudulent
sale of real estate
397–402 Falsification of books and documents 5 years
Fraudulently impersonating any person to gain
Sections 403–405 10 years
a financial advantage
Sections 406–41 Forgery of trademarks and trade descriptions 2 years
4.5.5 Fraud and other federal Criminal Code offences are prosecuted by the provincial
Attorney Generals, although federal offences under other statutes (Competition
Act, Income Tax Act, Customs Act and Telecommunications Act) are prosecuted
federally. Changes to the 1997 Criminal Code created a new federal jurisdiction
to prosecute Criminal Code offences committed by criminal organisations.
4.5.6 Prosecutors in Canada must file a separate legal case for every individual who
has been defrauded. By contrast, in the United States, legal authorities can
amalgamate individual instances of fraud into one case. When a court imposes a
sentence for breach of Sections 380, 382 and 400 of the Criminal Code, it must
consider aggravating circumstances under Section 380 (1). Aggravating
circumstances increase the severity of a crime and, consequently, of the penalty
imposed. They include the following:
• The value of the fraud committed exceeds CAD $1 million (£500,000).
• The offence adversely affected or could have adversely affected the
Canadian economy or investor confidence.
• There was a large number of victims.
• The offender took advantage of the high regard in which they were held by
4.5.7 The Employment Insurance Act 1996 is enforced by the Canada Employment
Insurance Commission (CEIC) and covers, amongst other things, fraud
committed by people who apply or have applied for benefits under the act. The
penalty provisions of Section 38 relate to claimants who make false or
misleading representations or fail to disclose relevant information about benefit
claims. The sanctions available are varied; for example, the CEIC may impose a
maximum penalty of a fine that amounts to not more than three times the
claimant’s weekly benefit. There is no minimum penalty set. These sanctions
are, therefore, punitive as well as compensatory in nature, as the maximum fine
is higher than the amount that the claimant may have obtained fraudulently in
4.5.8 Sanctions may also be imposed on employers. A breach of Section 39 (1) of this
act occurs if an employer, or someone acting on behalf of an employer, makes a
representation that they know to be false or misleading in relation to any matter
covered by the act. The scope of the act is broad, as it also provides sanctions
for the non-disclosure of facts, deeming this to fall under the category of a false
or misleading declaration. Again, the sanctions are punitive and deterrence-
based. Under Section 39 (2) of this act, the CEIC has the authority to impose a
fine for each act of not more than nine times the maximum weekly benefit that is
paid at the time the penalty is imposed.
4.5.9 Interestingly, via Section 39 (3), this act offers a provision for the sanctioning of
officers, directors or agents of corporations when the CEIC has established that
the corporation has breached the act, regardless of whether or not a penalty has
been imposed on the corporation itself. A breach here is again defined as
making a false or misleading representation, which can also occur through the
non-disclosure of facts. An officer, director or agent is in breach if they have
directed, authorised, assented to, acquiesced in or participated in the act
causing the breach. The sanction here is the same as for a breach of Section 39
(1) (see paragraph 4.5.8).
4.5.10 Under Section 41.1 (1), the CEIC may use discretion to issue a warning for
breach of Section 39 instead of stipulating a penalty under Section 39 (2). This
may act as a useful alternative for decision-makers when sanctioning less
serious breaches. Furthermore, a penalty cannot be imposed under Section 39 if
a prosecution for the act or omission has been initiated against the employee,
employer or other person. This limits the sanctions available, and its rationale
may be to prevent the same breach being sanctioned twice.
4.5.11 Canadian corruption legislation appears to focus much attention on the
prevention and sanctioning of bribery. This is evident in the Corruption of
Foreign Public Officials Act 1999, which contains three main offences. Sanctions
may also be imposed for attempts to commit these offences.
4.5.12 Bribing of foreign public officials is the first of the three main offences, and is
covered under Section 3 (1). This involves trying to obtain or retain an
advantage in the course of business by directly or indirectly giving, or offering to
give, a loan, reward, advantage or benefit to a foreign public official – including
government representatives or agents of public international organisations (or to
any person for the benefit of that official). The bribe must be given or offered
(defined in Section 2).
4.5.13 Breaches may be committed by corporations, which can also be prosecuted
under Canadian common law. The penalty is a five-year maximum term of
imprisonment for individuals. Fines may also be imposed. The sanction is
discretionary, as there is no maximum amount set.
4.5.14 The second main offence is laundering property and proceeds obtained from
bribery of a foreign public official under Section 5. The third is possession of
property and proceeds derived from bribery or laundering under Section 4. Once
again, corporations may be prosecuted and judicial discretion is high when
prosecuting by indictment. There is no set maximum for a fine imposed on a
company. For individuals, a 10-year maximum term of imprisonment is available.
If prosecuted summarily, a maximum fine of CAD $50,000 (£25,000), or a
maximum of six months’ imprisonment, or both, is available.
4.5.15 The Criminal Code contains many provisions to sanction fraudulent and corrupt
behaviour. Sections 119 and 120 criminalise the bribery of officials, including
judicial officers, police and public officers. This is similar to the offence contained
in the Corruption of Foreign Public Officials Act (see paragraph 4.5.11), including
the elements of the offence of bribery. Individuals found guilty under these
sections are liable to a term of imprisonment not exceeding 14 years.
4.5.16 Section 121 deals with fraud against the government, whereby bribes are
offered to or demanded by an official in order to influence any matter of business
relating to the government. These include bribes used to obtain contracts with
the government. Perpetrators are liable to a maximum term of five years’
imprisonment. Section 122 sanctions officials who, amongst other provisions,
commit fraud or a breach of trust in connection with their duties. Fraud is not
expressly defined in this section; however, it is addressed in part five of the act.
A violation of this section attracts a maximum term of imprisonment of five years.
4.5.17 Municipal corruption – which involves a member of a municipal council or a
person who holds office under a municipal government – is criminalised under
Sections 123 and 124 of the act. If bribes are offered, demanded or accepted,
an indictable offence is committed and a maximum term of imprisonment of five
years is available.
4.5.18 The Criminal Code was amended in September 2004 to include protection for
whistleblowers. Under Section 425.1 (1), an employer – including the director of
a company – is prohibited from taking action to prevent an employee who
believes an offence is being committed from providing information to another.
Sanctions include termination of employment and disciplinary action. Section
425.1 (2) protects employees who have already disclosed information from
retaliation on the part of their employers. Violation of Section 425 is classified as
an indictable offence and carries a maximum term of imprisonment of five years.
Alternatively, offenders may be punished on summary conviction.
4.5.19 The Income Tax Act 1985 also deals with bribery. Those who offer bribes to
influence the decision of an officer connected with the collection or management
of public money may face a term of imprisonment not exceeding five years under
Section 81. The same sanction is applicable to officers who accept bribes.
Furthermore, Section 80 criminalises officers who fail to report, in writing,
knowledge of fraud being committed against Her Majesty. It is an indictable
offence subject to a sanction of five years’ imprisonment or a CAD $5,000
4.5.20 Canada has made further advances in an attempt to strengthen its legal and
institutional anti-corruption regime. These developments include:
• Bill C-4, which reinforces the powers and independence of the Ethics
• Bill C-24, which limits campaign contributions to CAD $5,000 (£2,500) for
individuals and bans corporate donations
• the Corruption of Foreign Public Officials Act, which identifies three offences
– bribing a foreign public official, laundering property and proceeds, and
possession of property and proceeds.
4.5.21 Canada has also participated in a global anti-corruption and counter fraud
framework by ratifying a number of international conventions against corruption:
Table 6: International conventions against corruption ratified by Canada
Title of international convention Date ratified by Canadian government
OECD44 Anti-Bribery Convention
OAS45 Inter-American Convention
UN Convention Against Transnational
UN Convention Against Corruption Signed May 2004 (not yet ratified)
4.6 Countering fraud in the private and public sectors
4.6.1 The Canadian government has established several departments, organisations
and agencies that have responsibilities related to addressing fraud and
corruption. This section of the report will consider the following:
• The Office of the Auditor General of Canada
• Department of Justice (DoJ)
• Department of the Solicitor General
• The Treasury Board
• The Office of the Ethics Counsellor
• The Office of the Chief Electoral Officer
• Elections Canada
• The Information Commissioner
• Provincial Ombudsmen
• The Canadian Security Intelligence Agency
• The Royal Canadian Mounted Police.
Anti-fraud culture and deterrence
4.6.2 The federal, provincial and territorial ministers with responsibility for consumer
affairs approved a Cooperative Enforcement Agreement on Consumer-Related
Measures in 1998. They also announced public campaigns on telemarketing
fraud and loan brokers’ ‘scams’. The Cooperative Agreement defines procedures
for sharing information and consumer alerts across jurisdictions on issues such
as licensing and enforcement.
4.6.3 The Deceptive Telemarketing Prevention Forum, comprising government and
private sector representatives, released a poster and pamphlet entitled ‘Stop
Phone Fraud – It’s a Trap’. This campaign helped to raise public awareness of
telemarketing fraud, thereby doubling up as a deterrent to potential fraudsters.
The campaign began in January 1999.
4.6.4 The Fraud Prevention Forum (FPF) consists of private sector bodies,
government agencies, law enforcement agencies, and consumer and volunteer
groups. Its aim is to prevent Canadians from becoming victims of fraud. March
was officially declared ‘Fraud Prevention Month’ in Ottawa in 2006. During this
month, FPF members attempt to raise the awareness of the Canadian public in a
bid to prevent fraud by distributing fraud prevention material and broadcasting
public service documents.
4.6.5 FPF members include, but are not restricted to, the following bodies:
• Competition Bureau Canada (Chair)
• Canada Post
• Canadian Bankers Association
• eBay Canada
• MasterCard Canada
• Toronto Police Service
• Ontario Provincial Police
• Royal Canadian Mounted Police
• United States Federal Trade Commission
• Western Union.
4.6.6 The Canadian Health Care Anti-Fraud Association (CHCAA), founded in 2000,
provides a voice for public and private sector healthcare organisations interested
in preventing healthcare fraud. Membership is open to organisations and
individuals with a responsibility for the prevention, detection, investigation or
prosecution of healthcare fraud. The CHCAA’s objectives are to:
• create awareness amongst the ‘Canadian public, health care consumers
providers, suppliers and members of the CHCAA on combating health care
• promote anti-fraud programmes in the Canadian healthcare system
• build partnerships (public, private, national and international) with law
enforcement agencies, health regulatory bodies, consumer groups and
• work for legislative and regulatory change that supports the eradication of
fraud in the healthcare system
• provide a response to changes in the healthcare system and changes in
technologies and tools used by people who commit healthcare fraud.
4.6.7 PhoneBusters is a national anti-fraud call centre jointly operated by the Ontario
Provincial Police and the Royal Canadian Mounted Police. It plays a key role in
educating the public about specific fraudulent telemarketing pitches. It is the
central agency in Canada that collects information on telemarketing fraud,
advance fee fraud letters and identity fraud complaints.
4.6.8 PhoneBusters releases public information about preventing telemarketing fraud
and identity fraud. One example is a newsletter containing details of a number of
fraudulent telemarketing pitches that have been used successfully in the past,
based on information collected from fraud complaints. Such pitches include:
• a caller stating that a person has been automatically entered into a lottery
and has won a prize
• an employment advertisement offering a work-at-home opportunity to ‘be
your own boss’ and earn a higher income
• correspondence that asks someone to transfer a large sum of money in
return for a huge fee.
4.6.9 The Canada Mortgage and Housing Corporation (CMHC), established in 1946,
is committed to countering mortgage fraud in Canada. It works with its approved
lenders to manage fraud prevention through its Lender Quality Assurance
Framework. Once issues are identified, the CMHC works with its approved
lenders to identify systematic solutions that mitigate fraud throughout their
portfolios. One of the procedures employed by the CMHC to prevent mortgage
fraud is to give approved lenders information about the nature of mortgage fraud
and effective fraud prevention and detection initiation procedures.
4.6.10 In 1998, government consumer ministers launched Canshare, an information-
sharing network for enforcement agencies. This enables alert notices to be sent
to consumer protection and law enforcement agencies. This will permit faster
tracking of telemarketing and other types of fraud. The Canshare campaign
helped to raise public awareness of telemarketing fraud, as well as acting as a
deterrent to potential fraudsters.
4.6.11 PhoneBusters and RECOL (see paragraph 4.3.1) are the two main Canada-
wide fraud-reporting mechanisms. These organisations disclose reported fraud
to the appropriate law enforcement authority. Their databases have recently
merged, providing a single and complete picture of reported economic crime.
4.6.12 The Royal Canadian Mounted Police (RCMP) is the Canadian national police
service and an agency of the Ministry of Public Safety and Emergency
Preparedness Canada. Therefore, it is a national, federal, provincial and
municipal policing body. The RCMP:
• prevents and investigates crime
• maintains order
• enforces laws in matters ranging from health to the protection of
• contributes to national security
• ensures the safety of state officials
• visits dignitaries and foreign missions
• provides vital operational support services to other police and law
4.6.13 In October 2005, the Edmonton RCMP Commercial Crime Section filed 60
charges of fraud against four people under Section 380 of the Criminal Code
(see paragraph 4.5.3). The alleged perpetrators were accused of committing a
major mortgage fraud to the value of CAD $3.9 million (£1.9 million). The case
was investigated by the Edmonton RCMP Commercial Crime Section.
4.6.14 The Plainclothes Section of the Surrey RCMP contains an Economic Crime
Investigation Unit, which is tasked with investigating numerous fraud complaints
within the Surrey community. To date, cases ranging in loss value from CAD
$100,000 (£50,000) to CAD $1 million (£500,000) have been investigated.
4.6.15 Project COLT, established in April 1998, is a joint United States-Canada
telemarketing fraud task force. Its members include:
• USA Immigration and Customs Enforcement special agents
• Royal Canadian Mounted Police
• Quebec Provincial Police
• Montreal City Police Department
• USA Federal Bureau of Investigations
• US Postal Inspection Service.
4.6.16 The focus of the project is to detect and investigate organisations perpetrating
fraudulent telemarketing schemes and seize the proceeds of their operations, as
well as to seek redress by returning money to the victims. The schemes usually
involve potential victims being contacted by fraudulent telemarketers identifying
themselves as lawyers, customs officials, police officers or lottery company
officials. The victims are told that they will receive a sum of money varying from
thousands to millions of dollars.
4.6.17 The United Council on Welfare Fraud (UCOWF) consists of investigators,
administrators, prosecutors, eligibility workers and claims writers from local, state
and federal agencies in the USA and Canada. The UCOWF has been active in
the recovery of taxpayers’ money lost to fraud, waste and abuse in social
services programmes. Its membership currently consists of:
• welfare investigators
• recovery specialists
• fraud prosecutors (from 47 American states and seven Canadian
Sanctions and redress
4.6.18 The USA Immigration and Customs Enforcement has initiated a number of
complex criminal investigations due to the efforts of Project COLT, resulting in 26
USA grand jury indictments and 161 USA- and Canada-based arrests. To date,
Project COLT has seized and returned more than CAD $14 million (£7,000) to
American and Canadian victims of telemarketing fraud.
5 France 47
• Population (2004): 61.9 million48
• Gross domestic product (GDP) in 2004: £1.2 trillion49 (€1.7 trillion)
• Total cost of fraud in 2004: It has not been possible to find
a satisfactory estimate.
• Total cost of fraud as percentage of GDP: 2%50
France is a unitary state with administrative and political decentralisation. It is a
republic and a parliamentary democracy. The French government is a semi-
presidential system divided into an executive branch (cabinet), a legislative
branch (parliament) and a judicial branch (Supreme Cour de Cassation).
Parliament comprises two chambers: the Senate (members serve for nine years
and are elected by an electoral college) and the National Assembly (deputies
serve for five years and are elected by universal suffrage). The President has a
degree of direct executive power, but most executive power resides in his
appointee, the Prime Minister. The current government is a centre-right
5.1 National definition of fraud
5.1.1 There is no legal definition of fraud under French law. However, the following
activities have been defined in French law:
• breach of trust
• forgery of means of payment
• violation of an automated data system
• intentional use of or attempt to use counterfeit or forged payment cards,
5.2 Nature and scale of the problem
5.2.1 There does not appear to be an overall fraud cost estimate available for France.
However, one source estimated the total cost of fraud in France in 2000 at £27
billion51. The predominant types of fraud for which information is available are
displayed in the table below:
Table 7: Cost of predominant types of fraud in France
Type Amount Estimated by Date
Côntrole et Traitements des Valeurs et
Identity £1.4 billion Monnaies52 (Not
fraud (€2 billion) (CMTS – Control and Treatments known)
of the Values and Currencies)
Ministère de l'Économie, des Finances
Customs £140 million et de l'Industrie
fraud (€199 million) (Ministry for the Economy, Finances
Bank card £1.9 billion (Not
fraud (€2.7 billion)54 known)
5.3 Main areas of fraud (in private and public sectors)
5.3.1 The main types of fraud that occur in France are displayed in the table below:
Table 8: Predominant areas of fraud in France’s public and private sectors
Public sector Private sector
Embezzlement (including asset
Benefit fraud Insurance fraud
Cyber-crime fraud (including identity fraud
and online bank card fraud)
5.3.2 France pioneered the chip and PIN concept in 1992 when all CB (Groupement
des Cartes Bancaires – Grouping of Bank Cards) cards were converted into
smart cards in a bid to counter fraud. As a result, France witnessed a significant
fall in the level of fraud on cards issued in the country for domestic transactions
– a reduction of more than 50%.55
5.3.3 Leading on from this, a study conducted by PricewaterhouseCoopers (2005)56
revealed that 43% of French private sector businesses stated that they had
been a victim of one or more types of economic fraud. These included:
• asset misappropriation
• cyber-crime fraud
• counterfeit fraud
5.3.4 The PricewaterhouseCoopers study makes an interesting point: that, although
estimates of the cost of fraud in France have been calculated, there is no way of
measuring the financial impact of certain types of fraud, such as identity fraud
and cyber-crime fraud.
5.4 Does a national fraud strategy exist?
5.4.1 There does not appear to be an overarching national fraud strategy yet in place
in French administration. However, there are strategies that exist to counter
specific areas of fraud. One such example is Programme INES (Protected
Electronic National Identity), which is a state-led project created to counter
identity fraud in France. Its strategy includes:
• amalgamating, simplifying and making safe the procedures for passport
• improving the management of new passport applications
• delivering highly protected documents in conformity with international
• offering citizens the means of proving their identity on the internet and of
signing electronically, to support the development of the electronic
A note on French Legislation
French law is derived from the civil law tradition, rather than the
common law tradition found in the United Kingdom, Australia and the
United States. Therefore, great emphasis is placed on codified law as
opposed to case law. These codes provide the basis of all French law.
5.5.1 French law is concerned with two main areas – public law (‘droit public’) and
private law (‘droit privé’). Public law encompasses administrative law and
constitutional law, while private law includes both civil and criminal law.57
5.5.2 The main codes, a selection of which will be discussed in this section of the
• the Civil Code
• the Commercial Code
• the Penal Code
• the Consumer Code
• the Code of Criminal Procedure
• the Intellectual Property Code
• the Code of Civil Procedure.
The Penal Code
5.5.3 Article 313-1 of the French Penal Code is similar to the provision of obtaining
property by deception enshrined in English law. It sanctions individuals who
deceive an individual or corporation by using a false name or fictitious capacity,
by abusing a genuine capacity, or by means of an unlawful manoeuvre, thereby