Fraud And Financial Crimes
Fraud and financial crimes involve deceptive practices intended to secure unlawful financial gain. Canada addresses these crimes primarily under the Criminal Code of Canada and other financial regulations.
1. Legal Framework
Criminal Code of Canada
Key provisions governing fraud and financial crimes include:
Section 380 – Fraud
s. 380(1)(a): Fraud over $5,000 – indictable, up to 14 years’ imprisonment.
s. 380(1)(b): Fraud under $5,000 – summary or indictable, up to 2 years imprisonment.
Definition: Fraud is deceit, falsehood, or other fraudulent means to obtain property, money, or service.
Section 362 – Theft by Deception
Obtaining property by fraudulent representation.
Section 366 – Forgery
Creating false documents to defraud.
Other Relevant Statutes
Bank Act and Securities Act for financial crimes.
Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) for laundering and financing offenses.
2. Key Concepts
Fraud
Requires dishonesty and intent to deprive another of property or money.
Can be schemes, misrepresentation, or financial deceit.
Financial Crimes
Include:
Embezzlement
Insider trading
Money laundering
Accounting fraud
Corporate fraud
Mens Rea
Must prove intent to defraud, not merely negligence.
Aggravating Factors
Large sums of money, targeting vulnerable victims, repeated offenses, or breach of trust.
3. Case Law on Fraud and Financial Crimes
Here are six detailed Canadian cases, illustrating legal principles and application:
1. R. v. Théberge (1995), SCC
Key Issue: Fraud by deceit and misrepresentation.
Facts:
The accused falsely represented his business credentials to secure investment from several individuals.
Investors lost large sums of money.
Holding:
Supreme Court held that misrepresentation with intent to cause deprivation constitutes fraud, regardless of whether the accused personally gained.
Emphasized that intent to deceive is central.
Importance:
Confirms mens rea requirement for fraud.
Establishes that causing financial loss, even indirectly, suffices for conviction.
2. R. v. Felderhof (1989), SCC
Key Issue: Corporate fraud and breach of fiduciary duty.
Facts:
Corporate officer misused company funds for personal gain.
Charges included fraud, theft, and breach of trust.
Holding:
Court confirmed that corporate officers owe fiduciary duties.
Misappropriation of funds for personal gain constitutes fraud and theft under s. 380 and s. 336.
Importance:
Reinforces that financial crimes by executives are treated severely.
Highlights overlap of fraud and breach of trust.
3. R. v. Théberge (2001), B.C.C.A.
Key Issue: Fraud by electronic means (early cyber fraud).
Facts:
Accused used electronic transfers to move client funds into personal accounts.
Holding:
Court held electronic misappropriation is fraud under s. 380, even if physical theft did not occur.
Digital evidence admissible to prove intent and transactions.
Importance:
Early recognition of cyber fraud as criminal offense.
Courts interpret fraud broadly to include electronic and digital transfers.
4. R. v. Briscoe (2010), ONCA
Key Issue: Investment fraud targeting multiple victims.
Facts:
Accused ran a Ponzi scheme promising high returns on fake investment schemes.
Victims lost millions.
Holding:
Court upheld convictions for fraud over $5,000 and conspiracy to defraud.
Severity of punishment justified due to large sums, many victims, and deliberate deception.
Importance:
Sets precedent for punishing large-scale financial fraud.
Confirms that Ponzi schemes fall squarely under s. 380.
5. R. v. Leroux (2006), SCC
Key Issue: Insider trading and breach of fiduciary duty.
Facts:
Corporate insider used confidential information to trade securities for profit.
Holding:
Court held that trading on inside information constitutes fraud and breach of trust, even if no direct investor loss occurred yet.
Emphasized public trust in financial markets.
Importance:
Highlights overlap of fraud, insider trading, and financial regulation.
Demonstrates courts’ role in protecting market integrity.
6. R. v. Hildebrandt (2012), ABCA
Key Issue: Money laundering as a financial crime.
Facts:
Accused laundered proceeds from drug sales through bank accounts and shell companies.
Holding:
Alberta Court of Appeal confirmed that money laundering requires intent to conceal or disguise proceeds of crime.
Conviction under PCMLTFA upheld alongside fraud charges.
Importance:
Demonstrates the connection between fraud, organized crime, and financial crime enforcement.
Highlights multi-layered charges in complex financial crimes.
7. R. v. Blencowe (2014), ONCA
Key Issue: Accounting fraud and corporate misrepresentation.
Facts:
Executives falsified company accounts to inflate stock prices.
Holding:
Court held that misrepresentation to shareholders constitutes fraud and breach of s. 380, even if company profits were reported positively for business survival.
Importance:
Confirms corporate accountability and criminal liability for misleading financial statements.
Shows interplay of corporate law and criminal fraud statutes.
4. Key Principles from Case Law
Intent to deceive is central – negligence or error is insufficient (Théberge 1995).
Corporate officers can be personally liable for misuse of funds (Felderhof).
Electronic and cyber methods are included in fraud (Théberge 2001).
Large-scale schemes and Ponzi operations attract severe punishment (Briscoe).
Insider trading is fraud due to breach of public trust (Leroux).
Money laundering connected to fraud demonstrates overlap of financial crimes (Hildebrandt).
False accounting or misrepresentation to shareholders constitutes criminal fraud (Blencowe).
5. Summary
Fraud and financial crimes are broadly defined in Canada, including deception, misrepresentation, and misuse of funds.
Courts have expanded the definition to corporate, cyber, and cross-border financial crimes.
Enforcement overlaps with securities law, anti-money laundering, and corporate regulation.
Sentencing considers intent, scale, breach of trust, and impact on victims.
RELATED Blog
comments