What is Charity Fraud?

Charity fraud is a blanket term for various incidents that involve fraudulent behaviour relating to charity and is part of the broader area of fraud law. Fraud by a charity in the UK is a serious offence and can be either internal or external. In internal charity fraud cases, employees, volunteers or trustees are typically the culprits. However, external charity scams may be carried out by fake charities frauding the public or fake companies frauding the charity.

Internal Charity Fraud Cases

These are some common examples of internal fundraising scams:

• Misuse of funds

Charity embezzlement or misuse of funds occurs when someone working within a charity handles charity funds dishonestly. This could include stealing charity money or using credit cards for unauthorised payments. Learn more about bank transfer fraud in our blog post.

• False expense claims

False expense claims are a type of payroll fraud that occurs when expenses are incorrectly claimed for more money than was spent, siphoning funds from the charity into personal accounts.

• Abuse of position

This form of charity fraud describes an incident where an employee may abuse their position of power or trust to manipulate finances or other staff members to commit money laundering or charity embezzlement.

• Poor internal procedures

Having a weak internal financial policy and poor financial checking procedures can make charities vulnerable to internal charity fraud.

External Charity Fraud Cases

External acts of charity scams include, but are not limited to, the following examples:

• Invoice fraud

Invoice fraud involves external activity whereby fraudsters pose as suppliers and send invoices to charities. The charity then intends to pay their supplier but, unknowingly, pays the fraudster instead.

• Unauthorised funding

Unauthorised funding happens when individuals pretend they are raising funds for a charity, convincing members of the public to donate to a legitimate cause, only to keep the money for themselves.

• Cyber fraud

This type of charity fraud can include phishing emails, impersonation, or hacking a computer or network in an attempt to obtain a charity’s sensitive data or access funds. You can learn more about online banking scams and advance fee scams here.

Charity Fraud Court Process

If you have been accused of defrauding a charity, you may have already been charged or arrested. Whatever situation you may find yourself in, the legal process for dealing with charity fraud cases can be lengthy and intimidating. Charity scams are taken very seriously, and, as a defendant, it is important to know your options. The law around charity fraud complies with the Charities Act 2011 and is complex. Therefore, we would strongly urge you to seek legal counsel and representation from a well-versed lawyer in this area of law.

The process begins with a report to the police, Action Fraud or the Charity Commission from someone suspecting foul play. Suspected charity scams are then investigated by the police and possibly by the charity commission; this can include financial experts who are given access to accounts and conduct within the charity.

As well as the inspection of records and devices, each person that works for the charity will be interviewed by the Charity Commission to collect necessary evidence.

In the event of confirmed charity fraud, the suspected perpetrator is arrested and charged, followed by an interview conducted by the police. Depending on the evidence found, a court case follows.

Charity Fraud Sentencing

If you are found guilty of charity scams, you could face anything between three months and ten years in prison. You may also be required to return the funds you stole. Sentencing in charity fraud cases depends on the particulars of the crime, which is why we advise defendants to seek legal counsel from an expert in charity fraud cases. Your conviction for charity fraud will go on your criminal record, and the length of the endorsement will depend on the nature and length of your sentence.

Have You Been Accused of Charity Fraud?

Seek professional advice from the outset if you are unsure how to avoid charity fraud when setting up a charity. Ensure that you keep all relevant documents from accountants, banks or solicitors. Such documentation can prove to be compelling evidence to demonstrate your genuine motivation and intention when setting up and operating your charity. It is advisable to seek expert legal advice before any police interview on allegations of charity or fundraising scams.

At St Pauls Chambers, our specialist barristers are experts in charity fraud cases. We can advise you on the investigative process of charity scams and provide comprehensive support throughout. If you or your client faces a charity scam investigation, contact us today.

For more insight into the different instances of charity fraud cases, please see below.