The crime of fraud and how to defend yourself

What is fraud as a criminal offence

Fraud is a property crime. It is defined by the Criminal Code as a situation where a person enriches himself or herself or someone else by misleading another person, taking advantage of someone else’s mistake or concealing material facts, and thereby causes damage to someone else’s property that is not insignificant. Not insignificant damage means damage amounting to at least CZK 10 000.

What does this mean in practice?

What exactly does it mean to mislead, to take advantage of someone’s mistake and to conceal a material fact?

• Misrepresentation: Misrepresentation means that someone provides false or misleading information to another person in order to induce them to do something they would not otherwise do. An example would be the sale of counterfeit goods (e.g. imitation designer clothes) in order to convince the victim of their authenticity.
• Taking advantage of someone’s mistake: Exploiting someone else’s mistake occurs when someone knows that the other person has made a mistake and uses that mistake for their own benefit. This is, for example, a situation where an e-shop mistakenly offers a luxury product at a significantly lower price because of a typo. The customer notices the mistake and immediately orders several units of the product, taking advantage of the mistake for their own financial gain. Later, the e-shop discovers the error, but the customer has already received the goods and refuses to return them.
• Concealment of a material fact: Concealment of a material fact means that someone deliberately withholds important information that the other person would need to know in order to make a decision. An example would be the sale of a car by a perpetrator who conceals the fact that the car is wrecked and the victim pays more money as a result than the corresponding value of the car.

The most common types of fraud

Fraud can take many forms, and more are popping up all the time. Nowadays, as we move our activities into the online world, a variety of online scams are emerging. The most common types of fraud you will come across are:

• Fraudulent e-shops: a new e-shop appears on the internet offering products at very low prices. You order the goods and pay in advance, but you never receive them and the shop disappears after a while.
• Phishing: You receive an email that looks like it was sent by your bank, for example, asking you to confirm your login details etc. When you click on the link in the email and enter your details, your information is stolen and used to access and delete your account.
• Fake job offers: Someone advertises a very attractive job and collects a registration fee, money for training, etc. from applicants. However, in reality, no job comes out of it.

• Investment scams: someone offers to invest in a miracle fund that promises high returns. You put money into it, but later find out that there is no fund and the scammer has disappeared with your money.
• Apartmentrental scam: Someone offers to rent an apartment on very favourable terms, collects a deposit and first rent from you upfront, but stops communicating after receiving the money and you never see your money again.
• Fake invoices: A company receives an invoice from a supposed supplier for services or goods it never ordered or received. If the company pays it, it is paying the fraudster.
• Emotion Fraud: In this case, for example, someone creates a fake profile on a dating site and starts a relationship with you. After gaining your trust, he or she starts asking for money for an emergency or for a plane ticket to visit you.

• Ponzi scheme: Someone promises high returns on an investment and actually pays out the profits initially. But these profits are not generated by the real investment, but by the deposits of new investors. Once new investors stop coming in, the scheme collapses and you lose all your profits.
• Pyramid scheme: People are lured into a scheme where they have to pay an entry fee and earn commissions for bringing in other participants. Each new participant must also pay an entry fee. Profits are generated only by bringing in new people, not by selling actual products or services. Once they stop bringing in new members, the system collapses.

Specific types of fraud

In addition to ordinary fraud, the Criminal Code defines three specific types of fraud, which it also regulates separately (including penalties). These are:

Insurance fraud

The Criminal Code defines it as a situation in which someone provides false or grossly misrepresented information or conceals material information in connection with the conclusion or amendment of an insurance contract, the settlement of an insurance claim, or the exercise of the right to benefit from insurance or other similar benefits.

An example would be where a property owner deliberately causes a fire in his or her home and subsequently reports the unfortunate event to the insurer. He or she claims insurance benefits for the fire damage while deliberately concealing and covering up the actual circumstances.

Credit fraud

A person commits credit fraud if he or she makes false or grossly misleading statements or conceals material information when negotiating a credit agreement or when taking out a credit.

An example of this is where a person uses a false identity when negotiating a credit agreement, gives false personal data and presents false identity documents.

Grant fraud

Subsidy fraud is committed by a person who provides false or grossly misleading information or omits material information in an application for a grant, subsidy or repayable financial assistance or contribution.

An example would be a company applying for a research and development grant which submits false information about research projects that have never been carried out in order to obtain funding for other purposes.

Who can commit fraud

The crime of fraud can be committed by a natural or legal person. The natural person must be over 15 years of age, must be of sound mind (i.e. have the capacity to recognise the wrongfulness of his/her actions and control his/her behaviour) and must be intentionally culpable.

In the case of legal persons, the condition of imputability must also be met. This means that only certain persons connected with the legal person (such as statutory bodies, managing directors, persons in a managerial position or employees acting by example or with the consent of the manager) can commit fraud.

Intentional fault and caution of the victim

Fraud is specific in that it cannot be committed through negligence, but always requires proof of intent. At the same time, in the case of fraud, intent cannot be presumed but must be proved.

That intent must be present at the time of the act and must be directed against a protected interest. The protected interest in this context is the victim’s property (whether monetary or in kind). The fraudulent intent must therefore be directed against that protected interest, which means that the perpetrator intends to deliberately damage someone’s property by his conduct.

At the same time, however, the victim himself also plays a role. The victim should act carefully and protect his or her rights and interests. Therefore, if the victim does not take basic steps to protect his or her rights, it may not be fraudulent from a legal point of view. An example of this is when a property owner sells a property to another person and assures them that there are no easements on the property, even though they know full well that they are lying. However, if the buyer fails to verify this status with the Land Registry, then the court may find him or her negligent and declare that no fraud has been committed.

Penalty for committing fraud

Penalties vary based on the amount of damage and other circumstances. If the perpetrator has committed damage that is not insignificant, i.e. a minimum value of CZK 10,000, he or she may be sentenced to imprisonment for up to two years, a ban on activities or forfeiture of property. If it is a repeat offence from the last three years, the offender will receive a prison sentence of 6 months to three years. In the case of causing more damage, i.e. at least CZK 100 000, the offender will receive a prison sentence of one to five years.

A prison sentence of two years to eight years is then imposed if the offender has committed fraud:

• as a member of an organised group, or
• as a person under a special obligation to protect the interests of the victim, or
• if he or she committed the fraud during a state of national emergency or a state of war, a natural disaster or any other event seriously endangering human life or health, public order or property, or
• if the act causes significant damage (damage with a minimum value of one million crowns).

The offender shall be punished by imprisonment for five to ten years if he/she has caused damage of a large scale (at least CZK 10 million) or if he/she has committed such an act with the intention of enabling or facilitating the commission of a terrorist offence, a terrorist financing offence or a threat of a terrorist offence.

For specific types of offences (i.e. insurance, credit and subsidy fraud), the Criminal Code provides for specific penal rates.

How to defend yourself against fraud

First and foremost, prevention is most important. This consists of general caution and awareness. The most important aspects are:

• Dataprotection: Protect your personal and financial data. Never share account numbers, passwords or PINs with unknown people. Create complex and unique passwords for different online accounts and change them regularly.
• Online safety: regularly update your operating system, antivirus software and other applications to protect you from the latest threats. Use only secure Wi-Fi networks and VPNs. Before entering sensitive information, make sure the website is legitimate and secure (it should start with: https://).
• Phishing and fraudulent emails: be careful when opening emails and messages from unknown senders. Do not open suspicious links or attachments.

• Telephone and in-person scams: if someone contacts you asking for sensitive information, always verify their identity.
• Do not make advances: Be careful about making advances for services or products that you have not sufficiently verified.
• Monitor your bank accounts to detect suspicious transactions early. Set up alerts for activity on your accounts so you can stay on top of changes.
• Fraudulent offers and investments: Be wary of offers that seem suspiciously lucrative. Then carefully check the credibility and history of the project or company before investing.
• Active education Regularly update your knowledge of the latest fraudulent techniques and methods to defend against them. Follow news and articles on trusted websites, including the Affordable Advocate blog.

Unfortunately, you can become avictim of fraud even if you try to do everything correctly and in an informed manner. So what should you do in this case?

• Report the fraud to your bank immediately: if you discover a suspicious transaction on your account or suspect fraud, contact your bank immediately and request that your account or card be blocked to prevent further unauthorized transactions. Your bank can also be of significant assistance if you are trying to verify and identify any recent transactions.
• Report the fraud to the police: Report the fraud to the police. When filing a criminal report, provide all available evidence, including emails, text messages, bank statements, and any other documents that can substantiate the fraud. If you file a criminal complaint, you may also benefit from the assistance of an experienced attorney. An experienced attorney will always accurately analyze your situation and suggest a course of action based on that. If you go through the entire process alone, you may misjudge your case and file the wrong criminal complaint. In some cases, for example, it is better to sue for dam ages than to file a criminal complaint. You should also know the statute of limitations on your case and keep in mind that once a criminal complaint is filed, it cannot be withdrawn. With an Affordable Lawyer, you not only get a flawless case evaluation, but also a customized criminal complaint that maximizes your chances in court.

• Inform other authorities: you can also file a complaint with the Czech Trade Inspection Authority if the fraud is related to a purchase or trade. And if your personal data has been misused, you can also inform the Data Protection Authority.
• Secure your accounts: Change the passwords to all your online accounts immediately.
• Monitor your accounts: Check your bank accounts regularly to quickly detect any further suspicious activity.
• Take legal action: If you have been a victim of fraud and have suffered damages, talk to an attorney about the possibility of filing a lawsuit against the perpetrator. Keep in mind that you will only succeed in court if the lawsuit is bulletproof. If you choose the services of an Affordable Lawyer, we will conduct a careful analysis of your case and take care of preparing a pre-suit notice, a lawsuit, an appeal, or outright representation in court where we will vigorously enforce your rights.

Summary

Fraud is a property crime that comes in many different forms, from online fraud to more complex insurance, loan and grant fraud. Its main essence is the deliberate misrepresentation, taking advantage of someone else’s mistake or concealing material facts, resulting in damage. The Criminal Code provides for severe penalties for fraudulent conduct, which vary according to the amount of damage caused and the circumstances of the offence. Crucially, the fraudulent act must be intentional, and the victim should act with due care in order for the fraud to be legally recognised.