How the UAE laws deal with Fraud

• Fraud’ can be defined as a wrongful or

criminal deception intended to achieve certain unjustified financial or personal gains. The concept of fraud also encompasses intentional act/s are committed for deceiving others. The concept of ‘Fraud’ is defined under the UAE laws pursuant to Article 399 of the Federal law no. 3 of 1987 and its amendments commonly referred to as the ‘UAE Penal Code.

Article 399 of the UAE Penal code stipulates that,

• Whoever captures for himself or for others transferable money or documents or signing such document or cancelling, damaging or amending it through trickery or using a false name or personality for the purpose of tricking the victim and forcing him to deliver such shall be punished with a jail or a fine. The same penalty shall be applied to whoever disposes of a building or a movable that he knows he does not own or that he has no right to dispose of such or who disposes of anything of the same kind with the knowledge that another person has disposed of such or contracted on and hence he shall harm the other. The attempt shall be punished with jail term for a period not exceeding two years or a fine not exceeding ten thousand dirhams.’

It can be said that the concept of ‘deception’ is only one of the necessary element of ‘fraud’, however, deception in itself is not sufficient to establish fraud, and it is required that the end result of such deceit is established which is the wrongful gain obtained by means of such deceitful methods. The elements of a fraudulent act can be said to comprise of the following instances: i) using a false name; ii) acting in a false capacity; iii) disposing of money, or moveable or immoveable property while knowing that it is not the disposer’s property or that he is not entitled to dispose of the same, or iv ) falsely imitating an act previously carried out by another.

Test for Fraud:

In the UAE, generally, three conditions must be complied with in order to establish that fraud has been committed by assuming a false name or quality. These three conditions, which are established pursuant to the discretion of the judge, include:

1. i) The deceit led a victim into taking certain actions such as ‘handing over of a property,
2. ii) The accused has taken certain actions that had convinced the victim, and the mere misapprehension caused due to silence in itself is not enough to establish fraud.

iii) The nature of the fraudulent behavior should in itself be of a kind that it should not appear to be wrongful or suspicious to an ordinary person.

The UAE Courts seek to satisfy the average person rule in order to establish the nature of the fraud. In the instance the court determines that the conditions relating to the fraudulent act could have deceived an average person with an average intelligence then the act would be considered as ‘fraud’ having satisfied this test.

Further, if these three conditions are met, the crime of fraud is deemed to have occurred. Certain elements are essential in proving fraud include: i) the method of fraud in taking an object of value; ii) the object must be of real, material value and not just emotional value; iii) that there was intent to deceive the victim; 4) the deceit happened before the object of value was taken; and iv) the object was handed over by the victim as a result of the deceit – if the victim is aware of the fraud and continues to hand the property over in order, for example, to gain evidence for the prosecution, this will not amount to fraud.

Punishment for Fraud:

The punishment for fraud in the UAE is imprisonment and fines. A person who is convicted for fraud can be face imprisonment for a term of one year to up to three years and the same can be increased to even up to 6 years for more serious convictions.

New ‘Commercial anti-fraud law’:

In 2016, a new anti-fraud law was enacted in the UAE by issuing Federal Law Number 19 of 2016 concerning ‘Combating commercial Fraud’. This new law is commonly referred to as the ‘Commercial anti-fraud law’ and endeavors to bring in more stringent anti-fraud measures including combatting intellectual property violation. The new ‘anti-fraud law’ encompasses the entire UAE and specifically applies to the free zones in the UAE as well (Article 2 (1). The provisions of this law shall apply to anyone who commits an act of commercial fraud, and the free zones in the State shall not be exempted from the provisions of these laws.)

Pursuant to Article 2 (2) of the Commercial anti-fraud law, any of the following acts shall be considered to be an act of commercial fraud

• Importation or export or re-export or manufacture or sell or offer for sale or possession with the intent to sell or store or rent or marketing or circulation of fraudulent, corrupt or counterfeit goods.
• Advertising for prizes or reductions which are fictitious or untrue.
• Using commercial advertisements or presentations in misleading promotions or incorrect announcements or promotion for fraudulent, corrupt or counterfeit goods.
• Offering or presenting or promoting or announcing for fake commercial services.