Criminal Law and Business: Theft, Fraud and Deception

An accountant handles other people’s money and writes down figures that others trust. That is why criminal law matters to the profession. Theft, false pretences, forgery and false accounting are the offences that the Criminal Code uses to punish dishonesty with money and records, and the ethical codes of the profession set a standard that goes beyond what the criminal law demands.

Examiners ask for the elements of stealing, the list of fraudulent intents, the fraud-related offences and the difference between a crime and an ethical breach, so each of these is set out in full below.

This topic covers the sources and nature of criminal law, the distinction between criminal and civil law, ethics and ethical codes, the offence of stealing (taking, conversion, the six fraudulent intents, things capable of being stolen, punishment), false pretences, cheating, dishonoured cheques, forgery and fraudulent false accounting. Bribery and money laundering are in the next topic.

Criminal law

Sources and meaning

In Nigeria the primary sources of criminal law are the Criminal Code, which applies in the southern states, and the Penal Code, which applies in the northern states. Criminal law sets out the kinds of behaviour that are forbidden at risk of punishment. A person who commits an offence does so against the state, so the state has the power to prosecute him.

If he is found guilty, the court may sentence him to a custodial punishment (imprisonment) or a non-custodial one (a fine).

Criminal law is part of public law. It imposes criminal liability on conduct judged to be against the general interests of society, and what counts as criminal varies from society to society.

The two elements of an offence

• Mens rea, the guilty mind: the accused had the intention, knowledge or recklessness that the offence requires.
• Actus reus, the guilty act: the physical conduct that the offence describes.

Before a defendant is found guilty, both must be established. May 2016 asked for the elements of stealing and the examiners marked the fraudulent taking or conversion as the actus reus and the intention to deprive the owner as the mens rea.

Characteristics of criminal law

November 2022 asked for four. The examiners accepted:

• criminal law is classified under public law;
• it is between the state and the persons who commit offences;
• its aim is to punish offenders;
• the parties are the prosecution and the suspect;
• offences are not subject to the statute-bar principle, so there is no limitation period; and
• the offence is committed against the public, the state or the nation.

Criminal law and civil law

November 2014 and May 2022 asked for five distinctions.

Ethics and ethical codes

Ethics consists of commonly acceptable modes of conduct or behaviour in a given society. It is a moral persuasion against wrongdoing or unacceptable conduct. This is the examiners’ definition in March/July 2020 (Section A Q6), where it was a multiple-choice item.

Ethical codes regulate the conduct of professionals, such as chartered accountants, legal practitioners, doctors and engineers, in dealing with clients. They are set and administered by professional bodies. Institute of Chartered Accountants of Nigeria (ICAN) administers the ethical code for accountants.

The purpose of ethical codes

The aim is to ensure a high standard of conduct by members in their relationships with clients. Clients may be vulnerable to the exercise of authority and power by persons with superior and professional knowledge in positions of trust. This answer was marked in March/July 2020 (5 marks) and November 2020 (2 + 2 marks).

Objectives (November 2021, four marks)

The examiners listed the objectives of ethical codes, which are the fundamental principles of professional conduct: integrity, objectivity, competence (and due care), confidentiality and standard professional behaviour.

An offence compared with an ethical breach

May 2017 asked for the distinction (5 marks). An offence is a crime or wrong against the state. Guilt depends on proof of both mens rea and actus reus, and on conviction the offender is sentenced to a custodial or non-custodial punishment. Ethics is a commonly accepted mode of conduct or a moral persuasion against wrongdoing.

A breach of an ethical code is dealt with by the professional body, for example by discipline, and does not need a court conviction. One act may be both, as when an accountant steals a client’s money.

Stealing (theft)

The offence

Section 390 of the Criminal Code creates the offence of stealing. Under section 383(1), a person who fraudulently takes anything capable of being stolen, or fraudulently converts to his own use, or the use of any other person, anything capable of being stolen, is said to steal that thing.

Taking

To constitute taking, the thief need not take the thing completely into his physical possession. He is deemed to have taken it if he moves it or causes it to move.

Conversion

The Code does not say what conversion is. It is suggested to have its common law meaning: to destroy, alter, sell, pledge or use property belonging to another is to convert it. But for conversion to be stealing, it must be done with one of the fraudulent intents in section 383(2).

For example, A who merely uses B’s car and returns it is not guilty of stealing, because he did not act fraudulently, although the act is conversion in tort. A servant who receives money for his master and converts it is guilty of stealing.

The fraudulent intents (section 383(2))

Not every taking or conversion is stealing. There must be an element of fraud, and the test is the accused’s intent at the time of the taking or conversion. Any one of the following six intents makes it fraudulent:

1. an intent permanently to deprive the owner of the thing. A merely temporary intent is not stealing unless another intent is also present;
2. an intent permanently to deprive any person who has a special property in the thing of that property, which protects a person with a right depending on possession, though not the owner;
3. an intent to use the thing as a pledge or security;
4. an intent to part with the thing on a condition as to its return that the person may be unable to perform;
5. an intent to deal with the thing so that it cannot be returned in the condition it was in when taken or converted; or
6. in the case of money, an intent to use it at the will of the person who takes or converts it, although he may intend to repay it afterwards.

These were tested in November 2020 (five tests, 5 marks) and May 2022 (three intents, 6 marks). May 2024 asked what the intent states concerning money (4 marks), and the answer is the sixth intent, with its implication that an intention to repay later is no defence.

Cases

• R v Onzu (1954). The accused took money from people as deposits, promising to send them to America on scholarship. He did not send them and did not refund the money when asked. He was convicted of stealing.
• State v Odimayo (1967). The accused took a loan from a housing corporation to build a house on land he had mortgaged to the corporation. He spent it on an election contest. He was rightly convicted, because the money was still the corporation’s until used for the specific purpose, and it made no difference that he intended to repay it.

Things capable of being stolen (section 382)

• Every inanimate thing that is the property of any person and is movable can be stolen.
• An inanimate thing that belongs to someone and can be made movable can be stolen as soon as it becomes movable, even if it was made movable in order to steal it.
• Land cannot be stolen, and ownerless property cannot be stolen. A thing may be ownerless because it cannot be owned at all or because it has been abandoned.

Punishment (section 390)

• A person who steals anything capable of being stolen is guilty of a felony and, if no other punishment is provided, is liable to three years’ imprisonment.
• If the thing stolen is a testamentary instrument, whether the testator is dead or alive, or a postal matter, or any chattel, money or valuable security contained in postal matter, the offender is liable to imprisonment for life.

November 2022 asked for these two punishments (2 marks each), and November 2016 Section A asked for the punishment under section 390.

Fraud-related offences

The Criminal Code does not create a single general offence of fraud, but many offences are fraud-related. They include false pretences, cheating, obtaining credit by fraud, forgery and fraudulent false accounting. November 2015 asked for three of them to be explained (15 marks) and November 2017 asked for forgery and bribery.

False pretences (section 419)

• The felony of obtaining property by false pretences and with intent to defraud is committed if a person obtains from another anything capable of being stolen, or induces another to deliver anything capable of being stolen to any person.
• It does not matter that the thing was obtained through a contract induced by the false pretences.
• There must be intent to defraud, though not against any particular person. It means an intent to induce another by deceit to act to his detriment or contrary to his duty. It does not matter that no pecuniary loss was intended, so a loan obtained by false pretence is an offence even if it is later repaid.
• The pretence must have induced the owner to part with the property. If A obtains goods from B and only then starts telling lies, the goods were not obtained by false pretences. The representation must have weighed on the mind of the representee.

The examiners (November 2017) defined a false pretence as a representation in words, writing or conduct of a matter of fact, which is false, and which the maker knows to be false, made with intent to defraud another of anything capable of being stolen. It is presumed if the victim parted with his property or suffered loss, even if it was later returned.

Three factors are immaterial:

• that the property was obtained through a third party
• that the defendant did not intend economic loss
• that the defendant did not personally receive the benefit

Cheating

A person cheats if, by any fraudulent trick or device, he obtains from another anything capable of being stolen, or induces another to deliver money or goods, or a greater sum or quantity than he would have paid or delivered but for the trick. It is a misdemeanour punishable by two years’ imprisonment.

Obtaining property or credit by dishonoured cheque

A person who obtains property or credit by a cheque that is later dishonoured for insufficient funds is guilty of obtaining property by false pretences. The Dishonoured Cheques (Offences) Act now makes the conduct an offence.

Forgery (section 465)

Forgery is committed when a person knowingly makes a false document or writing with intent that it may be used or acted upon as genuine, in Nigeria or elsewhere, to the prejudice of any person, or with intent that any person, believing it genuine, may be induced to do or refrain from doing any act.

• To alter or add to the amount on a voucher or cheque is to make a false document. So is signing a document in the name of another person, or of a non-existent person.
• A document (section 463) includes a register or register book and any paper, parchment or other material used for writing or printing that is marked with letters, words or signs able to convey a definite meaning. It does not include trade marks on goods.
• The language of the forged document is immaterial. It is immaterial that it is incomplete or is not a document that would be legally binding, if it was made so as to be used or acted upon.

Fraudulent false accounting (section 438)

The offence is usually charged with stealing or forgery. A person who is a clerk or servant, or employed or acting in that capacity, and who does any of the following with intent to defraud, is guilty of a felony and liable to seven years’ imprisonment:

1. destroys, alters, mutilates or falsifies any book, document, valuable security or account that belongs to or is in the possession of his employer, or was received by him on his employer’s account, or any entry in it, or is privy to such an act;
2. makes, or is privy to making, a false entry in any such book, document or account; or
3. omits, or is privy to omitting, a material particular from any such book, document or account.

Points on this offence:

• If an employee makes a false entry in his own document about his master’s business, he is not guilty, because the document was not provided by his master.
• If charged with making a false entry, it must be proved that the entry was false to his knowledge. A correct entry is no offence.
• It is immaterial that he derived no benefit, or merely helped another to steal, or acted on a superior’s instructions, provided he knew the intent was to defraud.

May 2019 asked for the acts and the penalty (6 marks), and November 2015 asked for three items (6 marks).

Working through the rules

Is it stealing?

Which offence?

Worked problems

Problem 1: Onyi and the scholarship

1. The offence. Stealing is fraudulently taking or converting anything capable of being stolen (section 383).
2. The elements. The actus reus is the fraudulent taking or conversion of a thing capable of being stolen. Money is movable property. The mens rea is the intent: for money, an intent to use it at the will of the person who takes it, although he may later repay it.
3. The application. Onyi received the money for a specific purpose and spent it on his own children, so he converted it. As in R v Onzu and State v Odimayo, it does not matter whether he meant to repay.
4. Advice. Onyi may be prosecuted for stealing and, if convicted, is liable to three years’ imprisonment.

Problem 2: Okonto and the housing loan

1. The issue. Whether he committed theft.
2. The rule. For money, the intent is to use it at the will of the person who takes or converts it, although he may intend to repay afterwards.
3. The application. The loan was for a housing purpose and he spent it on a political form. His plan to build later does not matter.
4. Advice. He is liable to be convicted of stealing.

Problem 3: the clerk’s ledger

1. The offence. Fraudulent false accounting (section 438): a clerk who, with intent to defraud, alters or falsifies a book of his employer, or makes a false entry, commits a felony.
2. The defences. It is immaterial that he took no benefit, that he merely helped another to steal, or that he acted on his supervisor’s instructions, if he knew the intent was to defraud.
3. Advice. He is liable to seven years’ imprisonment.

Questions that have been asked on this topic, and how to answer them

Common mistakes in the exam

• Describing stealing without the fraudulent intent. Taking alone is not enough.
• Saying a person who means to repay money cannot steal it. Under the sixth intent he can.
• Saying land can be stolen. It cannot.
• Mixing up the penalties: three years for ordinary stealing, life for a testamentary instrument or postal matter, seven years for false accounting, two years for cheating.
• Confusing false pretences (obtaining property by a false representation) with forgery (making a false document).
• Saying a clerk is not guilty of false accounting because he gained nothing.
• Treating ethics as law. A breach of an ethical code is dealt with by the professional body and is not a crime unless a law also forbids it.
• Omitting both mens rea and actus reus when defining an offence.

Quick revision

• Sources: Criminal Code (south), Penal Code (north). An offence is against the state. Mens rea and actus reus.
• Ethics: accepted mode of conduct. Codes regulate professionals and are administered by professional bodies. Five objectives: integrity, objectivity, competence, confidentiality, standard professional behaviour.
• Stealing: fraudulent taking or conversion (s.383). Six intents. Money rule. Things capable: movable property, not land or ownerless things. Three years (s.390), life for testamentary instruments and postal matter.
• False pretences (s.419): intent to defraud, induced to part with property, repayment no defence. Cheating: two years. Forgery (s.465). False accounting (s.438): seven years.

Practice questions

These are original questions written in the style of the ICAN exam. Try each one before you open the answer. Full model answers follow the written questions.

Section A style: multiple choice

Section B style: written questions

Model answers

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