In brief
- Fraud consists of obtaining an undue financial benefit through deception that leads another person into error and causes them to carry out an act that harms their own assets or those of a third party (Articles 248 et seq. of the Spanish Criminal Code).
- Not every non-payment or breach of contract is fraud: the difference lies in the moment at which the fraudulent intent arises.
- Basic fraud is punishable by imprisonment of six months to three years; aggravated fraud by imprisonment of one to six years and a fine of six to twelve months, which may rise to imprisonment of four to eight years and a fine of twelve to twenty-four months.
- Fraud requires intentional conduct: as a general rule, the Criminal Code does not provide for a negligent form of the offence.
- A company may be held criminally liable for fraud, with a fine of two to four times the amount defrauded, unless it has effectively implemented an appropriate compliance programme (organisation and management model).
What is the offence of fraud?
The offence of fraud (estafa) consists, in general terms, of obtaining an undue financial benefit through deception that leads another person into error and causes them to carry out an act that harms their own assets or those of a third party.
The basic provisions are found in Articles 248 et seq. of the Spanish Criminal Code. The conduct normally requires five elements:
deception;
that the deception is sufficiently capable of inducing error;
a decision by the victim to dispose of property;
financial loss;
the intent to obtain a benefit.
The deception must precede or coincide with the transfer of assets, and there must be a direct link between the deception and the loss.
Fraud may be committed in dealings between private individuals, but it also frequently arises in business transactions, supply contracts, sales, investments, financing, the provision of services, e-commerce and transactions carried out through commercial companies.
What is the difference between fraud and breach of contract?
Not every non-payment or breach of contract amounts to fraud. A contract may fail because of a lack of liquidity, market changes, the loss of a supplier, financial difficulties or other supervening circumstances, without there necessarily being any criminal liability.
The essential difference lies in the moment at which the fraudulent intent arises. If a person enters into a contract with a genuine intention to perform it and subsequently fails to do so because of circumstances they had not foreseen, the dispute may be civil or commercial in nature. By contrast, there may be fraud where, from the outset, the person uses the contract as a front to obtain money, goods or services for which they never intended to give anything in return.
For example, a company that receives an advance payment to manufacture a product and is then unable to deliver it because of the unexpected loss of a supplier does not necessarily commit fraud. The assessment may be different if, when entering into the contract, it already knew that it lacked the means, had no intention of manufacturing the product and concealed that situation in order to obtain the payment.
What forms of fraud exist and what are the penalties?
Basic fraud
Basic fraud covers deception aimed at inducing a harmful disposal of property. It may consist of asserting false facts, presenting as real a transaction that does not exist, using a misleading business façade or concealing relevant information where the perpetrator is under a duty to disclose it.
Art. 248 of the Criminal Code provides for basic fraud a penalty of imprisonment of six months to three years. In setting the penalty, factors such as the amount defrauded, the extent of the loss, the relationship between the parties and the means employed are taken into account.
Where the amount defrauded does not exceed €400, the general rule is the imposition of a fine of one to three months (day-fine system), unless an aggravating circumstance or certain previous convictions for offences of the same nature are present.
Computer fraud and fraud involving payment instruments
The Criminal Code also covers conduct in which there need not be direct deception of a specific person. This includes, among other things, the manipulation of information systems or computer data in order to bring about an unauthorised transfer of assets.
The fraudulent use of credit or debit cards, traveller’s cheques, the data of such instruments and other non-cash means of payment is also punishable. The penalty for this conduct is, as a general rule, imprisonment of six months to three years.
Likewise, it may be an offence to manufacture, import, acquire, possess, transport or supply devices, programs, data or other means specifically designed to commit these types of fraud. The possession or distribution of unlawfully obtained payment instruments may attract a different criminal response depending on the knowledge and purpose of the person who possesses or uses them.
Aggravated fraud
The penalty increases where any of the circumstances set out in Art. 250 of the Criminal Code is present. Those most relevant to business activity include:
The fraud concerns housing, basic necessities or other goods of recognised social utility.
Another person’s signature is misused, or public or official documents are concealed, destroyed or removed.
The loss is particularly serious because of its amount or because of the financial situation in which the victim or their family is left.
The value of the fraud exceeds €50,000 or it affects a large number of people.
Personal relationships or business or professional credibility are abused.
Procedural fraud (estafa procesal) is committed, by manipulating evidence or using a similar deceit to cause a judge or court to issue a decision that harms another party or a third party.
There are certain previous convictions for offences of the same nature.
In these cases, the penalty is imprisonment of one to six years and a fine of six to twelve months.
Where the value of the fraud exceeds €250,000, or where certain particularly significant aggravating circumstances are present together with other circumstances, the penalty may rise to imprisonment of four to eight years and a fine of twelve to twenty-four months.
Continuing fraud
Where several frauds are committed as part of the same plan or by taking advantage of the same opportunity, a continuing offence (delito continuado) may be found. In determining the criminal response, the losses caused may be assessed together, particularly in offences against property.
This may be relevant, for example, where the same false offer is used to obtain advance payments from numerous customers, or where multiple fraudulent transactions are carried out following a common pattern.
Can fraud be committed through negligence?
Fraud requires intentional conduct. As a general rule, the Criminal Code does not provide for a negligent form of this offence. Poor management, an accounting error, a mistaken business forecast or negligent conduct are not in themselves sufficient to establish fraud.
There must be an intent to profit and deceptive conduct that causes the loss. This does not prevent negligent conduct from having civil, commercial or administrative consequences or, depending on the case, from giving rise to a different offence.
When is there attempted fraud?
Fraud may remain at the stage of attempt where the perpetrator begins to commit it through external acts, but the financial loss does not occur for reasons beyond their control. This may happen, for example, where false documents are submitted to obtain financing, but the institution detects the irregularity before handing over the money.
The attempt may affect the applicable penalty. If the perpetrator voluntarily desists or prevents completion of the offence under the conditions laid down by law, they may be exempt from liability for the attempted offence, without prejudice to any liability for other acts already committed.
Can a company be criminally liable for fraud?
A company may be criminally liable for fraud where the offence is committed in its name or on its behalf and for its direct or indirect benefit by a legal representative, director or person with powers of decision, organisation or control.
Corporate criminal liability may also arise where the offence is committed by an employee or subordinate in the course of the business activity and was made possible by a serious failure to fulfil the duties of supervision, monitoring and control.
The company may be exempt from liability, or have its liability mitigated, if, before the events, it had adopted and effectively implemented a compliance programme (organisation and management model) suitable for preventing offences of that nature, with financial controls, internal procedures, information systems and effective monitoring measures. Merely having a compliance programme on paper is not enough: its application, supervision and updating must be genuine.
For the legal person (company), Art. 251 bis of the Criminal Code provides, as a general rule, for a fine of two to four times the amount defrauded. If the offence committed by the natural person carries a prison sentence of more than five years, the fine may be three to five times that amount.
Other penalties may also be imposed, such as dissolution, suspension of activities, closure of premises, a prohibition on carrying out certain activities, disqualification from obtaining public aid or entering into contracts with the public sector, and judicial administration, under the terms provided by law.
What civil liability arises from fraud?
A conviction for fraud normally entails an obligation to make good the damage. Civil liability may include:
Restitution of the property obtained.
Repayment of the sums handed over.
Repair of the damage caused.
Compensation for material losses and, where appropriate, for non-material (moral) damage.
The amount must correspond to the loss actually caused, deducting any sums that have been returned or recovered, so as to avoid double compensation.
Where a legal person is criminally convicted, it will be jointly and severally liable in civil terms with the natural persons convicted for the same acts, in accordance with the rules of the Criminal Code. In addition, in certain cases there may be secondary (subsidiary) civil liability linked to the business activity and to offences committed by employees, agents, representatives or managers in the performance of their duties.
Example of fraud in a business context
A company offers several customers the installation of industrial infrastructure, requests large advance payments and presents quotations, references and technical resources that give an appearance of solvency. However, its managers know from the outset that they have no suppliers, staff or financing to carry out the work, and they use the advance payments for purposes unrelated to the contract.
If it is proven that the business façade was used to induce the payments, the conduct may constitute fraud, in addition to possible aggravation on account of the amount, the number of victims or the abuse of professional credibility.
Conversely, if the company genuinely began performance but subsequently suffered an unforeseeable financial crisis that prevented it from completing the project, the breach does not automatically become an offence. The legal characterisation will depend on the specific circumstances and the evidence available.
Conclusion
Fraud is not limited to obvious deceit or the forging of documents. It may also occur through an apparently normal business transaction when that transaction is used as a means of concealing, from the outset, an intention to obtain a benefit without providing the agreed consideration.
A significant financial loss, multiple victims, a relationship of trust or a corporate structure do not in themselves determine that the offence has been committed, but they may influence its legal characterisation and the criminal consequences. In each case it is necessary to analyse how the deception occurred, what information each party had, when the fraudulent intent arose, what transfer of assets took place and what preventive measures existed within the company.
Frequently asked questions
What is the penalty for fraud in Spain?
Basic fraud is punishable by imprisonment of six months to three years; where the amount defrauded does not exceed €400, the general rule is a fine of one to three months. Aggravated fraud is punishable by imprisonment of one to six years and a fine of six to twelve months, and may rise to imprisonment of four to eight years and a fine of twelve to twenty-four months, for example where the value of the fraud exceeds €250,000.
Is failing to pay or breaching a contract fraud?
Not every non-payment or breach of contract amounts to fraud. There may be fraud where, from the outset, the contract is used as a front to obtain money, goods or services for which there was never any intention to give anything in return; if the contract was entered into with a genuine intention to perform it, the dispute may be civil or commercial in nature.
Can a company be convicted of fraud?
Yes. A legal person may be criminally liable where the offence is committed in its name or on its behalf and for its direct or indirect benefit by a legal representative, director or person with powers of decision, organisation or control, or by an employee where this was made possible by a serious failure to fulfil the duties of supervision, monitoring and control. The general penalty is a fine of two to four times the amount defrauded.
Can fraud be committed through negligence?
No. Fraud requires intentional conduct and, as a general rule, the Criminal Code does not provide for a negligent form. Poor management, an accounting error or negligent conduct are not in themselves sufficient to establish fraud.