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What Is the Statute of Limitations for Fraud?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 July 2014
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Fraud is the intentional deception of a third party that causes some form of harm to the victim. There are many forms of fraud, including mail, wire, securities, real estate, and credit card fraud. The statute of limitations for fraud depends on the crime, the region, and sometimes when the crime was discovered.

A statute of limitations for any crime is a common law measure that prevents the prosecution of certain crimes after a specific period of time. This helps ensure that plaintiffs do not bring a claim simply out of spite or other motives, even though they have lived with the offense for many years. Additionally, it protects evidence from loss, contamination, or decay that could materially influence the outcome of a trial. Some legal experts also claim that, for minor crimes, punishing a person for what he or she did 20 years ago may be a meaningless use of the justice system.

The statute of limitations for fraud varies by region, and sometimes by the type of crime. In most US states, fraud proceedings are limited to between one and five years after the crime occurred, and limits are similar in other common law countries. Fraud may be charged at the regional or national level, depending on the type of crime. Mail fraud, for instance, is considered a federal crime in the United States and is prosecuted in the federal court system.

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One issue that may alter the statute of limitations is the application of the discovery rule. This is a special rule that allows for the possibility that a crime might not be discovered at the same time that it is committed. If, for instance, a person was a victim of a fraudulent accountant but did not realize the fraud had occurred until four years later, he or she might not be able to make a legal complaint if the statute of limitations had run out. The discovery rule allows the statute of limitations to begin at the moment of discovery, rather than the moment of the crime.

There are some exceptions to the discovery rule that prevent gross negligence on the part of the plaintiff from permitting prosecution. Some legal systems have an upper limit for the statute of limitations for fraud, even with the discovery rule applied. Securities fraud in the United States, for example, has a statute of limitations of two years, or up to five years if the discovery rule is applied. If the crime is discovered after five years, it would no longer be prosecutable.

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Discuss this Article

Fa5t3r
Post 3

I find this very interesting, because I can't help but wonder what happens when someone just manages to keep out of the way until the statute of limitations for, say, credit card debt (or fraud) just runs out.

It's pretty easy to get a new identity and the world is a big place. Maybe you can't keep running forever, but it seems like in some places all you'd have to do was run for five years and you'll completely get away with whatever your crime happened to be.

pleonasm
Post 2

@indigomoth - That would be a very corrupt thing to do and I hope that it doesn't actually happen all that much outside of gritty TV shows and the like.

Other than that kind of worst case scenario, I'm not sure what's wrong with the discovery rule, particularly as it relates to fraud cases, as I think it's very likely that often people don't discover that a crime was committed until a long time after the fact.

Imagine those people who get taken in by a con man and invest their money, only to be told they "lost it". If they find out five years later that their oh so kindly investment partner was actually a con man, they should still be able to prosecute him, even if the statute of limitations on fraud has technically run out.

indigomoth
Post 1

I can definitely see why you'd want to limit the application of the discovery rule. I mean, even without those limitations I think it's pretty difficult to take it seriously.

It's easy enough to just claim that you only just discovered the crime a few months ago and therefore you can still prosecute someone for it, but it seems like the kind of thing that people would lie about.

And, specifically, it would make it very easy for police to keep tabs on criminals that they wanted to keep as informants, because, until the statue of limitations on fraud (or whatever the crime was) ran out, any crime they had committed could be held over their head, and with the discovery rule on top of that, it could turn out to be a long time.

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