The Failure to Prevent Fraud offence is a new UK corporate criminal offence, introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) and coming into effect on September 1, 2025, which holds large organisations criminally liable if an associated person commits a specified fraud with the intent to benefit the organisation, without reasonable fraud prevention procedures in place. This offence encourages a corporate culture shift towards better fraud prevention and aims to hold organisations accountable for profiting from fraud, even if senior management was unaware or did not order the act.
The offence applies to large companies and partnerships, defined by specific employee, turnover, and asset criteria, with the potential to include subsidiaries and parent companies.
It covers specified fraud offences, such as fraud by false representation, and applies if a fraud is committed by an employee, agent, or other associated person.
The fraud must be intended to benefit the organisation or a person to whom the associated person provides services on behalf of the organisation.
Directors or senior managers do not need to have ordered or known about the fraud for the organisation to be held liable.
An organisation can avoid liability by demonstrating it had “reasonable fraud prevention procedures” in place.
Conduct risk assessments – organisations should identify potential fraud risks within their supply chains, geographies, procurement, sales, and other functions.
Implement reasonable procedures – develop and maintain appropriate fraud prevention procedures, though the required procedures will vary based on the organisation’s specific risks.
Create an anti-fraud culture – foster a corporate culture that actively discourages fraud and promotes reporting of suspicious activity to relevant authorities like the Serious Fraud Office (SFO) or Financial Conduct Authority (FCA).
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