Unsuccessful Implementation of Fraud Prevention Measures
Breaking News: UK Introduces New Failure to Prevent Fraud Offence
The UK government has introduced a groundbreaking new offence under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), effective from 1 September 2025. The failure to prevent fraud offence is set to revolutionise the way corporate fraud is managed and enforced in the UK [1][2][4].
This new law creates corporate criminal liability for large organisations if an "associated person" (such as employees, agents, or service providers) commits fraud with the intention of benefiting the organisation or its clients, unless the organisation can demonstrate it had reasonable fraud prevention procedures in place [1][3][4].
The offence marks a shift from a reactive to a proactive corporate responsibility model, emphasizing the need for organisations to assess fraud risks, identify associates, and implement robust anti-fraud controls across all parts of their business [1][2]. The law covers a wide range of fraud-related crimes, including cheating the public revenue, false accounting, fraudulent trading, and obtaining services dishonestly [4].
The impact of this new offence is expected to be far-reaching, affecting both UK and non-UK companies. UK-based large organisations will be directly subject to prosecution if an associated person commits fraud and insufficient prevention procedures exist [1]. Non-UK group companies may also fall within the scope of the offence if they have exposure to the UK market, making it critical to evaluate their fraud risk and prevention systems relative to UK operations or connections [1].
Liability arises regardless of senior management’s knowledge of the fraud; it is the failure to have reasonable prevention procedures that triggers prosecution [3]. The offence is expected to drive a major corporate culture shift towards stronger compliance and proactive fraud risk management. Human resources and compliance functions will play a critical role in embedding a culture that supports fraud prevention, including training, oversight of third parties, and constant reassessment of fraud risks [3].
The new offence offers valuable resources for organisations seeking guidance, including information on necessary training, risk assessments, programme enhancement, and understanding its implications [2]. The UK government expects the new offence to encourage more companies to implement or improve prevention procedures, ultimately helping to reduce fraud in the UK [1][4].
In conclusion, the new failure to prevent fraud offence mandates that organisations, UK or with UK exposure, take comprehensive active steps to prevent fraud, fundamentally changing how corporate fraud risk is managed and enforced in the UK [1][2][4]. The offence is a game-changer, expected to have an impact similar to the UK Bribery Act, and providing resources for training purposes to ensure compliance [1][4].
[1] Economic Crime and Corporate Transparency Act 2023 [2] UK Government Guidance on the Failure to Prevent Fraud Offence [3] UK Government Press Release: Introducing the Failure to Prevent Fraud Offence [4] Serious Fraud Office: The Failure to Prevent Fraud Offence Explained
Corporate entities operating within the UK or having exposure to the UK market must assess fraud risks, identify associates, and implement robust anti-fraud controls across all parts of their business to avoid potential prosecution for failure to prevent fraud. This new law is projected to drive a major corporate culture shift towards stronger compliance and proactive fraud risk management, emphasizing the critical role that human resources and compliance functions will play in embedding a culture that supports fraud prevention.
