- 25 Nov 2024
- •
- 2 min read
Corporate Fraud: A new offence is coming
The Economic Crime and Corporate Transparency Act 2023 created a new corporate criminal offence of failure to prevent fraud which will come into effect on 1 September 2025. From this date a large incorporated organisation can be found criminally liable where:
- A specified fraud offence is committed by an employee, agent, subsidiary or other ‘associated person’, for the organisation’s benefit (and in certain circumstances, the offence will also be committed where the specified fraud offence is carried out with the intention of benefitting a client of the organisation rather than the organisation itself); and
- The organisation did not have ‘reasonable’ fraud prevention procedures in place.
What organisations does the new offence apply to?
The new offence applies to:
- All incorporated bodies, subsidiaries and partnerships (so this will include limited companies, PLCs and LLPs)
- Not-for-profit organisations such as charities if they are incorporated
- Incorporated public bodies
where at least two of the following criteria are met by the organisation taken as a whole (which includes its subsidiaries, even if they are outside the UK):
- It has over 250 employees
- It has a turnover of over £36m
- It owns over £18 million in total assets
The offence will apply where the specified fraud is an offence under UK law, this being the case it doesn’t matter where in the world the organisation in question is incorporated or has its Head Office.
What do organisations need to do?
Firstly, consider whether your organisation is in scope. If it is:
- Consider the new guidance published on 6 November 2024 on the prevention procedures that in scope organisation should put in place to avoid criminal liability.
- Ensure your organisation has implemented appropriate measures before 1 September 2025. Indeed even if your organisation is not in scope of the new offence, the guidance explains that the fraud prevention guidance represents good practice for all organisations.
This new offence is expected to make it easier to prosecute organisations.
Want to read more?
Offence of ‘failure to prevent fraud’ introduced by ECCTA – GOV.UK
Failure to Prevent Fraud Guidance – English Language v1.2.pdf
Disclaimer
This information is intended for general informational purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0800 2800 421.
