What is the failure to prevent fraud offence?

The failure to prevent fraud offence is a new corporate criminal offence introduced under the Economic Crime and Corporate Transparency Act 2023 and will come into force on 1 September 2025.

The legislation is designed to hold large organisations accountable if they fail to prevent a person carrying out services for or on their behalf from committing fraudulent acts for the organisation’s benefit. Under the new law, an organisation can be prosecuted if such an associated person commits one of the fraud offences specified in the Act and the organisation did not have reasonable procedures in place to prevent it. Crucially, prosecutors will only have to show that a lack of reasonable procedures was present within the organisation at the time of the fraud.

Our video gives you the insights you need to become prepared:

The scope of offences captured by the new failure to prevent fraud offence is broad and includes fraud by way of:

• False representation
• Failing to disclose information
• Abuse of position
• Obtaining services dishonestly
• Participation in a fraudulent business
• False statements by company directors
• False accounting
• Fraudulent trading
• Cheating the public revenue

(Note: money laundering offences are not included, as they are covered by existing law.)

When will the failure to prevent fraud offence come into force?

The failure to prevent fraud offence will officially take effect on 1 September 2025. This offence follows in the footsteps of the failure to prevent bribery offence (under the Bribery Act 2010) and the failure to prevent tax evasion offence (under the Criminal Finances Act 2017).

Who is affected by the failure to prevent fraud offence?

The failure to prevent fraud offence will apply to large UK-based organisations, which captures both public and private sector organisations, and to unincorporated partnerships. Small and medium sized organisations will generally be exempt, but may find themselves in-scope as an associated person of a larger organisation.

The offence broadly applies to those organisations meeting two of the following criteria:

• More than 250 employees
• An annual turnover of more than £36 million
• A total balance sheet of more than £18 million

How businesses can prepare for the failure to prevent fraud offence

Large UK-based businesses, and the entities associated with them, must act now to ensure compliance and avoid criminal liability in the event a fraud takes place. Preparing for the offence involves more than just policy updates; it requires businesses to have a comprehensive, strategic and organisation-wide approach to fraud risk management.

Some steps that you can take to prepare are:

1. Identify where your organisation is most vulnerable to fraud by conducting a comprehensive fraud risk assessment
2. Review and update your internal policies and implement “reasonable procedures” aligned with the new offence and UK Government guidance
3. Review and update the contracts you have in place with staff and third parties through which your business is conducted
4. Train your employees and key stakeholders to embed a culture of fraud awareness
5. Create a clear governance structure within your organisation establish clear lines of accountability for fraud prevention
6. Put in place a lifecycle review of your policies to monitor, review, and adapt your fraud prevention strategy

Failure to prevent fraud: How we can help

Our Walker Morris Regulatory & Compliance specialists are experienced in dealing with all aspects of fraud prevention and cure. We help clients with the provision of staff training and the preparation of policies and procedures to prevent, mitigate and respond to fraud. If the worst does happen, we can deal urgently and effectively with internal investigations and we can advise on an appropriate strategic response (along with our Commercial Dispute Resolution team who can assist you with any resulting litigation, tracing, recovery, damage limitation and enforcement action).

Please browse our material below to support you with your preparation for the offence.