UNDERSTANDING THE PRACTICAL REQUIREMENTS OF THE UK GOVERNMENT’S NEW ‘FAILURE TO PREVENT FRAUD’ CORPORATE OFFENCE
In a significant development aimed at strengthening corporate accountability in the UK, the government is introducing a new corporate criminal offence of ‘failure to prevent fraud’. The new offence is being introduced through the Economic Crime and Corporate Transparency Bill that is currently being considered by the House of Lords and builds on the existing offences of ‘failure to prevent bribery’ and ‘failure to prevent tax evasion’.
The objective of the new offence is to hold ‘large’ organisations accountable if they benefit from fraudulent activities perpetrated by their employees, and to foster an organisational culture change toward enhanced fraud prevention procedures.
In this article we consider the rationale for the introduction of the new ‘failure to prevent fraud’ offence, which businesses will be impacted by the new offence, what businesses can do to demonstrate ‘reasonable procedures’ to prevent fraud, and an overview of anticipated timings for the introduction of the new offence.
Rationale
The motivation behind the introduction of the new ‘failure to prevent fraud’ offence is rooted in the need for enhanced corporate responsibility. Historically, existing legal avenues available to hold large organisations accountable for fraud have proven difficult to successfully prosecute.
The new offence seeks to bridge this gap by placing a clear duty on an organisation to prevent fraud by its employees.
Oct-Dec 2023 Issue
Baker Tilly