The Government has released guidance to organisations on the offence of failure to prevent fraud.
Under the offence, an organisation may be criminally liable, where an associated person commits a fraud intending to benefit the organisation and the organisation did not have reasonable fraud prevention procedures in place. In certain circumstances, the offence will apply where the fraud is committed with intended to benefit the client of the organisation. The penalty for companies guilty of failing to prevent fraud is an unlimited fine
The new offence, which will come into effect on 1 September 2025, is intended to make it easier to hold organisations to account for fraud committed by employees, or other associated persons, which may benefit the organisation, or, in certain circumstances their clients.
Who does the offence apply to?
The offence applies to large organisations across all sectors of the economy. An organisation is defined as being ‘large’ if it meets at least two of the following criteria:
- More than 250 employees
- More than £36 million turnover
- More than £18 million in total assets
Who is an ‘associated person’?
An employee, an agent or a subsidiary of the relevant body is automatically an ‘associated person’ for the purposes of this offence. A person who provides services for or on behalf of the relevant body is also an associated person while they are providing those services.
The Defence of reasonable fraud prevention
It is a defence if that the organisation had reasonable fraud prevention procedures in place or could demonstrate that it was reasonable not to have such procedures in place. To ensure you and your organisation are in the best position, you should incorporate this 6 point plan of action:
- Top level commitment
- Risk Assessments
- Proportionate risk-based prevention methods
- Due Diligence
- Communication and Training
- Monitoring and Review
The guidance can be found here: Economic Crime and Corporate Transparency Act 2023: Guidance to organisations on the offence of failure to prevent fraud (accessible version) – GOV.UK However, the document makes it clear that organisations cannot rely on the guidance alone and should seek legal advice on how the offence affects them. If you would like to discuss your business requirements, please contact
Contact details
marie.bourke@tyrlaw.co.uk + 44 (0)113 518 6060 +44 (0)7375 328187
