A new corporate offence of “failure to prevent fraud” is set to be enacted on September 1, 2025. This development is outlined in sections 199 to 206 of the Economic Crime and Corporate Transparency Act 2023 (ECCTA). The legislation stipulates that organizations will face criminal liability if an associated person commits fraud, unless the organization can demonstrate that it had reasonable procedures in place to prevent such activities.
The aim of this law is to address shortcomings in English law regarding the prosecution of companies for serious offences committed by agents within their authority intended to benefit the company. It builds on principles first introduced in the Bribery Act 2010 and the Criminal Finances Act 2017, which targeted failing to prevent tax evasion facilitation.
Organizations deemed “in-scope” for this offence are those meeting at least two conditions: a turnover exceeding £36 million, assets over £18 million, or more than 250 employees. However, smaller entities should also be vigilant as larger companies might require them to establish anti-fraud measures.
The legislation covers overseas circumstances with a UK nexus and encourages companies operating internationally to implement robust antifraud systems applicable across all business locations. Companies are advised against complacency even if they perceive themselves as ethical since failure to take preventive action could lead to credible allegations or convictions related to fraud benefiting them inadvertently.
A series of practical briefings will be produced ahead of September’s implementation date. These will provide guidance on understanding how the law affects businesses and what steps can be taken beforehand. Topics include UK corporate criminal liability reform, elements of the new offence, types of covered frauds, impact on international organizations with UK connections, and planning required work before enforcement begins.
This initiative aims not only at preventing fraudulent activities but also ensuring businesses understand their responsibilities under this evolving legal framework.
