Unpacking the new failure to prevent fraud legislation: A guide for potential defendants

With the recent Home Office announcement of the proposed Economic Crime and Corporate Transparency Bill, businesses across the country are being pushed to double down on fraudulent practices.

The legislation includes a new ‘failure to prevent fraud’ offence that can impose unlimited fines on large organisations that fail to implement reasonable measures to prevent fraud committed by their employees for the company’s benefit.

The introduction of this new offence will now see companies subject to prosecution if an employee commits fraud under their watch.

This may sound alarming to those who worry about rogue actions by employees, however, it’s important to note that the legislation does not aim to hold businesses responsible for unknowable actions, but for a lack of reasonable preventative measures.

It would, then, be prudent for businesses to take steps to improve their existing anti-fraud mechanisms, establish tighter internal control systems, and educate employees about the legal implications of fraud. The legislation places an increased focus on proactive measures against fraud rather than any retrospective penalties.

However, the new legislation does not apply to all businesses. Small and medium-sized enterprises (SMEs) are exempt from this offence, although they will continue to be held accountable under the existing legal framework.

While the introduction of this legislation may be cause for concern for some, it can also be seen as an opportunity. This is a chance for businesses to reflect on their current practices, reinforce their commitment to ethical operations, and build a culture of transparency and responsibility.

The goal isn’t just to prevent potential fines – it’s to place trust with stakeholders, which will, in turn, reinforce the long-term sustainability of your organisation.

As businesses await further guidance from the Government on this legislation, it is important to take pre-emptive actions and create a mindset within your organisation that actively dissuades fraudulent behaviour.

If you require any assistance relating to business fraud, please contact us today.