The U.K.'s Home Office has published guidance on the new corporate criminal offense of failure to prevent fraud under the Economic Crime and Corporate Transparency Act 2023. Under the offense, large organizations may be held criminally liable where an employee, agent, subsidiary, or other "associated person" commits a fraud intending to benefit the organization. In the event of prosecution, an organization would have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time that the fraud was committed. The offense applies to all large, incorporated bodies and partnerships (including partnerships that are not bodies corporate).
The guidance provides an overview of the offense, illustrated by theoretical examples. The guidance also sets out six principles for an organization's fraud prevention framework: (i) top level commitment; (ii) risk assessment; (iii) proportionate risk-based prevention procedures; (iv) due diligence; (v) communication (including training); and (vi) monitoring and review.
According to the Economic Crime and Corporate Transparency Act 2023 (Commencement No. 3) Regulations 2024, the offense will come into effect on September 1, 2025.
[View source.]
