‘Failure to prevent fraud’ guidance published by Government

Introduced last year as part of the Economic Crime and Corporate Transparency Act, the offence is intended to hold large organisations to account if they profit from fraud.

Under the offence, which has cross-Parliament support, large organisations may be held criminally liable where an employee, agent, subsidiary or other ‘associated person’ commits a fraud intending to benefit the organisation. 

Examples may include dishonest sales practices, the hiding of important information from consumers or investors or dishonest practices in financial markets.

In the event of prosecution, an organisation 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 offence is intended to encourage organisations to build an anti-fraud culture, in much the same way that failure to prevent bribery legislation has helped in reshaping corporate culture since its introduction in 2010.

Most common crime type

The guidance has been developed with input from the Crown Prosecution Service, the Serious Fraud Office (SFO), His Majesty’s Treasury, His Majesty’s Revenue and Customs, the Ministry of Justice, the Cabinet Office, the Attorney General’s Office and the Financial Conduct Authority.

‘Failure to prevent fraud’ will come into force on 1 September 2025.

With fraud being the most common crime type in the UK, amounting to around 40% of all crime in England and Wales, these new measures are part of a wider Government ambition to reduce fraud and protect potential victims, including those in the business community.

Corporate culture shift  

Lord David Hanson, Minister with Responsibility for Fraud, said: “Fraud is a pernicious form of crime and we’re determined to root it out wherever it takes place. This guidance marks the first steps towards a corporate culture shift around fraud prevention.”

He added: “I look forward to continuing our work with partners in industry and law enforcement to better protect the public and businesses from this appalling crime and bring these callous criminals to justice.”

Nick Ephgrave QPM, director of the SFO, said: “Corporate fraud significantly damages confidence in UK companies and, ultimately, costs the taxpayer. The publication of this guidance means that time is running short for corporations to make sure their house is in order or otherwise face criminal investigation.”

Changes to reporting fraud

In tandem, the SFO is working with the City of London Police to make it easier for victims to report fraud.

As of 28 October, all fraud referrals – unless from companies or whistleblowers – should be made to Action Fraud, either online at www.actionfraud.police.uk/reporting-fraud-and-cyber-crime or via the dedicated Call Centre on 0300 123 2040.

This change brings the SFO into line with all 43 national police forces in England and Wales and the National Crime Agency, supporting strong co-ordination between agencies in the face of emerging fraud threats and building a better picture of fraud across the country.

*Members of the public who have been a victim of fraud or wish to report on behalf of a victim of fraud should report here to Action Fraud 

**Those wishing to report an allegation of serious corruption or bribery, whistleblowers or those reporting on behalf of a corporate entity can do so online