As of 1 September 2025, a new corporate offence has been introduced in an effort to protect businesses and investors and crack down on fraud, following a 31% rise over the past year. The new ‘Failure to Prevent Fraud’ offence – under the Economic Crime and Corporate Transparency Act – dictates that an organisation will be criminally liable where a specified fraud offence is committed by an employee, agent or other ‘associated person’, for the organisation’s benefit, or where the organisation did not have ‘reasonable’ fraud prevention procedures in place. Crucially, this change means that liability does not depend on whether senior management was aware of the misconduct, but instead, whether or not suitable measures were implemented to prevent the crime from happening in the first place.
Is Your Company Ready?
ccording to Fraud Minister David Hanson, the introduction of this new offence is set to ‘strengthen our anti-fraud culture’, ‘build corporate trust’, and ‘support long-term economic growth’. “Fraud is a shameful crime” begins Hanson, “and we are determined to bring those responsible to justice.” While the introduction of this new zero-tolerance approach is an undoubtably necessary move and a welcome step for tackling fraud, it also puts companies at risk of unlimited fines and reputational fallout, so if you haven’t already, there’s no better time to tighten up your fraud prevention framework, than now.
Understanding the New Liability
The offence covers a wide range of fraudulent conduct, including:
False representation
False statements by company directors
Abuse of position
False accounting,
Fraudulent trading
Cheating public revenue
Aiding and abetting any of the above
The organisation will only be criminally liable, however, if any of the above is committed with the intention of benefitting the organisation or the clients of said organisation. In the instance of personal gain, the individual is the only liable party. This strict new enforcement essentially means that accountability is now organisational as well as individual, making structured policies, internal controls, and oversight the new must-haves for all relevant bodies. Proactive risk management at this stage is not a legal requirement, but in the case of reports of fraudulent activity within your company, doing nothing now is the worst defence you could offer.
Who is it for?
‘Large organisations’ should take preventative action to prove that they take anti-fraud policies seriously. If you’re unsure whether your organisation qualifies as ‘large’, check it against the following criteria. Meeting two or more means you fall within this category:
More than 250 employees
Annual turnover exceeding £36 million
Balance sheet total above £18 million
While the offence applies only to ‘large organisations’, smaller companies aren’t quite off the hook, as they may still face related scrutiny under other fraud laws, and therefore should also be advised to pay attention to the change in legislation.
What Constitutes ‘Reasonable’ Prevention?
Organisations can prove innocence if reasonable measures were put in place to prevent the fraud from occurring, but what classifies as ‘reasonable’ prevention? A poster about honesty in the break room? Shining a light in employees’ eyes at the end of every meeting? The suitability of action is, of course, discretionary, and relative to the scale of each company, but key actions across the board could include conducting fraud risk assessments to pinpoint vulnerabilities, implementing robust internal controls, establishing clear reporting lines and whistleblowing channels, and providing regular staff training. These procedures should be actively applied, regularly reviewed, and updated to keep up with evolving risks.
The Consequences of Non-Compliance
Failure to adhere to these guidelines comes with serious consequences – gone are the days of blissful ignorance towards what an individual staff member gets themselves involved with – companies could now face unlimited fines and reputational damage in the event of failure to prevent fraud, even without board-level knowledge. The fallout can be catastrophic, and failure to act could land Directors and PSCs under the microscope – senior leadership must regularly review policies, ensure employees understand their responsibilities, and embed a culture of compliance.
What to Do Next
There’s no set answer to the question of exactly what your company should do next, as measures will be proportionate to your size and risk profile, so legal advice could be essential to tailor procedures and actions to your needs. The first step in any case though, is to conduct a comprehensive fraud risk analysis, reviewing and updating internal policies in accordance with the results. Providing regular staff training and establishing clear reporting and whistleblowing channels also puts your company in a good position to ensure that all employees are diligent in taking necessary actions to prevent fraud within the company.
To ensure these measures are implemented effectively and to review your compliance framework against the latest Fraud Liability requirements, contact our team for expert guidance.