Businesses will benefit from a new corporate criminal offence of ‘failure to prevent fraud’, designed to drive an anti-fraud culture and improve business confidence, News Cover reports, citing UK government.
Introduced as part of the Economic Crime and Corporate Transparency Act (ECCT) 2023, the offence, which comes into effect today (Monday 1 September), will hold large organisations to account if they profit from fraud. It forms part of wider measures introduced by the government to tackle fraud and protect the UK economy, as part of the Plan for Change.
The offence of ‘failure to prevent fraud’ follows major steps forward on fraud prevention including:
pushing forward with a ban on SIM farms – technical devices which facilitate fraud on an industrial scale
a bilateral agreement with the insurance sector
adopting the first ever UN resolution on fraud
Under the new law, which was passed with cross-Parliament support, large organisations can 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
hiding important information from consumers or investors
dishonest practices in financial markets
In the event of prosecution, an organisation will now have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time the fraud was committed.
The offence is intended to encourage organisations to build an anti-fraud culture, in the same way that failure to prevent bribery legislation has helped reshape corporate culture since its introduction in 2010.
Throughout the implementation period, businesses have been supported with guidance advising on the new offence, ensuring they take action to prevent fraud.
With recent ONS figures finding that fraud increased last year by 31%, the government has placed key focus on tackling this issue. Plans are developing at speed ahead of the publication of a new, expanded fraud strategy, which places tackling fraud against business at its heart.
