Offence of failure to prevent fraud

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) has introduced a pivotal new offence for large organisations: the failure to prevent fraud. This legislation is designed to hold organisations accountable when an employee, subsidiary, or other ‘associated person’ commits fraud intended to benefit the organisation. This offence will come into force on 1 September 2025, following the latest ECCTA commencement regulations released on 6 November 2024.

The offence applies to large organisations, which are entities having two out of three of the following:

• More than 250 employees
• More than £36m turnover
• More than £18m in total assets

The Government has published comprehensive guidance to help organisations understand and comply with the new regulations. This guidance includes:

• Preventive measures: advice on actions organisations can take to prevent fraud.
• Scope of organisations: clarification on which organisations are covered by the offence.
• Types of fraud: details on the types of fraudulent activities that fall under the offence.
• Definition of ‘associated person’: explanation of who qualifies as an associated person under the law.

Organisations impacted should start preparing now to ensure they are ready for the new regulations. This will need to include the implementation of robust anti-fraud policies, conducting regular training for employees, and establishing clear reporting mechanisms.

For more details please see Offence of ‘failure to prevent fraud’ introduced by ECCTA – GOV.UK