Failure to prevent fraud guidance introduced in UK

Today the government has published guidance that will provide organisations with advice on the new corporate criminal offence, “failure to prevent fraud”.

Introduced as part of last year’s Economic Crime and Corporate Transparency Act (ECCT), a new offence has been created to ensure large organisations are held accountable if they profit from fraud.

This offence could see large organisations held criminally liable if an employee engages in fraudulent activity with the intent to benefit the organisation. Instances might include deceptive sales practices, withholding key information from consumers or investors, or unethical conduct within financial markets. If prosecuted, an organisation would need to prove to the court that it had effective anti-fraud measures in place at the time the fraudulent act occurred.

The goal of this legislation is to encourage businesses to foster an anti-fraud culture, similar to how the “failure to prevent bribery” legislation has influenced corporate behaviour since its introduction in 2010.

The guidance for this offence has been developed in collaboration with key agencies, including the Crown Prosecution Service (CPS), Serious Fraud Office (SFO), HM Treasury, HMRC, Ministry of Justice, Cabinet Office, Attorney General’s Office, and the Financial Conduct Authority (FCA).

Set to come into effect on 1st September 2025, this new measure forms part of a broader government effort to reduce fraud, which accounts for roughly 40% of all crimes in England and Wales, and to protect both individuals and businesses from becoming victims.

Lord David Hanson, Minister with Responsibility for Fraud, stated:

“Fraud is a harmful crime, and we are committed to eradicating it wherever it occurs. This guidance marks the initial step towards a transformation in corporate attitudes towards fraud prevention.

He added that he looks forward to ongoing collaboration with industry and law enforcement partners to better safeguard the public and businesses from this serious crime, and to ensure that perpetrators are brought to justice.”

Nick Ephgrave QPM, Director of the Serious Fraud Office (SFO), commented:

“Corporate fraud undermines trust in UK companies and ultimately costs the taxpayer. The release of this guidance sends a clear message that corporations must prioritise fraud prevention or face criminal investigation.”

Source: GOV.UK