Failure to Prevent Fraud Offence Solicitors

Under the Economic Crime & Corporate Transparency Act 2023, the UK government has created a new offence of ‘failure to prevent fraud’. The offence applies to fraud committed under UK law or targets UK victims. Coming into effect later this year, it will make a “relevant organisation” liable when an “associated person”, such as an employee, agent or any other person who performs services for the organisation, commits a specified fraud offence, and where the organisation did not have reasonable procedures in place to prevent the fraud.

This means that organisations will soon have a legal obligation to tackle fraud head on and that a failure to do so could have fatal legal and reputational consequences for any large organisation, including an unlimited fine.

If you are concerned about the new offence and the organisation’s ability to effectively prevent fraud, speak to the team at JMW. Our experts have been closely following the development of this legislation, and as a result, we are well-placed to offer advice, assistance and representation. We have extensive knowledge of this area of the law and have a track record of success in defending businesses during investigations and criminal proceedings.

To learn more about what you can do if an employee commits fraud, or how to prevent fraud offences from taking place, speak to JMW's Business Crime and Regulation team today. Call us on 0345 872 6666 or use our online enquiry form to request a call back at your convenience.

Which Organisations Can Be Charged with a Failure to Prevent Fraud Offence?

The failure to prevent fraud offence applies to large organisations in all sectors. It is designed to penalise organisations that do not introduce “reasonable procedures” to prevent fraud. To be a “relevant organisation” and for this offence to apply, the organisation must meet two of the three criteria:

• More than 360 million turnover;
• Balance sheet of over £18 million;
• More than 250 employees.

Also, one of the following offences must have been committed:

• Fraud by false representation (section 2 Fraud Act 2006)
• Fraud by failing to disclose information (section 3 Fraud Act 2006)
• Fraud by abuse of position (section 4 Fraud Act 2006)
• Obtaining services dishonestly (section 11 Fraud Act 2006)
• Participating in fraudulent business (section 9 Fraud Act 2006)
• False accounting (section 17 Theft Act 1968)
• False statements by company directors (section 19 Theft Act 1968)
• Fraudulent trading (section 993 Companies Act 2006)
• Cheating the public revenue (common law)

As with other corporate “failure to prevent” offences, these are offences of strict liability. This means that the organisation will still be liable for the actions of its employees, agents or persons who provide services to the organisation even if they had no knowledge of the offence being committed.

The proceeds of the offending are also likely to trigger the existing money laundering offences, as well as confiscation proceedings and in some circumstances, a Serious Crime Prevention Order.

Organisations Should Act Now

If you are a large organisation, you should start preparing now. It is likely that the guidance, which will be released later this year, will follow similar “adequate procedures” to those required to prevent bribery. Get ahead of the curve and consider what reasonable fraud prevention procedures you have in place now.

Why Choose JMW?

The Business Crime & Regulation team at JMW has decades of combined experience representing organisations and individuals accused of fraud and other offences. The care and thoroughness with which we prepare matters mean that we can help you to put the correct procedures in place or to build the strongest possible defence, based on the specific details of your case.

We can also represent directors, officers and stakeholders who may suspect employees of fraudulent activities and complete internal investigations. This could help organisations to meet their obligations required under the law and offer an opportunity to strengthen their fraud prevention policies.

Our team is extremely engaged with changes in the law and has been monitoring the development of this legislation carefully. This means that we are ready to advise organisations on the prevention procedures they should have in place now and will be fully ready to support businesses further from the moment that the law is enacted.

As JMW is a full service law firm, and thanks to our experience working on many complex cases, we can also provide any legal services you need that are related to your case.