From 1 September 2025,companiesin the UK will face a significant increase in their criminal law risk with the introduction of the new failure to prevent fraud offence under the Economic Crime and Corporate Transparency Act2023.
The legislation, aimed at tackling the widespread problem of fraud, which accounts for around 40% of all crime in England and Wales, will make large organisations criminally liable if an individual commits fraud for the company's benefit. A company will, however, have a defence if it can show that it had reasonable fraud prevention procedures in place, which is why, ahead of the introduction of this offence, there has been significant emphasis on the need for companies to review their compliance policies and procedures.
Commenting on the change, Richard Sallybanks, Managing Partner at BCL, warned that the Serious Fraud Office (SFO) is likely to act quickly under its new powers, "The SFO will be keen to bring cases under the new failure to prevent fraud offence as soon as possible; they will want to demonstrate that, for companies, the risk of investigation and prosecution is real and not just theoretical."
With the potential for significant financial penalties, companies within the scope of the offence are urged to take immediate steps to strengthen their anti-fraud policies and compliance frameworks.
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