Board Priorities in 2025: Failure to prevent fraud (UK)
16 January 2025
New ‘failure to prevent fraud’ corporate criminal offence must be on the agenda in 2025
The Economic Crime and Corporate Transparency Act 2023 includes a new ‘failure to prevent fraud’ corporate criminal offence which means that companies in scope can be held liable for fraud committed by individuals or entities for or on their behalf if the company benefited or was the intended beneficiary. The only defence is that the company had in place at the time of the fraud reasonable procedures to prevent it.
The UK government has published its guidance on the new failure to prevent fraud offence and confirmed that it will come into force on 1 September 2025, giving companies only months to assess fraud risk and implement or uplift fraud compliance programmes.
The guidance uses six familiar principles (from existing failure to prevent offences) as a framework. These six principles are: top level commitment, risk assessment, proportionate risk-based prevention procedures, due diligence, communication (including training), and monitoring and review.
Boards need to consider these six principles when designing and implementing their processes and procedures. It will be critical that companies use the implementation period carefully, to assess their risk of, and their response to, each fraud offence, according to the specific profile and activities of their business. There should be clear and robust governance for this work, with oversight from designated senior stakeholders.
Risk assessment is emphasised as a crucial starting point for any business in designing its procedures. Leveraging existing procedures and targeting focussed areas to uplift will be key to ensuring compliance, while minimising the overall burden imposed by the new offence.
All staff should have an understanding of the failure to prevent fraud offence and their responsibilities; bespoke, targeted training should be provided to those in higher risk functions or roles.
Finally, whistleblowing and culture feature prominently in the guidance. All organisations should have appropriate whistleblowing arrangements in place and all staff should feel able to, and understand how to, report any concerns.
Do read our further insights here and our reflections on Whistleblowing elsewhere in our list of Board priorities.
