Failure to prevent fraud

From 1 September 2025, a new corporate criminal offence – Failure to Prevent Fraud – will come into force under the Economic Crime and Corporate Transparency Act 2023. This landmark legislation marks a significant shift in how fraud is tackled in the UK, placing legal responsibility on large organisations to actively prevent fraudulent conduct within their ranks. 

What is the offence of ‘failing to prevent fraud’? 

The Economic Crime and Corporate Transparency Act 2023 created a new ‘failure to prevent fraud’ offence to hold organisations to account if they profit from fraud committed by employees.  

The new failure to prevent fraud will come into force on 1st September 2025. 

The offence applies when an employee, agent, subsidiary, or other “associated person” commits a fraud intending to benefit the organisation. Crucially, the organisation can be held criminally liable even if it did not know about the fraud, unless it can demonstrate that reasonable prevention procedures were in place  

Covered offences include: 

• Fraud by false representation 
• Fraud by failing to disclose information 
• Abuse of position 
• False accounting 
• Cheating the public revenue 
• Fraudulent trading  

An organisation may be liable where a fraud offence is committed by an employee or agent, for the benefit of the organisation, and the organisation did not have reasonable fraud prevention procedures in place. The offence is intended to hold large organisations to account if they profit from fraud. 

The offence sits alongside existing law; for example, the person who committed the fraud may be prosecuted individually for that fraud, while the organisation may be prosecuted for failing to prevent it. 

In the event of prosecution, an organisation would have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time that the fraud was committed. The offence is intended to encourage organisations to build an anti-fraud culture, in the same way that failure to prevent bribery legislation has helped reshape corporate culture since its introduction in 2010. 

Increasing liability of corporations 

The notion of increasing liability of corporations is not a new phenomenon. As indicated above, since 2010, the Bribery Act 2010 has required organisations to have adequate anti-bribery measures in place. The Corporate Manslaughter and Corporate Homicide Act 2007 made companies criminally liable for failings resulting in death. Furthermore, the Criminal Finances Act 2017 created the offence of failure to prevent tax evasion. 

The thinking behind the legislation is that whilst the UK has a large and open economy, making it a very attractive place for global business – the same openness carries risk, specifically the risk of bad actors taking advantage, including to perpetrate fraud and money laundering, which, in turn, funds serious and organised crime here in the UK, and facilitates corruption overseas. 

Who Is Affected? 

The offence applies to large organisations, defined as those meeting two out of three criteria: 

• More than 250 employees 
• Annual turnover over £36 million 
• Total assets over £18 million  

While smaller organisations are not directly in scope  all businesses are encouraged to adopt best practices. 

Failure to prevent fraud guidance 

On Wednesday 6th November 2024 new guidance was published to provide organisations with important advice on the new corporate criminal offence of ‘failure to prevent fraud’, helping make sure they are taking action to prevent fraud. 

The guidance has been developed with input from the Crown Prosecution Service (CPS), Serious Fraud Office (SFO), HM Treasury, HMRC, Ministry of Justice, Cabinet Office, Attorney General’s Office and Financial Conduct Authority (FCA). 

Although the offence of failure to prevent fraud applies only to large organisations, the principles outlined in the guidance represent good practice and may be helpful for smaller organisations. 

When does the offence of failure to prevent fraud come into force? 

Failure to prevent fraud will come into force on 1st September 2025. 

Why has failure to prevent fraud been introduced? 

Fraud is now the most common crime type in the UK, amounting to around 40% of all crime in England and Wales. These measures appear to be part of a wider government plan to reduce fraud and protect potential victims, including business victims. 

Olliers Solicitors – specialist fraud lawyers 

If you or your business face an investigation or prosecution in relation to an allegation of fraud or business crime, you need a specialist in your corner. When it comes to criminal defence and the defence of fraud allegations, Olliers is a market leader. 

We are ranked as a Top Tier Crime and Fraud Firm by the Legal 500 2025 as well as Chambers Directory 2025. We are a Times Top 200 law firm. We are the current Manchester Legal Awards Crime Team of the Year, an award we have won eight times since 2011. 

We have a team of over 25 defence lawyers. Eight of our Partners are recommended Legal 500 lawyers, including Matt Corn, Gareth Martin, Toby Wilbraham and Richard Cornthwaite. Our Managing Director, Matthew Claughton is a recent Legal 500 Northern Powerhouse Criminal Lawyer of the Year. If you or your company face investigation or prosecution, please contact us – we can help.