Recent Developments in the Fraud Strategy and Fraud legislation

Written 13th December 2023 by James Claughton

On 3 May 2023 the former Home Secretary launched the Fraud Strategy which set out the government’s plan to reduce levels of fraud in the UK by 10% on 2019 levels by the end of 2024. Recent progress includes the launch of the Independent Review of Disclosure and Fraud Offences and The Economic Crime and Corporate Transparency Act 2023.

Independent Review into the Disclosure Regime and Fraud Offences

As part of the wider fraud strategy aimed at investigating and prosecuting modern day fraud, the government announced an Independent Review into the Disclosure Regime and Fraud Offences on 16 October 2023.

The review will assess the effectiveness of the existing disclosure regime and also consider whether existing laws and the penalties available when punishing offenders are fit for purpose to effectively tackle modern fraud. Jonathan Fisher KC will chair the review. The appointment of a senior barrister with experience in cases involving financial crime demonstrates the government’s intent to tackle fraud. Proposals will be made to make it quicker and easier to prosecute fraud.

This is the first independent review of fraud in 37 years; methods of fraud have become significantly more sophisticated. The evolution of the internet and smart devices has provided new and more complex methods to commit fraud including on a much larger scale.

Due to the prevalence of smart devices, even those cases considered relatively small can have vast amounts of digital evidence. Such extensive digital material presents challenges to prosecutors in terms of disclosure as they must consider its relevance, evidential value and of course whether it ought to be disclosed and if so in what form. .

This frequently delays the investigation process, and it can take years before some cases get to court which clearly does not benefit any of the parties involved; time costs money but it also increases the stress and anxiety for defendants and complainants, moreover it can present further evidential difficulties as people move on from roles they may have held and peoples’ recollection of events begin to fade, amongst other issues

The review is intended to improve the efficiency of prosecutions through assessing the quantity and nature of the material which needs to be disclosed. It is hoped that the new proposals will create a fairer system for both victims and those accused of fraudulent crimes.

Punishments for fraud offences are also set to be reviewed to assess the impact that they have on those affected with consideration to be given to the implementation of a new fraud specific civil power. Jonathan Fisher KC is due to provide his recommendations on reforming the disclosure regime in summer 2024, and to report back on wider recommendations on fraud offences by spring 2025.

The Economic Crime and Corporate Transparency Act 2023

On 26 October 2023, The Economic Crime and Corporate Transparency Act 2023 (“the Act”) received Royal Assent. The Act is intended to address the apparent exploitation of the UK’s open economy. It will do so through the introduction of several measures aimed at strengthening the powers of UK law enforcement agencies to counter economic crime and improving the transparency around UK companies.

Reform of Companies House

Significant reforms are being introduced to Companies House to ensure that it can monitor those who use companies to commit criminal activity. Companies House will have greater powers to monitor creation of companies by being able to validate, remove or reject data submitted to its servers.

The reforms include powers to verify the identity of directors, remove fraudulent companies and share information with investigating bodies. The verification of identities will make it harder for individuals to hide behind false names and fraudulent companies.

These reforms will enable Companies House to become more active in monitoring companies from inception and blocking the creation of companies where necessary.

The Registrar of Companies has signalled that the following are likely to be introduced in early 2024:

• Enhanced powers to query information provided

• All companies will be required to register an email address with Companies House

• New rules on registered office address

• Requirement of all companies to confirm lawful purpose

• Enhanced checks on company names

• Data sharing with government departments and law enforcement

• Cleaning up the register and removal of inaccurate information

• annotations on the register to inform users regarding issues with information provided

These changes will require a major development of Companies House systems and procedures. The new powers given to Companies House represents the biggest change to it in its history and represents a significant step in the government’s strategy to tackle fraud.

Failure to Prevent Fraud Offence

As detailed in our article earlier this year, the new failure to prevent fraud offence is intended to make it easier to prosecute larger organisations if they profit, when an associated person commits one of the relevant offences, for example fraud, fraudulent trading and cheating the public revenue amongst others. For those organisations that benefit and did not have reasonable fraud prevention procedures in place, the legislation is intended to ensure that such behaviour will not go unpunished. It does not need to be demonstrated that company bosses ordered or knew about the fraud.

The offence currently aimed at “large organisations” that meet two out of three of the following criteria:

• More than 250 employees

• More than £36 million turnover

• More than £18 million in total assets

The only available defence is for the organisation to demonstrate that it had reasonable compliance procedures in place to prevent fraudulent actions by associated parties.

Under the new offence, large corporations will be criminally liable if a “senior manager” who is acting within the scope of their authority of commits a specified fraud offence. This can be either their “actual or apparent” scope.

A senior manager is defined as an individual with a significant role in:

• the making of decisions about how the whole or a substantial part of the activities of the body corporate or partnership are to be managed or organised, or

• the actual managing or organising of the whole or a substantial part of those activities.

How can we help?

The introduction of the new act will have a major effect on organisations, and they must consider their compliance procedures currently in place.

At Olliers, we have a team of specialist lawyers to assist you if you are facing an allegation in relation to fraud, please contact us by telephone on 0161 834 1515, by email to info@olliers.com or complete the form below.

James Claughton

James Claugton

Solicitor

Manchester

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