On 11 April 2023, the UK government added a new “failure to prevent fraud” offence to the draft Economic Crime and Corporate Transparency Bill. Below we explore what employers need to be aware of.
How would it affect businesses?
According to the government’s factsheet, under this new offence, an organisation would be liable where a fraud or false accounting offence is committed by an employee or agent for the organisation’s benefit, and the organisation does not have reasonable fraud prevention procedures in place. The government has introduced this offence to encourage employers to assist with shifting corporate culture and attitudes in an effort to reduce fraud.
If an employee and their organisation are based outside of the UK but commit fraud under UK law or target victims in the UK, the employer could still be prosecuted. Once convicted, an organisation can be subject to an unlimited fine and, in considering the amount of the fine, the courts will take into account the facts and circumstances surrounding the particular case.
Which businesses would be affected by the new offence?
The offence will apply to “large bodies corporate and partnerships”, which include charities and incorporated public bodies in addition to large businesses, that meet two of the following three criteria.
- 250 employees;
- £36 million in turnover; and/or
- £18 million in total assets.
What can employers do to ensure they do not fall foul of this new legislation?
Any large corporate body or partnership will want to review existing training and policies to ensure they are mandatory and robust. Organisations may want to consider onboarding training and further annual training as a reminder to employees in order to be able to establish the “reasonable fraud prevention procedures” defence. Organisations should seek advice on these procedures and consider taking appropriate action in relation to employees who are known to act in ways which are contrary to the spirit, not just the letter, of the employer’s policies on fraud prevention.
Further information regarding the new “failure to prevent fraud” offence is available here.