18/09/25
The Economic Crime and Corporate Transparency Act 2023 has introduced an offence of failure to prevent fraud for large organisations which came into effect on 1 September 2025.
This new offence means that organisations may be criminally liable where an employee, agent, subsidiary, or other “associated person” commits a fraud intending to benefit the organisation, and the organisation did not have reasonable fraud prevention procedures in place. If found guilty, corporations could face unlimited fines.
To start, this offence applies only to large organisations. A large organisation is defined in section 201 of the Act as one that satisfies two or more of the established conditions in the financial year preceding the year of the fraud offence. These conditions are:
- A turnover of more than £36 million;
- More than £18 million in total assets; and
- More than 250 employees
If your organisation satisfies two or more of these conditions, it is imperative that you understand your obligations. If not, the principles and guidelines for large organisations represent good practice to follow.
The Act establishes a number of specific fraud offences that are relevant, however, this list can be amended. The actions of an individual within an organisation that might constitute fraud (under section 1 of the Fraud Act 2006) include:
- Participation in a fraudulent business;
- Obtaining services dishonestly;
- Cheating the public revenue;
- False accounting;
- False statements by company directors; and
- Fraudulent trading.
For any prosecution to occur, the base fraud must be committed by an employee, agent, subsidiary, or person otherwise performing services for or on behalf of the body. Further, the fraud must be, at least in part, intended to benefit the organisation.
The Act establishes a defence to this offence. The defence applies if the organisation can prove that at the time the fraud offence was committed, there were reasonable prevention procedures in place, or that it was not reasonable to expect the organisation to have any prevention procedures in place.
Prevention procedures are those organisational procedures designed to prevent persons committing fraud offences. It is important to know what procedures your company has in place and to conduct risk assessments to establish which procedures are implemented.
If you need further help or information, Roe Lawyers is here to assist.