The new failure to prevent fraud offence
7th September, 2023
The Economic Crime and Corporate Transparency Bill is heading towards the final stages of its progress through Parliament.
The Bill, when it becomes law, will create a new offence of failing to prevent fraud.
Subject to last minute amendments, an organisation of any size (and not just large organisations as originally envisaged) will walk into the spotlight if they fail to prevent specified fraud offences committed by employees or agents which either benefit or are intended to benefit the organisation.
The new offence will apply to the current fraud and false accounting type offences. The Home Office has explained that the type of conduct captured by the new offence will include “dishonest sales, practices, false accounting and hiding information from customers or investors”.
Importantly, a defence of “reasonable procedures” to prevent fraud is envisaged by the legislation. Specific guidance will be published by the Government helping organisations understand what is expected of them in respect of this term, but in the interim, organisations are best advised to immediately review their current policies and procedures. As with any risk-based assessment, organisations should in very basic terms, identify risk and ensure that it is mitigated.
Relevant employees should be trained with their particular exposure to risk in mind, and controls should be introduced. There should be specific due diligence for particular activities, and then finally, the policies and procedures should be audited and reviewed regularly.
For advice on this, or any other regulatory matter, contact Richard Arnot, Head of Regulatory at Ward Hadaway.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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