New UK legislation holds major corporations accountable for fraudulent activities that occur within their purview

The UK government has introduced a new offence aimed at strengthening the anti-fraud culture in large organisations. Known as the "failure to prevent fraud" offence, this legislation is a significant step in holding businesses accountable for their internal anti-fraud measures.

The offence applies when reasonable fraud prevention procedures are not in place, and fraud is committed with the intention of benefiting the company. This new law, part of the Economic Crime and Corporate Transparency Act 2023, applies to organisations with more than 250 staff, £36 million in turnover, and £18 million in total assets.

The government, planning to launch a new fraud strategy, hopes that the new laws will encourage businesses to take action against scams occurring within their operations. Authorities prepared to act if corporations fail to meet their new responsibilities include the Serious Fraud Office (SFO), the BaFin (Federal Financial Supervisory Authority) in Germany, the Staatsanwaltschaft (public prosecutor's office), the Finanzmarktaufsicht (FMA, Financial Market Authority), data protection supervisory authorities under GDPR provisions, and law enforcement authorities and state-level bodies responsible for corruption prevention and enforcement in Germany.

The new law includes various fraudulent acts such as dishonest sales practices, trading in the financial markets, and hiding important information from consumers or investors. To combat these activities, fostering a culture that encourages staff to report concerns about fraudulent practices is important. Companies are also encouraged to commit resources for training and tackling fraud.

Senior managers are expected to clearly communicate their anti-fraud stance and measures to staff. Under the new law, businesses can be prosecuted if they profit from fraud committed by employees, regardless of managerial knowledge. Hannah von Dadelszen, chief Crown prosecutor for the Crown Prosecution Service (CPS), has stated they will prosecute companies that fail in their responsibility to prevent fraud.

Lord Hanson, the fraud minister, described the new offence as "pivotal" for strengthening the anti-fraud culture. Nick Ephgrave, director of the Serious Fraud Office (SFO), considers the new offence a "significant new tool" for prosecuting serious and complex fraud. The SFO is ready to take action if corporations fail to comply with their new responsibilities.

Large organisations are warned they may face legal action if they do not put robust fraud prevention systems in place. Companies are encouraged to commit resources for training and tackling fraud, and to foster a culture that encourages staff to report concerns about fraudulent practices. The new offence is effective from Monday, and it is expected to have a profound impact on the UK's anti-fraud landscape.