‘Failure to prevent fraud’ is here. Strengthen anti-corruption and anti-fraud controls for an effective response

Corporate compliance in the UK is expanding. The new ‘failure to prevent fraud’ offence, introduced by the Economic Crime and Corporate Transparency Act (ECCTA), comes into force on 1 September 2025. 

This means large organisations  can be held criminally liable (and face a potentially unlimited fine) for failing to prevent an “associate” from committing specified fraud offences intended to benefit the organisation. Non UK organisations can also be prosecuted where there’s a link between the fraud offence (e.g., the associated person’s location, victims, financial loss) and the UK.

Examples of conduct that could be caught by the offence include false statements by company directors, dishonest practices by sales agents to boost sales, an employee diverting company funds, and falsely promoting the 'sustainability' credentials of a product.

ECCTA already makes it easier to prosecute companies for economic crime by expanding the identification doctrine to provide an avenue for corporate liability where “a senior manager” commits certain economic crime offences including bribery and money laundering.

Expanding corporate liability for economic crime is an opportunity to leverage and reinforce existing controls – including anti-bribery and corruption (ABC) controls – to avoid duplicating work and strengthen risk management.

As with the groundbreaking UK Bribery Act 2010, which introduced ‘failure to prevent bribery’, the scope of associated persons who can trigger liability is defined broadly to include employees, subsidiaries, contractors and suppliers. While there won’t be exact alignment, there’s likely to be an overlap between the individuals and entities who carry heightened risk for both bribery and fraud. Linked risk factors include individuals trying to override internal controls, undisclosed conflicts of interests, irregular and/or complex transactions, and unusual authorisation requests.

Similar to ‘failure to prevent bribery’, organisations will have a defence where they had reasonable “prevention procedures” (“adequate” procedures” under the Bribery Act) at the time of the base offence or it was reasonable not to have any. 

The six principles underpinning reasonable procedures outlined in UK Home Office’s guidance on failure to prevent fraud – (1) top-level commitment; (2) risk assessment; (3) proportionate risk-based fraud prevention procedures; (4) due diligence; (5) communication; (6) monitoring and review – will be familiar to ABC practitioners and provide the building blocks for a compliance programme.

Start with a risk assessment and gap analysis

Risk assessments are foundational for identifying areas of greatest risk to inform risk-based controls. According to the Home Office guidance, “it will rarely be considered reasonable not to have even conducted a risk assessment.” Considering the “fraud triangle” (opportunity, rationalisation, motivation) to identify risk factors for associated persons is equally helpful in the ABC context where, similarly, financial pressures and targets can increase bribery risk. 

Leverage existing processes to avoid duplication, and test controls

ABC controls including due diligence checks on business partners, employee screening, contractual clauses, financial authorisations, documentation requirements, conflicts of interest disclosures and training can be leveraged to prevent fraud, while strengthening the company’s overall approach to preventing economic crime. In line with principle 6, testing that processes work in practice is critical. 

Nurture an ethical and open culture

As anti-corruption practitioners know well, policy commitments need to be embedded into company culture. Anti-fraud commitments are reinforced by those at the top and in the middle of the organisation leading by example and enabling a ‘speak up’ culture with protection against retaliation. In Values Added we explore how culture can enhance anti-corruption approaches. 

Recent joint Serious Fraud Office (SFO) and Crown Prosecution Service corporate prosecution guidance emphasises the factual nexus between fraud and bribery and that prosecutors may consider a ‘failure to prevent fraud’ charge where it’s difficult to charge ‘failure to prevent bribery’.  Expanding corporate liability for economic crime means it’s high time for companies to strengthen their anti-corruption and anti-fraud approach in parallel for an effective response.

Our Business Integrity Forum brings together anti-bribery and corruption compliance professionals from a range of sectors to discuss cutting edge trends in anti-corruption. Our next event will explore how fraud, sustainability and anti-corruption efforts intersect. 

If your company is committed to the fight against corruption and you’d like to join our members-only events, speak to a member of our partnerships team today ([email protected])