The government is creating a new failure to prevent fraud offence to hold organisations to account if they profit from fraud committed by their employees. This will improve fraud prevention and protect victims. The new offence will strengthen existing powers to fine and prosecute organisations and their employees for fraud.

Key Points

Under the new offence, an organisation will be liable where a specified fraud offence is committed by an employee or agent, for the organisation’s benefit, and the organisation did not have reasonable fraud prevention procedures in place. It does not need to be demonstrated that company bosses ordered or knew about the fraud. This will discourage organisations from turning a blind eye to fraud by employees which may benefit them and will encourage more companies to implement or improve prevention procedures.

The new offence will help to protect victims,  including where they are businesses, and cut crime by driving a culture change towards improved fraud prevention procedures in organisations and holding organisations to account through prosecutions if they profit from the fraudulent actions of their employees.

Having effective fraud prevention procedures is good for business and level the playing field for businesses that already take fraud prevention seriously. Businesses are often the victims of fraud by other corporations and will benefit from greater protection.

The offence applies to all large bodies corporate and partnerships so in addition to businesses, large not- for-profit organisations are in scope as well as incorporated public bodies.

However to ensure burdens on business are proportionate, only large organisations are in scope defined as organisations meeting two out of the three of the following criteria:

  • More than 250 employees
  • More than £36 million turnover
  • More than £18 million in total assets

Organisations will be able to avoid prosecution if they have reasonable procedures in place to prevent fraud. The government will be publishing guidance with more information about reasonable procedures before the new offence comes into force. This will be once the Economic Crime and Transparency Bill has been approved by Parliament.

More details are available via the web link below.

Link:

Factsheet: failure to prevent fraud offence – GOV.UK (www.gov.uk)

For further discussion and support, including fraud awareness training services, contact: fraud@tiaa.co.uk