New Offence for Failing to Prevent Fraud: Businesses Must Prepare

The offence of failing to prevent fraud is designed to mirror the existing offences of failing to prevent bribery and the criminal facilitation of tax evasion, as outlined in sections 7, 8, and 9 of the Bribery Act 2010 (BA 2010) and Part 3 of the Criminal Finances Act 2017 (CFA 2017), respectively. The offence applies when fraud is committed by an employee or associate of the organisation for the benefit of the organisation.

Scope of the Offence

The offence is limited to large organisations, defined by meeting two or more of the following criteria in the financial year preceding the year of the offence:

• Turnover: More than £36 million

• Balance Sheet Total: More than £18 million

• Number of Employees: More than 250

Available Defences

An organisation can defend itself by demonstrating that it had "reasonable procedures" in place to prevent fraud. This mirrors the approach taken under the CFA 2017 for preventing the facilitation of tax evasion. The concept of "reasonable procedures" is equivalent to "adequate procedures" under the BA 2010, interpreted to mean procedures that are reasonable in all the circumstances.

Guidance from the government is anticipated to clarify what constitutes reasonable prevention procedures. The burden of proof lies with the organisation to show either the implementation of such procedures or that it was reasonable not to have them.

Consequences of Conviction

If convicted, an organisation faces an unlimited fine, potentially amounting to millions of pounds for the largest firms.

How Can We Help?

At Forbes Solicitors, we stay abreast of legislative changes to ensure we provide the best possible advice. If you would like to discuss any aspect of your case, please contact Craig MacKenzie, Partner and head of our High-Profile & Private Crime Division.