New business fraud rules come into effect in the UK
Businesses will benefit from a new corporate criminal offence of ‘failure to prevent fraud’, designed to drive an anti-fraud culture and improve business confidence.
Introduced as part of the Economic Crime and Corporate Transparency Act (ECCT) 2023, the offence, which comes into effect on Monday (1 September), will hold large organisations to account if they profit from fraud.
The offence of ‘failure to prevent fraud’ follows major steps forward on fraud prevention, including:
- Pushing forward with a ban on SIM farms – technical devices which facilitate fraud on an industrial scale.
- A bilateral agreement with the insurance sector.
- Adopting the first-ever UN resolution on fraud.
Under the new law, which was passed with cross-Parliament support, large organisations can be held criminally liable where an employee, agent, subsidiary, or other ‘associated person’ commits a fraud intending to benefit the organisation. Examples may include:
- Dishonest sales practices
- Hiding important information from consumers or investors
- Dishonest practices in financial markets
In the event of prosecution, an organisation will now have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time the fraud was committed.
The offence is intended to encourage organisations to build an anti-fraud culture, in the same way that failure to prevent bribery legislation has helped reshape corporate culture since its introduction in 2010.
“Fraud is a shameful crime, and we are determined to bring those responsible to justice wherever it takes place,” said Fraud Minister Lord Hanson.
“Today marks a pivotal moment for businesses, and this new offence strengthens our anti-fraud culture to protect businesses, build corporate trust, and support long-term economic growth, a cornerstone of this government’s Plan for Change.
“I look forward to continuing our work with partners, as we publish our new, expanded fraud strategy, which places fraud against business at its heart,” he said.
