Key Takeaways:
On 6 November 2024, the Home Office finally published government guidance on the corporate offence of failure to prevent fraud (the “FTPF Offence”), which was introduced in the Economic Crime and Corporate Transparency Act 2023 enacted last October. The new offence will now come into force on 1 September 2025, giving companies a longer period to prepare than had been expected. The guidance is available at https://assets.publishing.service.gov.uk/media/671bb4f2e209b6a659ff4cb2/Failure_to_Prevent_Fraud_Guidance_-_English_Language_v1.1.pdf.
The FTPF Offence is modelled on the ‘failure to prevent bribery’ corporate offence in the Bribery Act 2010. It creates criminal liability for companies where an “associate” of a “large organisation” commits a specified fraud offence intending to benefit either the organisation or a third party to which it is providing services, unless the organisation had implemented “reasonable procedures” to prevent fraud. In this context, an “associate” is an employee, agent or subsidiary of the organisation, or any other person who performed services for or on its behalf.
The new offence is intended to make it easier for UK enforcement agencies to hold large organisations to account for corporate fraud. Both UK and overseas companies may be subject to the FTPF Offence, so long as (in general) one of the elements of the underlying fraud offence occurred in the UK, or the gain, loss or risk of loss occurred in the UK (for example, the fraud impacted UK victims).
The Government’s guidance on the FTPF Offence:
- Includes some high-level explanation of the elements of the FTPF Offence, such as when a corporate subsidiary could come within scope and how the requirement that the associate’s fraudulent conduct is intended to benefit the company should be interpreted;
- Provides some basic scenarios illustrating the circumstances in which the offence might be engaged, such as deliberately overstating company profits, giving potential investors false information regarding a company’s sustainability credentials, and falsifying test data so that a product meets regulatory standards; and
- Sets out the six principles for reasonable procedures to prevent fraud (which are the same as the six principles for “adequate procedures” under the Bribery Act), together with some helpful points for companies to consider in relation to each principle when implementing or enhancing their fraud prevention programmes.
This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.