The new offence of failing to prevent fraud has come into force, putting large organisations at risk of criminal liability if they have inadequate fraud prevention procedures in place.

The new law is found in section 199 of the Economic Crime and Corporate Transparency Act 2023, and applies to large organisations to which two of the following three criteria apply: (1) a turnover of more than £36 million; (2) a balance sheet total of more than £18 million; (3) more than 250 employees.

Under the law, organisations that meet the relevant criteria may be held criminally liable if a so-called ‘associated person’ commits one of a series of fraud offences set out in the legislation with the intention of benefiting the organisation directly or indirectly.

Importantly, the new law includes a statutory defence which is available to organisations if they have reasonable procedures in place to prevent fraud, or if they can demonstrate that it was not reasonable to expect them to have such procedures in place.

Extensive guidance on the application of the new legislation has already been published by the Home Office (on which we commented previously here). It includes, for example, the six principles that should inform any fraud prevention framework put in place by relevant organisations as follows: (1) Top Level Commitment, where those in charge foster a culture in which fraud is never acceptable; (2) Risk Assessments; (3) Proportionate Risk-based Prevention Procedures; (4) Due Diligence; (5) Communication (including training); and (6) Monitoring and Review.

Guidance has also recently been published by the Serious Fraud Office (SFO) setting out the common approach of both it and the Crown Prosecution Service to the prosecution of corporate offending in England and Wales, including the public interest factors that will be taken into account both in favour of and against prosecution.

To read the SFO’s guidance, click here. To read the guidance from the Home Office on the new offence, click here.