From 1 September 2025, large UK companies and partnerships face criminal liability if they fail to stop fraud carried out with the intention to benefit them.
This new “Failure to Prevent Fraud” (FTPF) offence under the Economic Crime and Corporate Transparency Act 2023 (ECCTA) marks a fundamental shift in corporate responsibility as it shifts the focus away from reacting to fraud after the fact, to proactively building an anti-fraud culture.
It also widens the group of people whose actions may lead to an organisation being accused of an FTPF offence.
This will undoubtedly increase the administrative burden for many businesses, but understanding your responsibilities is the key to staying compliant.
What does the new offence cover?
As it centres on large organisations, it is necessary to understand the types of businesses impacted by these reforms.
For the purposes of the change, a large organisation is defined as one which meets two out of three of the following criteria:
Given their power and influence, it is hoped that these businesses can be more vigilant and useful allies in the battle against fraud.
Large organisations will be guilty if an “associated person” commits a specified fraud offence, intending to benefit the organisation or its clients, and the company lacked reasonable prevention procedures.
An associated person includes:
Importantly, prosecutors no longer need to show that directors or senior managers knew or authorised the fraud.
Strict liability applies as soon as the fraud occurs within the UK, even if the organisation never actually receives any gain or is based abroad.
The conduct that is defined as fraud is relatively broad and can include:
Any one of these can trigger prosecution if your prevention framework is incomplete or not robust enough.
Alongside FTPF, ECCTA widened the identification principle so that an organisation can now be found criminally liable if a senior manager acting within their authority commits any one of a range of economic crimes, including bribery, money laundering, false accounting and tax evasion.
What can businesses do to prepare for the reforms?
Businesses should attempt to align their conduct and practices to include the six core principles for a defence that have been outlined by the Government.
These principles are:
These principles need to be closely followed, monitored and updated as needed and should not be viewed as a simple box-ticking exercise.
The exact implementation of these measures will vary depending on the unique nature of your business, so seeking professional support and advice is wise to ensure that you are staying fully compliant.
You should designate someone in your business to manage fraud risk and coordinate all of the preventative measures that you are implementing.
However, this is not a way to simply identify a scapegoat to blame if things go wrong – it will be the responsibility of everyone to manage and mitigate the risk of fraud.
Regular staff training can help achieve this goal, as everyone in the team should know what to do when even the slightest suspicion of fraud arises.
Don’t get caught out by the upcoming changes. Speak to our team today
