Act Now: UK's New 'Failure to Prevent Fraud' Law Is Live Today, Experts Warn

A new corporate offense, the 'failure to prevent fraud' law, has come into force in the UK. This significant piece of legislation, part of the Economic Crime and Corporate Transparency Act (ECCTA), now makes it a criminal offense for large companies to fail to prevent fraud from which they, or their associates, benefit. The law aims to hold organizations accountable and marks a fundamental shift in corporate responsibility by removing the previous requirement to prove that senior management was complicit in the fraudulent activity, Daily Dazzling Dawn understands.

This new law applies to large organizations that meet at least two of the following three criteria:

More than 250 employees.

An annual turnover exceeding £36 million.

Total assets valued at over £18 million.

The law holds a company criminally liable if an "employee, agent, subsidiary or other ‘associated person’" commits fraud with the intention of benefiting the organization. Examples of such fraud include dishonest sales practices, concealing crucial information from consumers or investors, or other deceptive practices within financial markets. If prosecuted, a company must prove to the court that it had 'reasonable' anti-fraud measures in place.

The new legislation is a direct response to the rising tide of fraud in the UK, with recent figures from the Office for National Statistics (ONS) showing a 31% increase in fraud last year. It is expected to encourage companies to cultivate a stronger anti-fraud culture, similar to the impact of the 'failure to prevent bribery' legislation introduced in 2010.

Failure to comply with the new law can result in unlimited fines, severe reputational damage, and a criminal investigation by agencies like the Serious Fraud Office (SFO) or the Crown Prosecution Service (CPS). Legal experts and regulatory specialists are advising businesses to proactively review their fraud risk assessments, update internal controls, and ensure that all staff and third parties are properly trained and aware of whistleblowing procedures.