New offence of Failure to Prevent Fraud: Masterclass sessions on 25 April & 4 June 2024

A new corporate criminal offence of Failure to Prevent Fraud will soon be in force; expected later this year. When it is, in scope corporate organisations may face potentially unlimited fines and other severe commercial and practical consequences if a person associated with them commits a fraud offence (including outside the UK in some circumstances), and they do not have in place “reasonable prevention procedures”.

This new offence forms part of a package of measures in the Economic Crime and Corporate Transparency Act 2023 (“the Act”). Other important aspects of the Act are already in force. In particular, a new statutory route to corporate criminal liability has been introduced which will apply where senior managers of corporates commit economic crimes while acting with the actual or apparent authority of their organisation.

The new Failure to Prevent Fraud offence is similar to the UK’s existing failure to prevent offences (in respect of bribery and the facilitation of tax evasion) but covers a much broader range of factual scenarios. Following extensive Parliamentary debate, the new offence will apply to “large organisations” only (which is determined by reference to turnover, assets and number of employees, and covers large numbers of companies).

Such organisations may commit the new offence where the conduct of “associated persons” amounts to the commission of various fraud related offences. “Associated persons” is broadly defined and may include, for example, employees, subsidiaries or joint venture partners.

The UK Government is currently in the process of finalising the guidance on the new offence. Current policies and procedures may go some way to satisfying the requirement to have in place “reasonable prevention procedures”, but existing arrangements are unlikely to cover all the types of scenarios in which the new offence may be committed. Putting in place “reasonable prevention procedures” is unlikely to be a quick or straightforward exercise.

Waiting until publication of the upcoming “reasonable prevention procedures” guidance before engaging with stakeholders and making necessary changes is unlikely to be practical.

Despite recent Cifas research revealing 92% of key decision-makers from large corporates felt prepared for the Failure to Prevent Fraud offence, that doesn’t mean they should rest on their laurels. Now is the time for in scope organisations to engage with what “reasonable prevention procedures” will look like in the context of their business, to carry out review and risk assessment exercises to identify situations in which fraud could occur in the course of their business operations and to assess whether current detection and prevention measures are sufficiently robust.

Cifas and Eversheds Sutherland are providing virtual Failure to Prevent Fraud masterclass sessions on 25 April and 4 June 2024, 10am-12pm. These are standalone sessions so that organisations can choose the date that suits them.

In the sessions, you will learn:

• Where the legislation is up to, and when we expect it to come into force
• How the offence significantly expands potential corporate criminal liability
• How, and how often, the new offence will be used by enforcement authorities
• The steps needed to brief senior stakeholders on how organisations prepare their “reasonable prevention procedures” guidance
• What the practical consequences of investigations and prosecutions could be, and what to do to manage and minimise risks
• How to implement prevention measures to demonstrate counter-fraud procedures are in place

While open to all, this masterclass is particularly relevant to legal teams and professionals. Register to find out more and book your place today.