The UK government has introduced a new "failure to prevent fraud" offense as part of the Economic Crime and Corporate Transparency Act, aimed at holding organizations accountable for their employees' fraudulent actions. As explained in a recent government factsheet, the new measure seeks to strengthen fraud prevention, improve corporate culture, and protect victims by closing existing legal gaps.
Under this new offense, organizations will face liability if their employees commit specific fraud offenses for the organization's gain and reasonable fraud prevention measures have not been implemented. It discourages companies from turning a blind eye or having inadequate or ineffective internal policies.
Though the government has yet to publish guidance on “reasonable fraud prevention procedures,” core elements of internal fraud programs include robust whistleblower policies, monitoring and audit programs, and investigations plans. These measures help companies not only mitigate legal risk but also protect their reputations and their bottom line.