Failure to Prevent Fraud: What Businesses Need to Know (23 June 2025)

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) marks a significant shift in the UK’s approach to tackling economic crime. With its introduction, the government has made clear its intention to impose greater accountability on businesses, encouraging them to take a proactive stance against fraudulent conduct. A cornerstone of this legislative overhaul is the creation of a new "failure to prevent fraud" offence, which comes into force on 1 September 2025.

Under this new offence, large organisations will be held criminally liable if they fail to prevent fraud carried out by individuals or entities “associated” with them, where that fraud was committed for the benefit of the organisation. Associated persons may include employees, subsidiaries, agents, or other third parties acting on the organisation’s behalf.

Significantly, liability arises even if senior management was unaware of the misconduct. The only statutory defence available is having “reasonable fraud prevention procedures” in place. A conviction may result in unlimited fines, further regulatory scrutiny, and reputational damage.

Who does the offence apply to?

The offence is targeted at “large organisations”, which are defined as entities meeting at least two of the following criteria in the financial year prior to the alleged offence:

• More than 250 employees
• More than £36 million in annual turnover
• More than £18 million in total assets

It is therefore crucial for organisations operating at or above this threshold to assess their risk exposure and ensure that compliance measures are in place well ahead of the September 2025 implementation date.

Taking Steps to Ensure Compliance

The introduction of this offence creates a strong incentive for organisations to review and strengthen internal anti-fraud controls. Importantly, the law recognises that fraud can still occur despite robust procedures. However, where reasonable steps have been taken to prevent such conduct, a company can avoid liability.

The Six Principles of a Robust Fraud Prevention Framework

Guidance accompanying the new offence highlights six core principles that should inform the design and implementation of fraud prevention procedures:

1. Top-Level Commitment
   Senior leadership must actively support and promote a culture of integrity and compliance.
2. Risk Assessment
   Businesses must regularly assess the nature and extent of their exposure to fraud risks, tailored to their size, sector, and operational model.
3. Proportionate Procedures
   Anti-fraud measures must be proportionate to the risks faced, reflecting the scale and complexity of the organisation.
4. Due Diligence
   Reasonable steps must be taken to understand and monitor associated persons and business relationships.
5. Communication
   Anti-fraud policies must be clearly communicated, and relevant personnel should receive appropriate training.
6. Monitoring and Review
   Procedures should be subject to ongoing evaluation and improvement to ensure their continued effectiveness.

These principles are intended to be flexible and outcome-focused, allowing organisations to develop controls that are realistic, appropriate, and fit for purpose.

The introduction of the failure to prevent fraud offence represents a transformative change in corporate criminal liability in the UK. While the potential penalties are severe, the law offers organisations a clear path to protection: put in place reasonable and effective fraud prevention procedures.

At Duncan Lewis Solicitors, we assist businesses in reviewing their compliance frameworks and implementing the systems necessary to meet their obligations under the ECCTA. Whether you are undertaking a risk assessment, drafting internal policies, or providing training to your staff, our expert team is here to help.

For more information on our crime services, services, please contact us via telephone on 033 3772 0409

About the Author

Sunjay Versani is Director of the City of London and Harrow crime team at Duncan Lewis Solicitors. Recognised by The Legal 500 UK for his outstanding work, Sunjay manages a formidable team dedicated to achieving the best possible outcomes for their clients in complex criminal matters.

For advice in any criminal litigation matter, contact Sunjay via email at sunjayv@duncanlewis.com or via telephone on 020 7923 4020. 

Duncan Lewis Solicitors

The Duncan Lewis Crime & Fraud department, recommended by The Legal 500 UK and ranked as a Band 1 criminal practice in Chambers & Partners, is renowned for its well-prepared, high-quality work and the ability to assemble first-rate evidence and documentation. We regularly represent our clients at police stations, magistrates’ courts, crown courts, and at appeal courts such as the Court of Appeal.