What is the offence of ‘failure to prevent fraud’ introduced by the Economic Crime & Corporate Transparency Act 2023 (‘ECCTA’):
Guidance (here) published by the Home Office updates the Economic Crime and Corporate Transparency Act (ECCTA) by introducing enhanced measures to prevent fraud. Whilst most firms will be aware of how they may be the victim of fraud and have likely implemented controls to mitigate the risk, the updated Act now extends the requirements to prevent fraudulent activity that is intended to benefit the firm or its clients.
The Act increases corporate responsibility, making it easier to hold organisations criminally liable for fraudulent activity if an associated person commits an offence intending to benefit the organisation, either directly or indirectly, such as through gaining an unfair business advantage.
It does not need to be demonstrated that Directors or Senior Managers ordered or knew about the fraud, therefore it is imperative that firms have a strong anti-fraud culture and implement robust controls to mitigate the risk of fraud occurring anywhere in the business. The definition of fraud is very broad and will impact a number of departments in the firm, so firms need to consider the full effect on their business.