Proposed new corporate offence of failing to prevent fraud
Bill Dixon, a Partner in FSP’s Dispute Resolution team, comments on the government’s plans to introduce new anti-fraud legislation which could have important implications for Corporates.
Well over a decade ago, the 2010 Bribery Act created an unusual corporate offence of “failing to prevent” bribery. In order to avoid liability, organisations had to establish that they had put in place “adequate safeguards” to avoid becoming embroiled in bribery. Recommended practices included appointing appropriate senior individuals with responsible for dealing with anti-bribery measures, having proper policies in place, appropriate risk assessment and training.
Subsequently, the corporate offence was extended to cover failing to prevent tax evasion.
In April 2023, the government announced plans to now introduce a new corporate offence of “failing to prevent” fraud. Lisa Osofsky, the Director of the Serious Fraud Office, has described this as a “game-changer for law enforcement”.
As the bill is currently drafted, it will work in a similar way to the anti-bribery measure. Organisations will be responsible for the acts of widely defined associated persons but there will be a defence if it can be shown that reasonable procedures are in place. As presently drafted the focus is on large organisations rather than SMEs.
It is not currently known when the legislation will be finalised. It is expected government guidance will also be published to help businesses understand what steps they should be taking. Organisations should begin to anticipate however having to assess their anti-fraud procedures and, in due course, internal policies and employment contracts will need to be reviewed.