New fraud offences - what charities need to do now

Failure to prevent fraud offence

In our piece New corporate offence of failure to prevent fraud - how should charities prepare, we highlighted the new corporate offence of failure to prevent fraud, which comes into force in September 2025. The new offence will directly target large incorporated charities, making them criminally liable if they fail to prevent fraud by an associated person and the fraud committed by the associated person is intended to benefit the organisation. All types of charities, though, will be affected by the new offence and will need to prepare, in order to protect themselves generally - as third parties who are caught will require compliance from an entity they deal with.

Time is short before the 1 September 2025 go-live date for the new offence. We are urgently working with charities now to ensure that they have:

• Fully assessed their fraud risk
• Designed and implemented appropriate procedures to reduce those risks. Ideally, those measures should be contained in an anti-fraud policy (or across several policies/ procedures)
• An anti-fraud culture which includes a top-level commitment to preventing fraud, training, ongoing monitoring of fraud risks and updates to the organisations anti-fraud procedures when required.

The 'Senior Manager' offence

This offence, also introduced by ECCTA, makes corporate bodies, including incorporated charities, criminally liable for fraud offences committed by a senior manager when acting within the actual or apparent scope of their authority. It's important to note that a "senior manager" includes anyone that has a significant role in making decisions for the organisation (they do not need to be called a "senior manager" to be classed as one).

Unlike the new failure to prevent fraud offence:

• The senior manager offence applies to organisations of any size (not just large organisations)
• Organisations cannot rely on a defence of having reasonable fraud prevention measures in place
• The offence already applies now (and has been in force since December 2023).
• Consequences for organisations found guilty include criminal conviction and corporate criminal record, fines, regulatory action, and significant reputational damage.

As there is no defence available for having reasonable measures in place to prevent fraud, we are working with organisations now to reduce their fraud risk as much as possible.

This will typically include:

• Conducting a comprehensive audit of possible fraud risks across the organisation
• Putting in place appropriate policies and measures to reduce the risk of fraud
• Being clear about who the "senior managers" might be and the scope of their authority
• Having a strong anti-fraud culture where fraud is not tolerated at any level.