The Senior Managers Offence: what healthcare organisations need to know
The 'Senior Managers' offence, introduced under Section 196 of the Economic Crime and Corporate Transparency Act 2023, introduces direct corporate liability for certain economic and fraudulent crimes committed by senior managers.
What is the 'Senior Managers' offence?
The Senior Managers offence is a significant development in corporate liability. It applies to all corporate bodies (including companies, LLPs, charities and traditional partnerships), regardless of size, and holds them accountable for offences committed by senior managers within the scope of their authority. The offence has been in force since December 2023.
How does the offence work?
If a senior manager commits a relevant offence (of which there are 48 in Schedule 12 of the Act) within the actual or apparent scope of their authority, the organisation is also guilty of the offence.
A 'senior manager' is defined as anyone who plays a significant role in making decisions about the whole or a substantial part of the organisation's activities, or in actually managing or organising those activities. They do not need to hold the job title 'senior manager'. The definition will therefore not only capture those in management (such as directors/ board members), it will also capture partners and others in senior positions (e.g. the partners of a GP practice). Depending on the nature of the role, the definition is likely to include within its scope the role of a practice manager at a GP practice, for example.
Examples of relevant offences include:
- False statements
- False accounting
- Offences under the Fraud Act 2006
- Offences under the Financial Services and Markets Act 2000
- Offences under the Proceeds of Crime Act 2002
As such, if someone in a position of authority (satisfying the definition of being a 'senior manager') commits one of the listed offences, the organisation will also therefore be guilty of the same offence.
The organisation could face prosecution, a criminal conviction and a corporate criminal record, fines, potential regulatory scrutiny and significant reputational damage.
Recommendations
Unlike the new Failure to Prevent Fraud offence (which technically only applies to the largest of organisations), there is no defence of having had 'reasonable fraud prevention measures' in place at the time the offence was committed. Organisations must therefore do what they can to ensure that the opportunity for fraudulent behaviour does not arise in the first place. They should therefore be proactive in assessing and reducing their fraud risk. Steps that can be taken to do so include:
- Conducting a thorough fraud risk audit
- Implementing clear anti-fraud policies and procedures
- Undertaking enhanced screening processes for new members of staff, for example, DBS checks and checking fraud databases
- Clearly identifying who your senior managers are and defining the scope of their authority
- Fostering a strong anti-fraud culture where fraud is not tolerated at any level
Public sector organisations are required to undertake fraud risk assessments as set out by the Public Sector Fraud Authority, and these should be extended to include risks of frauds in scope of the Senior Managers offence. At the time of writing, the relevant standard is the ‘Professional Standards and Guidance for Fraud Risk Assessment in Government’. The NHS Counter-Fraud Authority provides more detailed information on fraud risk assessment and the Public Sector Fraud Authority requirements to be applied across the NHS and wider health group.
For further information, please contact Ben Hay (0117 992 9209) or Terence Dickens (0117 314 5408) in our Fraud team, or Rachel Kelsey in our Healthcare team (07384817640). Alternatively, complete the form below.