New legislation introduces business crime reforms
The Economic Crime and Corporate Transparency Act 2023 received Royal Assent at the end of October. It will, amongst other things, introduce two key business crime reforms.
Failure to prevent fraud offence
The Act will introduce a new 'failure to prevent fraud' offence. The offence will apply where a specified fraud offence is committed by an employee or agent, for the benefit of an organisation or one of its clients.
The offence will apply to large companies, not-for-profit organisations and incorporated public bodies who meet at least two of the following three criteria:
- they must have more than 250 employees
- a turnover of more than £36 million
- more than £18 million in total assets
If convicted, an organisation may receive an unlimited fine. However, there will be a defence available where the organisation had 'reasonable' fraud prevention procedures in place. The question of what fraud prevention procedures are reasonable to take by any individual employer will depend on their individual circumstances and employers may need to carry out risk assessments in order to identify particular areas of risk and how these can be mitigated. The Government is under an obligation to publish guidance to set out reasonable fraud prevention procedures before the offence comes into force.
Change to corporate criminal liability
The Act will also introduce a change to corporate criminal liability by expanding on the class of persons whose conduct can be criminally attributed to an organisation. An organisation will be guilty of an offence where a senior manager of a body corporate or a partnership, acting within the actual or apparent scope of their authority, commits an offence set out in the Act.
This provision is due to come into force two months from the date of Royal Assent.