14 August 2023
Disputes Quick Read – 4 of 81 Insights
Failure to prevent fraud – a new offence?
In April 2023, the UK government published a factsheet outlining proposals to introduce a new offence of failure to prevent fraud as part of the upcoming Economic Crime and Corporate Transparency Bill. With a number of amendments having been tabled recently, we discuss this new offence and its implications below.
The Economic Crime and Corporate Transparency Bill is the most significant overhaul to corporate criminal liability for half a century and designed to hold corporations liable in their own right for economic crime. It proposes, among other things, an addition to the growing roster of corporate "failure to prevent…" offences (like those relating to bribery and tax evasion), with the proposal of a failure to prevent fraud offence and the recently proposed addition of a failure to prevent money laundering offence.
Another highly notable proposed reform is the recent amendment to the Bill to widen the identification doctrine - the legal test for deciding whether the actions and mind of a natural person can be regarded as those of a company. The reform would replace the common law legal test of the "directing mind and will" of a corporation and be expanded to include senior managers, designed to reflect modern day company structures.
The proposed fraud offence will mean that bodies corporate and partnerships may face criminal liability and an unlimited fine for failing to prevent an employee or agent from committing a fraud offence for its benefit. The fraud offences likely to be caught under the new offence include:
- Fraud by false representation (section 2 Fraud Act 2006).
- Fraud by failing to disclose information (section 3 Fraud Act 2006).
- Fraud by abuse of position (section 4 Fraud Act 2006).
- Participation in a fraudulent business (section 9 Fraud Act 2006).
- Obtaining services dishonestly (section 11 Fraud Act 2006).
- False accounting (section 17 Theft Act 1968).
- False statements by company directors (section 19 Theft Act 1968).
- Fraudulent trading (section 993 Companies Act 2006).
- Cheating the public revenue (common law).
The failure to prevent fraud offence will also apply to overseas organisations and employees, provided the employee has committed fraud under UK law or has targeted a victim based in the UK.
To avoid liability, organisations will need to ensure that reasonable procedures are in place to prevent the commission of fraud by employees and agents. While the details of such procedures are to be outlined in future government guidance, it is clear that what is "reasonable" will vary depending on the nature and size of the organisation in question.
These proposed changes reflect the UK government's appetite to increase organisational responsibility for fraud and hold corporate criminals to account.
If the legislation is passed, it is likely to come into effect in late 2024. In the interim, organisations should be advised to review the adequacy of their current anti-fraud procedures and prepare for the inevitable increase in fraud prosecution, corporate criminal liability, and likely greater utilisation of deferred prosecution agreements.
In this series
The use of AI in Trial Witness Statements post-PD 57AC
23 October 2023
by Multiple authors
CAT to hear the first application for a collective settlement approval order
17 October 2023
Failure to prevent fraud – a new offence?
14 August 2023
by Multiple authors
Supreme Court rules that APP fraud victims cannot rely on Quincecare Duty
4 August 2023
by Multiple authors
The Law Commission's Consultation Process on the Arbitration Act 1996 – taking stock
21 July 2023
What does the latest decision of the CAT in the Mastercard/Visa proceedings mean for class actions?
10 July 2023
Disputes Quick Read: ClientEarth refused permission to pursue directors of Shell
1 June 2023
by Multiple authors
Disputes Quick Read – developments in the fixed costs regime
3 May 2023
by James Bryden
Disputes Quick Read: Service by email – are the rules any clearer?
20 April 2023
by James Bryden
Disputes Quick Read - What do practitioners think about making alternative dispute resolution (ADR) compulsory?
8 March 2023
Disputes Quick Read: What are the litigation trends for 2023?
2 March 2023
Disputes Quick Read: further guidance on witness statement preparation rules
14 February 2023
Disputes Quick Read: A cautionary tale – settlement agreement (un)wittingly releases all claims for fraud
13 February 2023
Disputes Quick Read: Why the UK should join the Hague Judgments Convention 2019
8 February 2023
Disputes Quick Read: extensive information orders granted against crypto exchanges following hack
19 January 2023
Disputes Quick Read: A new approach to giving evidence? WhatsApp with that?
3 October 2022
Disputes Quick Read: Ethereum Merge - what legal issues arise?
22 September 2022
by Ben Jones, Emma Allen
Disputes Quick Read: New obligations on cryptobusinesses to report under the UK sanctions regime
9 August 2022
by Nick Maday
Disputes Quick Read: Disclosure - What information can be redacted?
25 July 2022
Disputes Quick Read: what claims exist when a smart contract is breached?
6 July 2022
by Emma Allen
Disputes Quick Read: New gateway for serving Norwich Pharmacal Orders and Bankers Trust orders out of the jurisdiction
Welcome news for those pursuing fraud claims in the English Courts
28 July 2022
Disputes Quick Read: Defining the duty - the limits of the responsibility assumed by professionals
27 July 2022
by Stuart Broom
Disputes Quick Read: Climate change litigation – successful challenge to government's Net Zero Strategy
29 July 2022
Disputes Quick Read: Judicial Review and Courts Act 2022 – now in force
17 June 2022
Disputes Quick Read: an important reminder of the duty to disclose electronic documents in native format
13 June 2022
Disputes Quick Read: ENRC prevails in claim against former solicitor
26 May 2022
Disputes Quick Read: Climate change litigation update – McGaughey v Universities Superannuation Scheme Limited
31 May 2022
by Multiple authors
Don't lose your keys: Bitcoin developers do not have a duty to assist owners in recovering lost cryptocurrency
4 April 2022
Disputes Quick Read: The new witness statement preparation rules – a year on
5 April 2022
Disputes Quick Read: ClientEarth v Shell – climate change litigation shifts focus to UK companies
31 March 2022
by Multiple authors
Disputes Quick Read: High Court rules that failure to provide adequate data security is not a positive act
21 September 2021
by Multiple authors
Disputes Quick Read: Key changes to the Disclosure Pilot Scheme
13 September 2021
Disputes Quick Read: Judicial Review and Courts Bill – unpacking the UK government's proposed amendments
6 September 2021
Disputes Quick Read: Will litigants be compelled to participate in alternative dispute resolution?
2 August 2021
Disputes Quick Read: Freezing injunctions – maximum custodial sentence imposed for breach
21 July 2021
Disputes Quick Read: The online future of civil justice – the end of the legal profession or the end of legal drudgery?
15 July 2021
Disputes Quick Read: Will the courts change forever post-COVID?
26 May 2021
Disputes Quick Read: One Blackfriars administrators cleared of misfeasance
5 May 2021
Disputes Quick Read: Not your prerogative – the Independent Review of Administrative Law reports its recommendations on judicial review
21 April 2021
Disputes Quick Read: Amendments to the Disclosure Pilot Scheme – a step in the right direction
31 March 2021
Disputes Quick Read: UK Supreme Court rules on the territorial extent of the SFO's powers
26 February 2021
Disputes Quick Read: No dropping anchor – parent company liability for environmental claims
24 February 2021
Disputes Quick Read: What lawyers need to know about new witness statement preparation rules
20 January 2021
Disputes Quick Read: Should you still choose the English courts to have jurisdiction in your international contracts after Brexit?
12 January 2021
by Tim Strong
Disputes Quick Read: Privilege lost in the EU post-Brexit (with exceptions)
23 November 2020
Disputes Quick Read: Law on interest applicable to US dollar awards reaffirmed
16 October 2020
Disputes Quick Read: Care required when drafting SPA claim notices
23 September 2020
by Multiple authors
Disputes Quick Read: Why the modernised LCIA rules are a welcome update
7 October 2020
by Nick Storrs
Disputes Quick Read: COVID-19 and supply chain disruption – key issues
9 April 2020
by Multiple authors
Disputes Quick Read: High Court orders parties to explore options for 5-week remote trial
15 April 2020
Disputes Quick Read: Tomlin Orders – ensuring the confidentiality of settlement terms
27 April 2020
by Multiple authors
Disputes Quick Read: UK's OFSI fines Standard Chartered Bank £20 million for sanctions breaches
21 April 2020
Disputes Quick Read: A different approach to witness evidence
11 March 2020
by James Bryden
Disputes Quick Read: Coronavirus - a growth in virtual courts?
17 March 2020
by Stuart Broom
Disputes Quick Read: Embracing remote hearings – the experience to date
26 March 2020
by Multiple authors
Disputes quick read: climate change activism by litigation
26 February 2020
Disputes Quick Read: Commercial Court's arbitral power shift
21 February 2020
Disputes Quick Read: Court stays evictions during COVID-19 – is this lawful?
2 June 2020
Disputes Quick Read: Will the civil justice system change forever post COVID-19?
16 June 2020
Disputes Quick Read: Retailers reign supreme in Visa and Mastercard proceedings
9 July 2020
Disputes Quick Read: The contra proferentem rule reconsidered?
21 July 2020
Disputes Quick Read: Scope of duty and the SAAMCo counterfactual following Manchester Building Society
3 December 2021
Disputes Quick Read: Facilitating transactions in cryptoassets - Lord Leggatt and the point of commercial law
24 November 2021
by Stuart Broom
Disputes Quick Read: Privy Council clarifies the law on freezing injunctions in aid of foreign proceedings
8 October 2021
Disputes Quick Read: Climate change litigation – what's the latest?
10 January 2022
Disputes Quick Read: Court decisions on the Disclosure Pilot Scheme – the 2021 roundup
20 January 2022
Disputes Quick Read: Assumption of responsibility - tax schemes and investors
22 March 2022
Disputes Quick Read: Dealing in crypto? Be careful what you call it
7 April 2022
by Multiple authors
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