14 août 2023
Disputes Quick Read – 10 de 87 Publications
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.
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Failure to prevent fraud – a new offence?
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The Law Commission's Consultation Process on the Arbitration Act 1996 – taking stock
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Disputes Quick Read: ClientEarth refused permission to pursue directors of Shell
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Disputes Quick Read: What are the litigation trends for 2023?
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Disputes Quick Read: Ethereum Merge - what legal issues arise?
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25 July 2022
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Disputes Quick Read: Judicial Review and Courts Act 2022 – now in force
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Disputes Quick Read: ClientEarth v Shell – climate change litigation shifts focus to UK companies
31 March 2022
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21 September 2021
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Disputes Quick Read: Key changes to the Disclosure Pilot Scheme
13 September 2021
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Disputes Quick Read: Judicial Review and Courts Bill – unpacking the UK government's proposed amendments
6 September 2021
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26 May 2021
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Disputes Quick Read: One Blackfriars administrators cleared of misfeasance
5 May 2021
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21 April 2021
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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
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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
par Stephanie High
Disputes Quick Read: Should you still choose the English courts to have jurisdiction in your international contracts after Brexit?
12 January 2021
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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
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Disputes Quick Read: Why the modernised LCIA rules are a welcome update
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Disputes Quick Read: The importance of proper service
26 May 2020
par Edward Spencer
Disputes quick read: Mandatory changes to Statements of Truth
18 May 2020
par Katie Chandler
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27 April 2020
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21 April 2020
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11 March 2020
par James Bryden
Disputes Quick Read: Coronavirus - a growth in virtual courts?
17 March 2020
par Stuart Broom
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26 March 2020
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21 February 2020
par Andrew Howell
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2 June 2020
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16 June 2020
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2 July 2020
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Disputes Quick Read: Retailers reign supreme in Visa and Mastercard proceedings
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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
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Disputes Quick Read: Privy Council clarifies the law on freezing injunctions in aid of foreign proceedings
8 October 2021
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Disputes Quick Read: Climate change litigation – what's the latest?
10 January 2022
par Tim Strong, Jessica Thomas
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
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