NEW LAW HOLDS BIG COMPANIES LIABLE FOR FRAUD – Failure to prevent’ offence brings unlimited fines
Large companies could now face unlimited fines and criminal prosecution if they fail to prevent fraud carried out by their staff, agents, or subsidiaries under a major new corporate offence that comes into force today.
The “failure to prevent fraud” law means organisations will be held criminally liable if someone associated with the company commits fraud intended to benefit the firm. Examples include dishonest sales tactics, concealing vital information from customers or investors, and market manipulation.
To defend themselves, companies will have to prove in court that they had “reasonable anti-fraud procedures” in place. The law applies to larger organisations meeting at least two of three criteria: more than 250 employees, turnover above £36m, or assets worth over £18m.
Legal experts at Irwin Mitchell described the measure as a “fundamental shift” in corporate accountability, removing the previous requirement to show senior management were complicit. Failure to comply could bring unlimited fines, reputational damage, and criminal investigation by the Serious Fraud Office (SFO) or Crown Prosecution Service (CPS).
The Home Office said the offence was designed to drive a stronger anti-fraud culture across UK businesses, similar to the impact of the 2010 “failure to prevent bribery” law. Official statistics show fraud rose by 31% last year, underlining the urgency of tougher enforcement.
