Failure to Prevent Fraud guidance holds large organisations to account

The UK Government website statesfraud is the most common offence across the UK, totalling 41% of all crime recorded throughout the year in 2022.​ UKHospitality has also previously called for members of the hospitality industry to remain ‘particularly vigilant’ when dealing with fraud.

The new legislation applies to organisations that fit two of three criteria:

• companies with more than 250 employees, companies with a £36m turnover and up to £18m in overall total assets.
• Introduced last year as part of the Economic Crime and Corporate Transparency Act, (ECCT), the new offence is set out to hold large organisations to account if they profit from fraud or fraudulent acts. 
• The offence holds cross-Parliament support, and details that larger organisations may be held criminally liable where either an employee, agent, subsidiary, or other potentially “associated person”, commits a fraud intending to ultimately benefit the organisation. 

Examples may include:

• dishonest sales practices
• the hiding of important information from consumers or investors
• or dishonest practices in financial markets.  

In the event of prosecution, an organisation would have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time that the fraud itself was committed. 

The offence is intended to encourage organisations to build an Anti-fraud culture, in the same way that failure to prevent bribery legislation has helped reshape corporate culture since its introduction in 2010. Failure to Prevent Fraud will come into force on 1 September 2025. 

Wider Government ambition

With fraud being the most common crime type in the UK, amounting to around 40% of all crime in England and Wales, these new measures are part of a wider Government ambition to reduce fraud and protect potential victims, including business victims.  

Minister with responsibility for Fraud, Lord David Hanson said: “Fraud is a pernicious crime, and we are determined to root it out wherever it takes place. 

This guidance marks the first steps towards a corporate culture shift around fraud prevention.”

Hanson continued: “I look forward to continuing our work with partners in industry and law enforcement to better protect the public and businesses from this appalling crime and bring these callous criminals to justice.” 

Director of the Serious Fraud Office (SFO), Nick Ephgrave QPM said: “Corporate fraud significantly damages confidence in UK companies and ultimately costs the taxpayer.” He stated: “The publication of this guidance means that time is running short for corporations to get their house in order or face criminal investigation.”

Operators previously shared their thoughts on maintaining anti fraud best practice. Owner of the Unruly Pig in Bromswell Suffolk, Brendan Padfield discussed the new anti fraud measures. He stated: It will help focus minds, fraud is an ever-growing burgeoning problem for everyone​."

Significant shift

Owner of The Tamworth Tap in Staffordshire, George Greenaway also shared his thoughts on the possibility of new legislation. Explaining what he has in place to deal with fraud measures currently, he said: "We have recently conducted a risk assessment and have incorporated the awareness of the anti fraud legislation into our induction programmes and employment contracts​." Greenaway also previously described the anti-fraud measures as "an evolving responsibility" for hospitality workers to their customers.

Capcon is a company that specialises in comprehensive risk management and compliance solutions, enhancing operational efficiency and profitability across the hospitality sector.

Managing director Marcus Jones discussed the new legislation, touching on the effects it may have on the hospitality sector. He told the Morning Advertiser​: "The new 'Failure to Prevent Fraud' legislation marks a significant shift in corporate accountability, compelling businesses to proactively combat fraud at all levels. This is an opportunity for larger hospitality businesses not only to fortify their operations against fraudulent activities but also to strengthen trust with stakeholders and customers.

"By implementing rigorous fraud prevention strategies, businesses can protect their assets and reputation, potentially leading to operational efficiencies and enhanced compliance.”

Jones explained that the new legislation should deter fraud at all levels, fostering a safer and more robust environment for hospitality workers to feel safer in.