![]() Crucially, there would have to be dishonest intent for an offence to be committed. Offences could arise out of warranties and representations made in transaction documents, prospectuses, annual reports, and insurance claims. The types of conduct that could be caught are broad. cheating the public revenue (common law).fraudulent trading (section 993, Companies Act 2006).false accounting (section 17, Theft Act 1968).false statements by company directors (Section 19, Theft Act 1968).participation in a fraudulent business (section 9, Fraud Act 2006).obtaining services dishonestly (section 11, Fraud Act 2006).fraud by abuse of position (section 4, Fraud Act 2006).fraud by failing to disclose information (section 3, Fraud Act 2006).fraud by false representation (section 2, Fraud Act 2006).The offence applies to the fraud and false accounting offences which the government considers are most likely to be relevant to large corporations. This is different from the jurisdictional scope of the UKBA (which focuses on organisations carrying on a business in the UK), and is likely to be more unpredictable: jurisdictional scope will hinge on the facts of the case in question. The new offence also applies to organisations and employees who are based overseas where an employee or agent commits a fraud offence under UK law or which targets UK victims. In practice, however, smaller organisations will still have to consider putting in place, or reinforcing, their anti-fraud procedures – given that they may be the ‘associated person’ of a large organisation, meaning the large organisation will require them to have in place reasonable procedures to prevent fraud. The threshold for this would be met where an organisation satisfies two or more of the following conditions in the financial year preceding the year of the offence: (i) more than 250 employees: (ii) more than GBP 36 million turnover and / or (iii) assets of more than GBP 18 million. As a result, the new offence only applies to ‘large organisations’. Whilst the House of Lords argued that the offence should apply to all organisations, regardless of their size, the House of Commons repeatedly pushed back on this. The scope of application of the new offence has been a subject of debate. This means it effectively requires organisations to review and enhance their anti-fraud systems and controls to cover fraud committed for their benefit by employees or agents, although the government has stated that there may be circumstances where it is reasonable for an organisation to have no fraud prevention procedures in place. Importantly, the offence has a defence of “reasonable procedures” to prevent fraud. The new offence makes an organisation liable if it fails to prevent a specified fraud offence (see details below) from being committed where: (i) an employee or agent commits the fraud and (ii) the fraud is intended to benefit the organisation or a person to whom services are provided on behalf of the organisation. It also requires many organisations to make significant changes to fraud compliance programmes in order to prevent a wide range of fraud offences. In particular, it shifts the focus from organisations as victims of fraud (inward fraud) to make it easier for organisations to be prosecuted for fraud committed by employees or third parties that the organisation benefits from (outward fraud). This change to the corporate criminal liability will come into effect in December of this year.Ĭoupled with the renewed focus of the Serious Fraud Office, Financial Conduct Authority (FCA) and other authorities on the prevention of fraud, this offence is expected to significantly shift the landscape for organisations carrying on a business in the UK, in a similar way to the impact of the UK Bribery Act (the UKBA) more than a decade ago. This forms part of broader reforms of UK corporate criminal liability (which also replaces the “directing mind and will” test for corporate criminal liability with a new “senior managers” test which is likely to make prosecuting organisations for criminal offences much easier more generally (for more detail please see here)). The Act has received Royal Assent, and although timing for implementation is unclear, it is expected that the new offence could come into force during early 2024. A new “failure to prevent fraud” offence has been introduced as part of the Economic Crime and Corporate Transparency Act (the Act). ![]()
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