Investigation Reveals Negligence in Fraud Prevention Measures
New Failure to Prevent Fraud Offence Set to Transform UK Corporate Landscape
The UK government has introduced a new Failure to Prevent Fraud (FTPF) offence, effective from 1 September 2025. This legislation aims to strengthen fraud prevention measures for large organisations, both in the UK and abroad.
The FTPF offence creates corporate criminal liability for organisations that fail to prevent fraud committed by employees, agents, subsidiaries, or associates, with the intention of benefiting the organisation or its clients. To avoid liability, organisations must demonstrate that they have reasonable fraud prevention procedures in place. This requires comprehensive risk assessments covering all business areas and identifying all associates providing services on behalf of the organisation.
The offence applies not only to UK companies but also to non-UK group companies with UK exposure, giving the law an extra-territorial reach that affects foreign subsidiaries and global operations. This shift from reactive to proactive corporate responsibility focuses on the organisation’s duty to prevent fraud rather than responding after fraud has occurred.
Senior management does not need to have ordered or known of the fraud for the organisation to be liable; the mere occurrence of fraud benefiting the organisation by an associate triggers accountability. The offence complements other corporate crime reforms under the Economic Crime and Corporate Transparency Act 2023, which also amends principles around corporate criminal liability and identification of culpable individuals.
Regarding its impact on corporate culture, organisations must embed a culture of fraud prevention and compliance throughout their operations, emphasizing risk management, transparency, and strong internal controls. Senior management and boards will face increased pressure to establish and oversee effective fraud prevention measures, necessitating enhanced governance and ongoing compliance monitoring.
Compliance programs may require greater investment in fraud risk assessments, training, and possibly AI-supported monitoring tools to meet the heightened legal expectations. The law encourages a broader awareness and accountability culture, as liability extends beyond direct perpetrators to the organisation as a whole, creating incentives for organisational-wide vigilance.
In summary, the FTPF offence imposes a robust legal duty for large organisations to proactively prevent fraud through reasonable procedures, with significant implications for governance, compliance architecture, and organisational culture focused on transparency and prevention. The new offence is comparable to the UK Bribery Act in its potential impact, and programme enhancement is a possible approach for complying with the new offence. Organisations may need to review and improve their fraud prevention procedures to meet the requirements of the FTPF offence.
[1] HM Government (2023). Economic Crime and Corporate Transparency Act 2023. London: The Stationery Office. [2] HM Government (2023). Failure to Prevent Fraud Offence: Guidance for Organisations. London: The Stationery Office. [3] HM Government (2023). Failure to Prevent Fraud Offence: Code of Practice. London: The Stationery Office. [4] HM Government (2023). Failure to Prevent Fraud Offence: Regulations. London: The Stationery Office.
- The new Failure to Prevent Fraud (FTPF) offence, part of the Economic Crime and Corporate Transparency Act 2023, will impact the finance and business sectors significantly, as it requires organizations to establish comprehensive risk assessments, invest in fraud prevention measures, and maintain strong internal controls to avoid potential legal liability.
- Under the FTPF offence, large organizations must demonstrate that they have reasonable procedures in place to prevent fraud, regardless of where it originates, be it in the UK or overseas, affecting both domestic and foreign business operations.
