Businesses will benefit from a new corporate criminal offence of ‘failure to prevent fraud’, designed to drive an anti-fraud culture and improve business confidence.

Introduced as part of the Economic Crime and Corporate Transparency Act (ECCT) 2023, the offence, which came into effect earlier this week (Monday 1 September), will hold large organisations to account if they profit from fraud. It forms part of wider measures introduced by the government to tackle fraud and protect the UK economy, as part of the Plan for Change.

As businesses prepare for the change, experts have weighed in on what firms should know and provided tips to help create an anti-fraud culture.

Joe Phelan, money.co.uk business bank accounts expert, comments:
“This new law is a good thing for all businesses. It encourages firms to tighten up anti-fraud efforts and prevent incidents that could damage their financial standing and reputation, as well as offering protection for SMEs against business-to-business fraud.

“While this legislation doesn’t apply to small businesses, they’re still accountable to existing anti-fraud laws, such as the ‘failure to prevent bribery’ law and tax evasion offences. It’s important for all companies, regardless of size, to put procedures in place to prevent fraud and misconduct. These are some steps you can take:

• “​​Start by doing a thorough fraud risk assessment, as recommended by the government. This means identifying potential fraud risks, such as employee behaviour or any technical loopholes that could be exploited. This should also be extended to agents or associated persons (someone acting on behalf of your business). Assess the likelihood and potential impact of risks by evaluating existing controls, such as security guidelines for employees and vetting of agents, and identify any gaps or weaknesses.
• “Next, educate your team and provide training. Does everyone on your team have an awareness of fraud risks and protections? Is there any specific training you can offer, especially for workers in roles with high exposure to fraud risks? Where are you most vulnerable? According to the government guidance, if a business is accused of fraud, it may have a defence if able to prove it has responsible procedures and due diligence to prevent fraud.
• “A dedicated business bank account can help by providing a log of all transactions, which business owners can use to closely monitor company finances and keep an eye out for any accounting issues. A business bank account can also help by adding an extra layer of protection through a two-factor authentication process, permission levels, and detection of suspicious activity. Check what controls you have in place with your banking provider and review your statements regularly.”

Further guidance on the new failure to prevent fraud law can be found on the GOV.UK website.