Navigating New UK Fraud Laws

In this episode, we’re diving into a topic that’s critical for businesses operating in or connected to the UK. We’re discussing the UK’s Economic Crime and Corporate Transparency Act 2023, or ECCTA, which includes the new Failure to Prevent Fraud Offense set to take effect on September 1, 2025.  

 What does this mean? It expands corporate liability for fraud committed by employees and associated persons. This isn’t just another regulatory obligation; it’s a call to action for businesses to refine compliance measures and strengthen internal systems to mitigate fraud risks.  

Read the article
The UK's Failure to Prevent Fraud Offense

About the authors
Luke Cass
Joe D. Whitley
Audrey N. Karman
Ting-Yu Huang*
Emma Radmore

Transcript

Welcome to Womble Perspectives, where we explore a wide range of topics, from the latest legal updates to industry trends to the business of law. Our team of lawyers, professionals and occasional outside guests will take you through the most pressing issues facing businesses today and provide practical and actionable advice to help you navigate the ever changing legal landscape.

With a focus on innovation, collaboration and client service. We are committed to delivering exceptional value to our clients and to the communities we serve. And now our latest episode.

Welcome to today's episode of Womble Perspectives. In this episode, we’re diving into a topic that’s critical for businesses operating in or connected to the UK. We’re discussing the UK’s Economic Crime and Corporate Transparency Act 2023, or ECCTA, which includes the new Failure to Prevent Fraud Offense set to take effect on September 1, 2025.  

What does this mean? It expands corporate liability for fraud committed by employees and associated persons. This isn’t just another regulatory obligation; it’s a call to action for businesses to refine compliance measures and strengthen internal systems to mitigate fraud risks.  

To start, let's paint a larger picture of global anti-corruption enforcement and why this new UK law is such a significant development.  

Though there’s been some ebb in U.S. enforcement of the Foreign Corrupt Practices Act - that is, the FCPA - international efforts to curb bribery and fraud have surged. For example, the European Commission proposed a directive in May 2023 to tackle corruption across its member states, and the UK has teamed up with France and Switzerland to form the International Anti-Corruption Prosecutorial Task Force.  

What does this mean for you? It signals a continued push for robust compliance programs globally. Your business may already have compliance measures for bribery or tax evasion under laws like the UK Bribery Act or Criminal Finances Act, but this is the moment to extend those protections to fraud prevention.  

Now, let's shift focus to the Failure to Prevent Fraud offense and what you need to know.  

If you’re considered a large organization, you could be criminally liable if an employee, a subsidiary, or even a business partner commits fraud to benefit your organization, and you didn’t have adequate fraud prevention measures in place.  

How do you know if your company is defined as "large"? Well, it meets this threshold if it ticks two of these three boxes: more than 250 employees, a turnover of over £36 million (about $47.6 million USD), or assets exceeding £18 million (roughly $23.8 million USD).  

There are two key points to emphasize here. First, the offense has extraterritorial reach. This means even if your organization isn’t based in the UK, you could still be held accountable if the fraud occurred in the UK, involved UK-based employees, or impacted the UK.  

Second, the actions constituting fraud are pretty broad. They include things like dishonest sales practices, concealing critical information from customers, or unethical behavior in financial markets.  

The bottom line? If your business has any connection to the UK, you’re likely in the scope of this new law.  

Given all that, how can businesses shield themselves from liability under this new offense?  

The key lies in demonstrating that you have “reasonable fraud prevention measures” in place. The UK government has outlined six core principles for effective compliance programs.

First, leadership must show a strong commitment to setting the tone at the top, emphasizing the importance of fraud prevention. Second, conducting thorough risk assessments is essential to identify areas where the business is most vulnerable to fraud. Third, businesses should implement proportionate procedures, tailoring their measures to address specific risks unique to their operations. Fourth, due diligence is critical, requiring close scrutiny of partnerships and transactions to identify potential fraud risks. Fifth, clear communication and regular training should be provided to employees and partners to ensure everyone understands the organization’s fraud prevention standards. Finally, monitoring and reviewing policies is vital to ensure they remain effective and adapt to evolving risks. 

A crucial note here is that ignoring the need for a risk assessment is a no-go. The UK Home Office has stated that failing to conduct a comprehensive risk assessment will “rarely be considered reasonable.

To help you stay on top of these regulations, here’s a checklist of proactive steps to prepare for the Failure to Prevent Fraud offense:

Determine Applicability: Does your organization have a UK connection or meet the large organization thresholds?  

Identify Associated Persons: This includes employees, agents, subsidiaries, or business partners.  

Conduct a Fraud Risk Assessment: Document everything to demonstrate diligence.  

Review and Update Policies: Make sure they address fraud risks specifically.  

Train Your Team: Ensure employees and associated persons understand their obligations.  

Monitor and Audit: Set up protocols to regularly review your compliance framework.  

Taking these steps now could pay dividends when these laws come into effect.  

Beyond mitigating legal risk, a well-designed compliance program offers strategic advantages. It builds trust with regulators, strengthens your brand’s credibility, and helps you adapt to new enforcement trends.  

The pace of regulatory change is only accelerating. By aligning your internal policies with the UK’s expectations now, you’re helping protect your business against emerging risks and complexities.  

The key takeaway is clear: compliance isn’t just a legal obligation; it’s a competitive advantage if approached thoughtfully. Use this window before September 2025 to refine your fraud prevention measures and bolster your compliance systems.  

If you have questions about implementing effective fraud prevention strategies or need further insights, feel free to reach out to us. You can find additional resources and updates linked in the show notes.  

Thank you for listening to Womble Perspectives. If you want to learn more about the topics discussed in this episode, please visit The Show Notes, where you can find links to related resources mentioned today. The Show Notes also have more information about our attorneys who provided today's insights, including ways to reach out to them.

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