Proposed new failure to prevent fraud offence

Amendments have been tabled to the Economic Crime and Corporate Transparency Bill (the ECCT Bill) that will introduce a new failure to prevent fraud offence for corporates.

The ECCT Bill, which is currently progressing through the House of Lords, also contains the draft amendments to the Companies Act 2006 to facilitate the reform of Companies House.

Under the proposed new offence, an organisation will be strictly liable if:

• a specified fraud offence is committed by an employee, agent or subsidiary; and
• the organisation did not have reasonable fraud prevention procedures in place.

A list of the specified fraud and false accounting offences will be set out in the legislation, and includes, for example, cheating the public revenue, false accounting and false statements by company directors. The Secretary of State will be given power to amend the list of specified offences by regulations.

The offence will:

• apply to all large companies, LLPs and partnerships (including those incorporated outside the UK); and
• be punishable by an unlimited fine.

The Government will issue statutory guidance on reasonable prevention procedures.

The amendments will be considered by the House of Lords, along with others tabled, when it resumes business next week after the Easter recess.  The ECCT Bill is expected to become law later this year.

For further information, see our briefing here.