Failure to prevent fraud - the clock is ticking and the reach of the offence is wider than you think

The clock is ticking… in just over three months, the prevention of fraud offence comes into force.

In order to fall within scope, an organisation must fall within two of these three criteria:

• have more than 250 employees; 
• a turnover of more than £36 million, and
• total assets in excess of £18 million. 

Whilst many of these businesses will already have procedures and safeguards in place to prevent a fraud being perpetrated against them, the new offence requires the organisation to have extensive procedures in place to prevent a fraud being perpetrated which benefits it or a client.  

In the fanfare leading up to the introduction of the new offence there has been a lot of focus on typical “fraud” offences.  However, the reach is much wider than you may think, as it also applies to non-financial regulated activity – and there does not need to have been a financial benefit for the failure to prevent fraud offence to be committed.   

Examples of the wide-reaching nature of the offence

Government guidance published towards the end of 2024 gives an example which is directly relevant to businesses which are regulated under environmental legislation. 

The example relates to a business which has a permit allowing it to make specified discharges into a watercourse.  In order to comply with the conditions of the permit the business must provide discharge data to the Environment Agency.  The business actually discharges more than it is permitted (this could be for a number of reasons – including a failure of the plant), and so the head of the technical department submits falsified data in an attempt to avoid financial penalties. The individual would have committed fraud by false representation, and if the business did not have reasonable processes in place to prevent this fraud, it could be prosecuted for failure to prevent fraud.  That would be in addition to any environmental criminal offences which may have been committed.   

The Serious Fraud Office has said that it is currently looking for a case to prosecute under the new offence when it comes into force, so businesses should now be actively looking to achieve compliance in advance of 1 September 2025.