Rhys Novak writes for Investment International on the UK’s new fraud prevention guidelines

In an article for Investment International, Rhys Novak,  Partner, discusses the UK government's recent guidance on the 'failure to prevent fraud' offence under the Economic Crime and Corporate Transparency Act 2013 (ECCTA).

This offence holds organisations liable if fraud is committed by an associated person for the organisation's benefit, and the organisation lacked 'reasonable procedures' to prevent it. The guidance, which draws on the UK Bribery Act 2010, outlines six principles for organisations to prevent fraud.

However, Rhys points out that fraud is more complex to define than bribery and that the guidance cannot be a one-size-fits-all solution. Unlike bribery, fraud encompasses a wide range of offences, making it impractical to directly apply anti-bribery policies to fraud prevention. He notes that while businesses are accustomed to preventing external fraud, they must now also consider internal fraud that could benefit the organisation, requiring a nuanced approach.

The guidance serves as a framework to help businesses think about anti-fraud policies and procedures, but it is not exhaustive. With limited precedents, companies must be creative and adapt their strategies to address various potential fraud scenarios, including training staff to understand and detect fraudulent activities.

Rhys advises businesses to proceed with caution, conduct thorough risk assessments, and tailor the guidance to their specific risks. The new offence and guidance signal a significant change in how businesses must approach fraud, and proactive measures are essential to address potential internal fraud risks.

Read the full piece in Investment International here.