Government creating new offence for large businesses: failure to prevent fraud

The government is creating a new failure to prevent fraud offence, designed to hold organisations accountable if they profit from fraud committed by their employees. Under this new offence, an organisation will be liable where a specified fraud offence is committed by an employee or agent, for the organisation's benefit, and the organisation did not have reasonable fraud prevention procedures in place. It does not need to be demonstrated that company bosses ordered or knew about the fraud. The government says that this will only apply to organisations meeting two out of three of the following criteria:

· more than 250 employees

· more than £36 million turnover

· more than £18 million in total assets.

This new offence's coming into being is not imminent. Once the Economic Crime and Corporate Transparency Bill has received Royal Assent, the government will need to publish guidance on reasonable fraud prevention procedures. Only then, the government says, will this come into force. Devolved application: Equivalent offences in Scotland and Northern Ireland will be included in the base offence list, with a power for the relevant minister in Scotland or Northern Ireland to amend the list with regards to offences they are responsible for (devolved offences). Full details from the government available here.