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UK’s ‘Failure to Prevent Fraud’ Law Takes Effect Sept. 1 as Prosecutors Tighten Corporate Guidance

New charging guidance signals tougher scrutiny of how boards embed and evidence effective fraud controls and whistleblowing systems.

Overview

  • The ECCTA offence makes large organisations criminally liable if an associated person commits fraud intended to benefit the business and reasonable prevention procedures are lacking.
  • The CPS and SFO have updated their Corporate Prosecutions Guidance, highlighting factors such as the effectiveness of controls, organisational culture, cooperation, and turnover-linked fines.
  • Specialist lawyers expect the SFO to seek early test cases, and several predict more whistleblowing and self-reports, including referrals aligned with a previewed HMRC scheme.
  • Sector guidance flags concrete risks for big law firms, including overbilling, misleading environmental or diversity claims, and potential ‘fraud by silence’ when withholding material information.
  • Practitioners note broad reach alongside the senior manager attribution test and report continued uncertainty over how ‘large’ is assessed, with sources differing between a two-of-three test and any one threshold.