A new failure to prevent fraud offence is being introduced by the Economic Crime and Transparency Bill.
It will apply to all large bodies corporate and partnerships, including large charities structured as companies or CIOs. To qualify as large two of three criteria must be met:
- More than 250 employees;
- More than £36 million turnover; and/or
- More than £18 million in total assets.
The offence is committed where an employee or agent commits fraud and the organisation did not have reasonable fraud prevention measures in place. Company bosses need not have encouraged or even been aware of the fraud.
According to the government, fraud is the most common offence in this country, amounting to 41% of all crime in 2022/2023.
For charities, the most common types of fraud are:
- False expenses or overtime
- Misuse of charity money
- Invoicing fraud from external fraudsters
- Fraudulent fundraising where proceeds are pocketed by fraudsters.
The penalty for failure to prevent fraud is an unlimited fine for the organisation. No personal liability will be introduced for trustees or management for failure to prevent fraud.
The new legislation is far reaching; even where an organisation is based overseas, if an employee commits fraud under UK law or targeting UK victims, their employer could be prosecuted.
The government will produce detailed guidance once the legislation comes into force. We will keep you up to date with the new guidance and would be very happy to help with any queries about fraud prevention.
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