Anticipating the new failure to prevent fraud offence in the UK

On 24 April, FRA Partners and anti-fraud experts Weng Yee Ng and Derek Patterson were invited to facilitate a roundtable discussion on the new failure to prevent fraud offence within the Economic Crime and Corporate Transparency Act 2023 (ECCTA). The event was co-hosted by Claudia Van Gruisen, Andrew Reeves and Stuart Neely from Norton Rose Fulbright, and organised by the Institute of Business Ethics for a select group of corporate members and guests.

Key Take-aways

Enhance employee training

The introduction of the ECCTA and its various underlying offences calls for regular employee training, which is expected in a robust compliance program. It is important to create and maintain awareness of requirements and repercussions in the event of a potential breach. That, however, brings a different challenge to compliance teams: the potential risk of compliance (and training) fatigue. Ideas exchanged at the roundtable included consideration of thematic training as opposed to topic-by-topic, e.g. impact of dishonest behaviour to the organisation.

Explore fraud-specific risk assessments

Companies are at different stages of maturity when it comes to fraud-specific risk assessment but there is a broad-based recognition that action is required.  

Map policies and procedures to fraud risks

Organisations are reminded to ‘look under the hood’ and have a good understanding of policies, procedures and controls that are already in existence, and to map them to the fraud risks identified. Some policies and procedures may require an update to align with the requirements of ECCTA, whereas others may require a brand new policy to be written and implemented.

Assess monitoring and review capabilities

Consider how the three lines of defence are structured within the organisation, and the adequacy of resources available for the required monitoring and testing of the controls that mitigate fraud risks.

Consider questions of jurisdiction

The interaction of the ECCTA with subsidiaries, joint ventures and associated companies outside the UK will require careful consideration, especially where these entities are included in consolidated reporting published in the UK.

Consider crossovers between different regulations and enforcement agencies

Organisations are encouraged to consider potential overlaps between the ‘failure to prevent fraud’ offence and other regulations, e.g. an offence of false representation (s2. Fraud Act 2006) under the ECCTA on sustainability reporting could also potentially breach the FCA’s anti-greenwashing rule which comes into effect on 31 May 2024.

Learn more about how FRA can help companies mount a good defence ahead of the UK’s new failure to prevent fraud offence.