RSA Insurance is urging businesses to prepare for the Failure to Prevent Fraud offence, which takes effect on 1st September 2025 under the Economic Crime and Corporate Transparency Act 2023. The law requires organisations to have robust fraud prevention procedures or risk prosecution if an employee, agent or supplier commits fraud for their benefit.

The act applies to companies or partnerships meeting at least two of these thresholds: more than 250 employees, turnover over £36m or total assets above £1m. Government figures suggest nearly 25,000 businesses fall within scope, marking a major shift in corporate accountability.

Adele Sumner, head of counter fraud strategy and financial crime at RSA, said: “The strategic objective of the legislation is clear, reduce fraud by embedding stronger controls. One way to reduce the risk is to ensure your organisation has reasonable procedures in place to prevent fraud.”

Sumner warned that smaller firms often lack strong controls and may not realise they could face criminal liability even if unaware of a fraud.

Commenting on the challenges associated with the extra-territorial reach of the offence, partner at law firm Ashurst's dispute resolution practice, Neil Donovan said: "During the ten-month implementation window, in-scope organisations have grappled with two challenges: first, the breadth of conduct caught by the definition of fraud, which includes false accounting and tax evasion; and second, its wide extra-territorial reach, which extends to overseas companies where they fail to prevent fraud with a UK nexus."

The offence takes on heightened significance when viewed alongside the new test introduced in December 2023 for attributing criminal liability to corporates for a wide range of economic crimes (including fraud, bribery, tax evasion, sanctions and money laundering) committed by senior managers, according to Donovan.

"The director of the SFO has conveyed a bullish optimism for these reforms in recent months and has stated his intent to be the first to prosecute someone under the new provisions in ECCTA," he added. "There is no doubt that the enhanced prosecutorial toolkit increases the risks of criminal liability for corporates and will shape how organisations respond to suspected criminality within their business."

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