UK Introduces New ‘Failure to Prevent Fraud’ Corporate Offence
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- The UK Government has published draft wording for a new ‘failure to prevent fraud’ corporate criminal offence. Large companies will be liable where an associate commits a specified fraud offence intending to benefit the company, unless it had implemented reasonable procedures to prevent fraud.
- This new offence will make it easier to hold companies to account where they profit from fraud and it has significant extraterritorial scope, although several issues limit its likely application and enforcement potential.
- We expect that many clients will encounter considerable difficulty in designing effective prevention measures due to the broad and amorphous nature of the offence. Companies should consider focusing on potential fraud against investors and customers, and in particular on procedures to avoid making misleading statements to either group.