The Home Office published ‘Economic Crime and Corporate Transparency Act 2023: Guidance to organisations on the offence of failure to prevent fraud’ last week. This gives corporations a nine-month lead-in time before the offence comes into effect on 1 September 2025.
The 46-page guidance sets out detail on types of situation covered, due diligence required and available defences. However, it emphasises that the guidance is advisory only.
Louise Hodges, head of criminal litigation at Kingsley Napley, said: ‘In theory the guidance gives companies plenty of time to prepare.
‘However, no “grace period” has been provided for, and this timetable remains very challenging for the types of entities that fall under the legislation—large global businesses with multilingual staff and where the concept of economic crime and the pre-existing national compliance requirements may be very different.
‘The Serious Fraud Office [SFO] have indicated their enthusiasm to prosecute the new offence and so large organisations should very much be on notice that they will be under scrutiny on the provisions.’
Hodges said the guidance provided ‘some clarification’ on the interpretation of ‘associated person’, but warned that real-life situations ‘are likely to be complex’. Similarly, she wished the guidance contained ‘more sophisticated examples’ on the key question of ‘who is intended to benefit’.
She noted the guidance has a section on whistleblowing, increasing pressure on large organisations to adopt whistleblowing procedures if they have not already done so.
The government signalled its intent to crack down on financial crime last week with an extra £9.3m funding for the SFO to improve its case management and evidence handling.
Katie Wheatley, head of crime, regulatory and fraud at Bindmans, said: ‘The government will expect to see a return on that investment in faster and more consistently successful outcomes.
‘It is interesting this announcement comes hot on the heels of the publication of the Home Office guidance… which has set the clock ticking for corporates to work on fraud prevention procedures that will provide them with a defence to failing to prevent fraud committed by their employees.’
