Tick-tock, goes the clock! With the UK’s new Failure to Prevent Fraud Offence approaching fast, businesses have a crucial deadline looming. Are your fraud prevention systems truly ready for September 2025, or are you leaving your organisation vulnerable to serious investigations? It’s time to check your corporate pulse!
The United Kingdom is on the cusp of a significant shift in corporate accountability with the impending Failure to Prevent Fraud Offence (FTPFO), set to take effect on 1 September 2025. This pivotal legislation demands immediate attention from organisations across all sectors, as the grace period for establishing robust fraud prevention frameworks rapidly concludes. The Serious Fraud Office (SFO) and the Crown Prosecution Service (CPS) have underscored this urgency through their updated Joint Prosecution Corporate Guidance, signaling a resolute stance on enforcement.
The updated Joint Guidance serves as a critical wake-up call, emphasizing that corporations must proactively “get their house in order” or face stringent investigations and potential prosecution. This stern warning from leading prosecution authorities highlights an intensified commitment to combating economic crime, making it imperative for entities to reassess and fortify their internal controls against illicit financial activities. Failure to act now could expose organisations to significant legal, financial, and reputational risks in the near future, increasing their organisational liability.
The scope of the FTPFO is notably broad, encompassing a wide array of dishonest conduct, including fraud by false representation, abuse of position, false accounting, and misleading statements by company directors. Crucially, liability can also extend to assisting or encouraging such offences. Unlike tax evasion, which often leads to civil settlements, fraud offences are subject to more frequent and rigorous criminal prosecution, necessitating a robust and proactive fraud prevention strategy that goes beyond existing controls often focused solely on preventing fraud against the company.
A cornerstone of the FTPFO is the concept of an “Associated Person,” defined as anyone performing services for or on behalf of an organisation. This expansive definition includes, but is not limited to, directors, employees, agents, subsidiaries, contractors, and consultants. Prosecutors will apply a “common sense approach” to the Associated Person Test, scrutinizing the true nature of an individual’s relationship and role, irrespective of their contractual status. Organisations failing to meticulously map, assess, and monitor these relationships risk culpability for misconduct they neither sanctioned nor were aware of, thereby increasing their organisational liability.
For an organisation to be prosecuted under the FTPFO, a clear UK nexus must be established, reflecting UK law. This involves at least one act related to the underlying fraud occurring in the UK, or the gain or loss manifesting within the UK’s borders. Furthermore, an overseas-based organisation could face prosecution if an employee or associated person commits fraud in the UK or targets UK victims. In an increasingly interconnected global economy, organisations must possess clear oversight of their international operations and conduct thorough due diligence to mitigate cross-border corporate compliance risks effectively.
The Joint Guidance also elucidates the close factual nexus often present between bribery and fraud offences. For instance, an organisation might engage in improper payments for business acquisition (bribery) while simultaneously manipulating accounts or misrepresenting information to deceive another party (fraud). Prosecutors are encouraged to consider FTPFO charges where a prosecution under the UK Bribery Act 2010 might not be feasible, ensuring that serious misconduct is addressed regardless of the initial intended charge, highlighting the comprehensive nature of this new fraud prevention framework.
Public interest factors both in favour of and against prosecution are carefully outlined within the guidance, underscoring the authorities’ expectation for organisations to adopt a robust, proactive approach to corporate compliance from the very beginning. Entities lacking the infrastructure to swiftly identify wrongdoing, disclose the full extent of misconduct, report promptly, or take immediate action to mitigate harm to victims will find it challenging to mount a defense based on these public interest considerations against prosecution. Timely and transparent action is therefore paramount to managing organisational liability.
Adhering diligently to the Failure to Prevent Fraud Guidance will prove invaluable for any organisation undergoing investigation by the SFO. The guidance directs prosecutors to reference it throughout their inquiries, from interviewing witnesses to identifying lines of inquiry and scrutinizing weaknesses in prevention procedures. An organisation that can demonstrably evidence and authenticate the adequacy of its fraud prevention procedures, by meticulously following the prescribed principles, will significantly strengthen its defense position, providing a crucial safeguard in the complex landscape of UK law and corporate liability.
