Large Corporates Required to Enhance Fraud Prevention Systems Amid New Offence

What's Happening?

A new corporate crime landscape has emerged with the introduction of the 'failure to prevent fraud' offence, effective from September 1st. This offence mandates that corporations must demonstrate robust fraud prevention systems, including training, monitoring, and reporting mechanisms. The Joint Guidance from the Crown Prosecution Service and Serious Fraud Office outlines that companies failing to prevent fraud by an associated person could face investigation and prosecution unless they can prove reasonable procedures were in place. This shift emphasizes proactive compliance, allowing companies to potentially avoid charges through early-stage representations. Prosecutors are now instructed to assess whether adequate procedures are in place, with the FtPF charge being used strategically alongside other offences.

Why It's Important?

The introduction of the 'failure to prevent fraud' offence marks a significant shift in corporate accountability and compliance culture. Large corporations are now under increased scrutiny to ensure their fraud prevention systems are effective. This development could lead to heightened enforcement actions and deterrence, impacting corporate governance and legal strategies. Companies that fail to comply may face severe consequences, including prosecution, which could affect their reputation and financial standing. The requirement for robust systems also implies potential costs for corporations in implementing and maintaining these measures, influencing their operational and financial planning.

What's Next?

Corporations are advised to review and update their compliance policies and procedures to address the new offence. Failure to act could invite scrutiny and potential prosecution. The Guidance encourages proactive self-reporting and strong remedial actions, which may weigh against prosecution. Companies must prepare for potential investigations and adapt their compliance strategies to align with the new legal requirements. This may involve investing in training and monitoring systems to ensure they meet the standards set by the Guidance.