Understanding the UK's New Corporate Criminal Offence
This Failure to Prevent Fraud (“FTPF”) offence marks the most significant expansion of corporate criminal liability since the Bribery Act 2010. Unlike previous frameworks that required prosecutors to identify a “directing mind and will”, the new legislation imposes automatic liability, subject only to one defence: proving reasonable fraud prevention procedures were in place.
The FTPF offence holds large organisations criminally liable when their associated persons commit specified fraud offences intended to benefit the organisation or its clients. This represents a fundamental departure from traditional corporate criminal liability principles.
The offence became law when the Act received Royal Assent in October 2023, with government guidance published on November 6, 2024. Under the strict liability framework, prosecutors must show only that an associated person committed a qualifying fraud offence with intent to benefit the organisation. The organisation’s knowledge, approval, or involvement is irrelevant.
This approach mirrors the “failure to prevent” models under the Bribery Act 2010 and Criminal Finances Act 2017. The Serious Fraud Office (“SFO”) has indicated it will prioritise enforcement, especially where systemic failures in fraud prevention are evident.
The offence applies to “large organisations” meeting at least two of the following criteria during the financial year when fraud occurred:
These thresholds apply to corporate bodies, partnerships, limited liability partnerships, and certain charitable organisations, including overseas entities carrying on business in the UK.
For corporate groups, thresholds apply on an aggregate basis, meaning that parent companies may be liable for the combined metrics of their subsidiaries (and vice versa). This ensures organisations cannot avoid liability by fragmenting operations across smaller entities.
The term “associated person” is interpreted broadly, covering anyone performing services for or on behalf of the organisation, not just employees. This includes agents, subsidiaries, contractors, intermediaries, joint venture partners, and consultants.
Professional advisers acting in purely advisory roles (e.g. external lawyers or auditors) are generally excluded.
The fraudulent act must be intended to benefit the organisation or its clients. This benefit can be financial or non-financial, such as enhanced reputation, competitive advantage, regulatory compliance, or cost savings.
Actual benefit need not materialise, and mixed motives do not exclude liability.
The offence applies to a defined set of underlying crimes listed in Schedule 13 to the Economic Crime and Corporate Transparency Act 2023.
There are nine specified fraud offences, including:
Money laundering and tax evasion are not included, as these are already addressed under the Proceeds of Crime Act 2002 and the Criminal Finances Act 2017 (Failure to Prevent the Facilitation of Tax Evasion) offences respectively.
The offence has extensive extraterritorial effect, applying to both UK and overseas entities with UK connections. For UK organisations, liability applies regardless of where the underlying fraud occurs.
Overseas organisations become subject to the offence if they carry on business in the UK and the fraudulent conduct has sufficient UK nexus, including when:
The sole defence is that the organisation had reasonable procedures in place to prevent fraud. The Government guidance identifies six core principles:
Conviction exposes organisations to unlimited fines, with courts considering factors including:
Fines may reach hundreds of millions of pounds for major organisations. Beyond financial penalties, consequences include public contract debarment, regulatory action, and severe reputational damage.
Deferred Prosecution Agreements (DPAs) remain available where organisations cooperate and commit to remediation.
Different industries face distinctive fraud risks:
The Failure to Prevent Fraud offence marks a transformative development in UK corporate criminal law.
Organisations must act now to review fraud risk assessments, strengthen prevention procedures, and demonstrate top-level commitment to compliance.
For further information on the Failure to Prevent Fraud offence, or to discuss how your organisation can develop robust fraud prevention procedures, please contact me.
Pregeshni is a senior compliance, risk and governance professional with more than 15 years of experience working within the financial services industry. Pregeshni works with financial services clients regulated by the FCA and PRA, advising on regulatory authorisation, regulatory change, conflict management, governance frameworks, compliance controls and market abuse frameworks.