The new corporate criminal offence of failure to prevent fraud under the Economic Crime and Corporate Transparency Act (ECCTA) came into force on 1 September 2025. While it currently applies only to large organisations with more than 250 employees, a turnover exceeding £36 million or total assets exceeding £18 million, smaller businesses will inevitably be affected. 

The offence was introduced because fraud is endemic in the UK, accounting for around 40 per cent of all crime in England and Wales. It is estimated that the economy loses approximately £219 billion each year, with £157.8 billion of that coming from the private sector.

Developed with input from the Crown Prosecution Service (CPS), Serious Fraud Office (SFO), HM Treasury, HMRC, Ministry of Justice, Cabinet Office, Attorney General’s Office and the Financial Conduct Authority (FCA), the new rules mean businesses may be held criminally liable if an employee, agent, subsidiary or other ‘associated person’ commits fraud intended to benefit the organisation.

Organisations that come within the sights of the authorities can defend themselves against prosecution if they can demonstrate that reasonable fraud prevention measures were in place at the time the fraud was committed. This highlights the importance for even small businesses to have strong policies that clearly define what all employees can and cannot do.

As Roger Isaacs, Forensic Partner at Milsted Langdon said: “The ECCTA introduces a strict liability offence for organisations that fail to prevent fraud committed by an “associated person”, which could extend to a supplier if it was deemed to have acted as the agent of the larger company.   For that reason, small companies are likely to find themselves being asked to demonstrate to their large company customers that they have adequate and appropriate anti-fraud measures in place..

“Proactive measures are not just about compliance, but about safeguarding a business’s reputation and financial health. Implementing strong anti-fraud controls can help detect issues early and prevent significant losses.”

Sources: Gov.UK