Written by Ken Dulieu
The Economic Crime and Corporate Transparency Act1 has introduced a new “failure to prevent fraud offence”2. This legislation, having received Royal Assent, is anticipated to come into force imminently. It signifies an important shift in the UK’s approach to corporate criminal liability, particularly in terms of holding businesses accountable for their employees’ actions. Companies are now at risk of criminal charges for misconduct by “senior managers” or failing to prevent employees and associates from engaging in fraudulent activities. This move aims to bridge the accountability gap that has allowed especially complex multinational corporations to avoid legal repercussions.
This development in corporate criminal liability further reinforces the urgent need for thorough risk management and investigative actions. Businesses must conduct detailed assessments to identify individuals who meet the Act’s broadened “senior manager” criteria, delving into their roles, responsibilities, and influence within the organisation, beyond mere job titles. The Act also introduces a specific offence for failing to prevent fraud, targeting “large organisations,” making comprehensive fraud prevention measures a critical part of every Board’s agenda.
With these legal updates, it’s crucial for businesses to reassess and if necessary, overhaul internal controls and compliance programmes. Implementing sound strategies against economic crime risks and ensuring fraud prevention measures are essential.
To adhere to the Act, businesses should consider the following compliance actions:
- Identify Senior Managers: Determine who within your organization qualifies as a “senior manager” under the Act, considering their roles, responsibilities, and organizational influence.
- Update Training Programmes: Inform your senior managers about the economic crime risks and new criminal liabilities under the Act.
- Review Compliance Programmes: Ensure your compliance and risk assessment frameworks are strong enough to mitigate the increased risk of prosecution.
- Implement Fraud Prevention Measures: Establish fraud prevention policies, controls, and practices to identify and mitigate fraud risks.
- Documentation and Record Keeping: Maintain comprehensive records of all compliance efforts, crucial for demonstrating due diligence.
- Seek Expert Advice: Consult with risk management experts to align your compliance efforts with the latest compliance standards.
- Continuous Monitoring and Review: Regularly monitor and review your compliance and fraud prevention measures, ready to adjust as necessary.
Adapting to these changes is about more than avoiding fines; it’s about preserving your company’s reputation and maintaining client trust. At Capcon, we are helping businesses through this transition, ensuring they navigate corporate criminal liability complexities effectively. Here are some of the areas where we are working with businesses to ensure they are prepared and remain compliant:
- Risk Assessments and Compliance Programmes – Tailored solutions to meet the new requirements.
- High Level Employee Screening – Meticulous background checks to protect against internal fraud.
- Investigative Services – In-depth investigations to uncover and address any potential fraudulent activities.
- Training and Awareness Programmes – Educating staff on economic crime risks, internal threats, and compliance.
- Risk Management and Regulatory Advice – Expert consultations to navigate the evolving legal landscape.
- Fraud Prevention Strategies – Developing and implementing robust fraud prevention measures.
- Dark Web Monitoring – Proactively protecting against cyber threats and data breaches.
These reforms mark a crucial development in enhancing corporate accountability. We’re here to assist businesses in adapting to these changes, offering comprehensive support and expertise in risk management and security.
Chairman of Capcon and Head of Capcon Argen
Capcon Argen offers discreet intelligence services to help businesses and individuals manage risk, implement countermeasures, and provide security solutions, ensuring effective risk management and protection.
