(Commonwealth_Europe) Many British businesses are not yet prepared for the impending reckoning moment. From next Monday, a new law comes into force that could reshape how companies think about fraud, not just as something that happens to them, but as something they could be held responsible for, even if they didn’t realize it was happening.
The warning signs have been clear. The Serious Fraud Office (SFO) has been urging companies to get their affairs in order, and with good reason. On September 1, under the Economic Crime and Corporate Transparency Act, large businesses could face criminal charges if someone connected to them—an employee, a contractor, or even a subsidiary—commits fraud that benefits the business in some way. Whether the company knew about it or not won’t matter if it can’t show it took proper steps to prevent it.
This is a big change. Up until now, most businesses have concentrated their fraud controls on safeguarding themselves from scams or misinformation. But now the focus is shifting. Companies have to think about the possibility that they might, however indirectly, benefit from fraudulent activity. And that means looking inward in a way many haven’t done before.
The new offence, known as “failure to prevent fraud,” applies to a wide range of large organisations. Specifically, it targets companies with more than 250 employees, or more than £36 million in turnover, or over £18 million in total assets. That covers a significant portion of the UK’s corporate landscape, from high street names to sprawling international operations.
The Home Office published the guidance behind the new law last November, and they didn’t write it in a vacuum. It was developed in collaboration with several government departments and regulators, including the Crown Prosecution Service, the SFO, HMRC, the Treasury, and the Financial Conduct Authority. That level of coordination shows just how seriously the government is taking this.
The government’s stance is justified. Fraud is not a fringe issue. It accounts for about 40% of all crime in England and Wales. A recent report from Crowe UK and law firm Peters & Peters reveals that the economic cost is staggering, exceeding £219 billion a year, with over £150 billion of that impacting the private sector. It’s not difficult to see why the government wants businesses to step up.
Legal professionals are calling the legislation a watershed moment. Andrew Reeves, a partner at Norton Rose Fulbright, said the new offence is a “game-changer.” This isn’t just a hypothetical concept. Regulators are no longer content with companies saying they didn’t know what was happening. They expect businesses to show that they’ve taken real, proactive steps to stop fraud before it starts.
Katie Stephen, a partner at the same firm, cautioned that no one wants to be the first example. But someone inevitably will be. Richard Sallybanks, managing partner at BCL Solicitors, pointed out that the SFO is likely to move quickly to test these new powers. They want to prove the law isn’t just another bit of legislation with no teeth. They want to show that corporate accountability is real and enforceable.
The situation puts businesses in a tricky spot. Many are realizing that the fraud policies they’ve had in place until now were built around avoiding being victims, not avoiding becoming unintentional beneficiaries. It’s a subtle difference, but one with serious consequences. A business could be found liable even if a rogue employee acted alone, provided it cannot demonstrate that it had adequate measures in place to prevent such actions.
And the consequences are no small matter. There’s no limit on the fines that can be handed down. A conviction under the new offence could not only damage a company financially, but it could also shred its reputation, destroy investor confidence, and even lead to lasting operational restrictions.
With the clock ticking, there’s a real sense of urgency. Rhys Novak, a partner at Charles Russell Speechlys, is encouraging businesses to act now if they haven’t already. A good place to start, he says, is with a fraud risk assessment, followed by putting in place some of the basics, like a clear anti-fraud policy. The policy doesn’t have to be flawless from the start, but it must exist.
The difficulty, of course, is that fraud isn’t always easy to define. Unlike bribery, which has clearer legal boundaries and more straightforward definitions, fraud can take many forms. It can be hard to spot until it’s too late.
But that’s precisely why it matters. Uncertainty doesn’t serve as a shield. It’s a reason to take fraud prevention even more seriously.
At the heart of all this is trust. Trust in the businesses that make up our economy. Trust that they’re not just focused on the bottom line but also on doing things the right way. The government has made it clear: companies are expected not just to follow rules but to actively help in the fight against economic crime.
For some, that’s a daunting prospect. But for others, it’s a chance to lead, to show investors, employees, and customers that they take integrity seriously. In the long run, that matters just as much as profits.
The deadline is almost here. This isn’t about compliance for compliance’s sake. It’s about stepping into a new era of corporate responsibility, one where turning a blind eye is no longer good enough.
