November 28, 2023
The Economic Crime and Corporate Transparency Act 2023 is the latest measure to reform corporate criminal liability and increase corporate transparency. Companies House and the Registrar of Companies will also be granted greater powers to query information submitted to them and identify fraudulent discrepancies.
Business owners, company secretaries and senior management teams will need to take into account the new liabilities.
Failure to prevent fraud
The Act has created a ‘failure to prevent’ offence, meaning that companies will be held to account where they profit from fraud committed by their employees. This means companies will need to be vigilant when it comes to their employees committing a specified fraud offence, whether it is intended to benefit the company or not. It will also be considered an offence under the Act if it is found that the company did not have reasonable fraud prevention procedures in place.
A company can expect to receive an unlimited fine if found guilty and convicted.
The new ‘failure to prevent’ offence significantly lowers the existing standard of establishing liability, creating a wider remit to enable prosecution of a company for the actions of their employees outside of the board room.
Will this apply to all businesses?
In its current form, the Act only applies to ‘large’ companies in England and Wales, that meet two of the following criteria:
The new offence and economic crime provisions are scheduled to come into force by 26 December 2023.
Prudent organisations will already have existing robust policies and procedures to prevent fraud but these will most likely need to be significantly expanded. By conducting risk-mapping exercises, a business can identify the high-risk areas that may be subject to economic crime, such as procurement.
It is good practice for senior managers to be provided with targeted training on economic crime offences and companies should consider what enhanced controls measures may be required to monitor senior management conduct on an ongoing basis. It is also a good time for organisations to review and, if required, update current internal policies on anti-bribery and corruption.
If you require assistance with any commercial or corporate matters, please contact a member of our commercial team, Emily Shingler, via email at firstname.lastname@example.org or via telephone on 029 2082 9102 for a free initial chat to see how we can help you.
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