The offence under the Economic Crime and Corporate Transparency Act 2023 (ECCTA) applies to all large, incorporated bodies, subsidiaries and partnerships; large not-for-profit organisations such as charities if they are incorporated; and incorporated public bodies.

The Home Office said: “The strategic objective is to reduce crime, specifically fraud. Criminal activity can be enabled and perpetuated by organisations. The limited ability to hold organisations criminally responsible for fraud has raised concern that parts of corporate criminal liability law are not fit for purpose. This has created challenges in the successful prosecution of organisations for crime, particularly economic crimes. 

“Reform of corporate liability is required to protect the integrity of the UK as a safe place to conduct business. This means improving the ability for prosecutors to hold to account, and appropriately deal with, organisations whose employees, agents, or other associated persons perpetuate or facilitate economic crime. This includes clamping down on organisations without sufficient procedures in place to prevent the most common crime.”

Guidance issued this week by the government provides advice to large organisations on procedures they can put in place to prevent fraud.

Under the legislation, an organisation will be criminally liable where:

• a specified fraud offence is committed by an employee, agent or other ‘associated person’, for the organisation’s benefit
• the organisation did not have ‘reasonable’ fraud prevention procedures in place.

It does not need to be shown that company managers ordered or knew about the fraud. The offence does not apply to either police forces or government departments. 

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