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UK: Fraud Prevention in Large Organisations

By - - Employment Law

On September 1st, 2025, the new offence of ‘failing to prevent fraud’ will come into force.

The offence affects “Large Organisations”, subsidiaries and partnerships.

Large Organisations

A Large Organisation (“LO”) is defined as having two of the following:

  • More than £36 million turnover;
  • More than 250 employees; or
  • A balance sheet total in excess of £18 million.

A subsidiary of an LO may be caught, despite not itself being an LO.

Frauds

The fraud that LOs must now take action to prevent include various frauds covered by existing laws, including:

  • by example false accounting;
  • fraud by misrepresentation;
  • abuse of position;
  • false statement by directors;
  • fraudulent trading; and
  • obtaining services dishonestly.

New frauds are not created by the new law. The fraud needs to be committed in the UK.

The fraudulent offence that the LO failed to prevent would need to have been committed or attempted by a person associated with the LO. This person can be:

  • An employee
  • An Agent
  • A person who provides services to the LO, while providing those services     

Aiding, abetting, counselling or procuring the commission of the fraud also count as a fraud offence.

The LO should be the intended beneficiary of the fraud but does not need to have actually received any benefit from the fraud. The intended benefit can be financial or non-financial. 

It does not need to be shown that senior management were aware of the fraud.

The New Offence

The offence is one of failing to put in place measures to prevent the fraud committed. On conviction, the LO would be subject to a Court determined fine.

Defence of Reasonable Procedures

The LO will have a defence if it can show either (1) it had reasonable procedures in place to prevent fraud or, (2) it was not reasonable to have such procedures in place.

What is reasonable will depend on the sector, the specifics of the LO’s business operation and the nature of the fraud. 

The UK Home Office has issued guidelines to assist in establishing fraud prevention with relevant organisations.

High Level Summary of the Guidelines
Top Level CommitmentBoard level and Senior management should have a visible, communicated and accountable leadership role in preventing fraud.
Risk AssessmentDocumented and regularly reviewed risk assessments of where there is exposure to the risk of fraud, within the organisation.
Proportionate Risk Base Prevention ProceduresClear, practical, accessible and enforced procedures which are proportionate to the assessed risk and potential impact of fraud. 
Due DiligenceEstablishing proportionate due diligence procedures in areas identified as containing fraud risk, including conducting due diligence on relevant persons (e.g. by searches, contract reviews and monitoring).
Communication and TrainingEnsuring that fraud prevention policies and procedures are communicated, understood and embedded within all levels of the organisation, in particular, by maintained training programmes.
Monitoring and ReviewMonitoring and reviewing the fraud prevention policies, including having mechanisms for detection of fraud/attempted fraud, procedures for carrying out investigations and for identifying and learning from experience.  

This is a high level general update only. Legal advice should be obtained on specific circumstances.
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