From 1 September 2025, large organisations in the UK may be criminally liable if they fail to prevent fraud committed by employees, agents, or other ‘associated persons’ under a new offence introduced by the Economic Crime and Corporate Transparency Act 2023.
The offence applies to businesses that meet two out of three thresholds:
- More than 250 employees
- Over £36 million turnover
- Over £18 million in total assets
If an associated person commits fraud for the organisation’s benefit, the company may be prosecuted – even if senior management was unaware – unless it can demonstrate it had ‘reasonable procedures’ in place to prevent it.
Why This Matters to Employers
Until now, organisations could often avoid liability for employee wrongdoing by relying on a lack of knowledge at senior level. That defence is no longer sufficient. The new law echoes the ‘failure to prevent bribery’ model under the Bribery Act 2010 and signals a shift towards corporate accountability in tackling economic crime. Penalties include unlimited fines and significant reputational damage.
What Counts as ‘Reasonable Procedures’?
While statutory guidance is expected in due course, employers should begin to implement and evidence fraud prevention frameworks.
Reasonable procedures might include:
- Risk assessments: Identifying where fraud risks are most likely across the business.
- Policies and controls: Ensuring robust, tailored anti-fraud policies are in place.
- Training: Providing regular, role-specific training on fraud risks and reporting obligations.
- Due diligence: Conducting checks on suppliers, contractors, and other third parties.
- Whistleblowing mechanisms: Establishing and promoting confidential internal reporting channels.
- Monitoring and review: Ongoing reviews of prevention measures and response protocols.
Practical Steps for Employers
- Assess your organisation’s size – if you meet the threshold, this offence likely applies to you.
- Conduct a fraud risk audit – map out key vulnerabilities across your operations.
- Update policies and procedures – ensure anti-fraud frameworks are practical, proportionate, and implemented in practice.
- Train your staff – provide clear guidance on awareness, prevention, and escalation routes.
- Maintain records – a documented paper trail will be key in defending any enforcement action.
Final Thoughts
This new offence marks a significant shift in the corporate crime landscape. Employers must take proactive steps to manage fraud risk, — not just to comply with the law, but to protect their reputation, stakeholders, and financial health. Even companies below the threshold may wish to review their fraud-prevention procedures, particularly where supply chains or third-party risks are involved.
Although statutory guidance is expected, employers should act now to document proactive fraud-prevention efforts. Contact our Employment team today for expert guidance on preventing fraud in the workplace.
