UK poised to finalise ‘failure to prevent fraud’ offence

The United Kingdom has pioneered corporate “failure to prevent” offences in the context of the UK Bribery Act 2010 (UKBA) and the Criminal Finances Act 2017 (CFA).

Debate has long continued about whether the UK should implement a broader offence of corporate failure to prevent economic crime.

According to recent announcements, parliament is considering amendments to the Economic Crime and Corporate Transparency Bill, to introduce an offence for failure to prevent fraud, false accounting, and money laundering.

Although details have not yet been released on exactly which offences will be included in the amended bill, the FT reports that the new provisions will target law firms, accountants, and casinos that lack adequate procedures to prevent crimes including fraud, false accounting, and money laundering.

According to Paige Berges, counsel in Ropes and Gray’s Anti-Corruption and International Risk group, it is unclear whether earlier proposals to include corporations in the fraud and false accounting offences have also been reintroduced. 

The “failure to prevent” offences in the UKBA and CFA permit prosecutors to bring actions against organisations for lack of “adequate” or “reasonable” controls to prevent wrongdoing (namely, bribery and the facilitation of tax evasion) without having to demonstrate that a “directing mind” at an organisation intended to commit the crime.

While it remains to be seen which crimes and sectors will be covered by the new amendments, UK government representatives have indicated that the new offence will mirror similar “failure to prevent” constructs under the UKBA and CFA.

UK Serious Fraud Office chief, Lisa Osofsky has praised the proposal.