A new offence of ‘failure to prevent fraud’ is a good start, but if we really want to stop this crime we need better incentives for whistleblowers, says Dr Alison Cronin

Earlier this month the government published its guidance on the new corporate ‘failure to prevent fraud’ offence, from the Economic Crime and Corporate Transparency Act 2023, which will come into force next year.

The Home Office deserves some credit. Unlike the attribution of corporate liability for the substantive offence of fraud itself, for which it is necessary to show that senior managers or directors were involved or knew about the fraud, the new failure to prevent offence is suitably broad. Instead of relying on just senior managers or directors, it holds large organisations to account where an employee, agent, subsidiary, or other “associated person” commits a fraud offence. Liability can be imposed where the organisation did not have reasonable procedures in place to prevent the offence and the fraudster intended to benefit: the organisation, its clients, or indeed just the fraudster themselves if their actions also benefitted the organisation.