01792 687 146
“Failure to prevent fraud” to be made a criminal offence for UK businesses
The UK government is set to introduce new laws that will make “failure to prevent fraud” a criminal offence for large businesses. This will be the most significant change in UK corporate criminal enforcement in over a decade.
The government has proposed changes to the legislation, introducing a new offence that holds organisations accountable if an employee or agent commits a fraud offence for the organisation’s benefit and the organisation lacks reasonable fraud prevention procedures. This represents a shift from viewing organisations as victims of fraud. The new offence applies to various fraud and false accounting offences, including fraudulent representation, failure to disclose information, abuse of position, obtaining services dishonestly, and more. The government emphasises that the types of conduct covered by the offence are wide-ranging and can include dishonest sales practices, withholding crucial information, and fraudulent activities in financial markets. The government plans to provide specific guidance on “reasonable” fraud procedures.
The new offence will primarily target large corporations and partnerships, including not-for-profit organisations and public bodies. The definition of a “large corporation” aligns with the criteria set by the Companies Act 2006:
- more than 250 employees
- more than £36m turnover, and
- more than £18m in total assets.
This approach aims to ensure that the burden of implementing fraud prevention policies is proportionate. Individuals or senior management within large corporations will not be subject to this offence. However, companies convicted of the offence may face unlimited fines, making it crucial for businesses to plan and prepare to avoid such penalties.
Whilst this legislation applies to large corporations and partnerships, all businesses considered high risks, such as the legal sector and conveyancing, should take any necessary steps to reduce their risk of fraud.
We recommend conducting thorough risk assessments to identify areas where fraud is most likely to occur within your operations. This will help you understand their vulnerabilities and prioritise preventive measures.
Review your policies and procedures and establish robust policies and procedures to prevent and detect fraudulent activities. These may include clear guidelines for ethical behaviour, whistleblower mechanisms, and internal controls to mitigate fraud risks.
Conduct employee training, including new and existing employees, regardless of employment history. Introduce programs to educate employees about fraud risks, detection techniques, and reporting procedures. This helps raise awareness and encourages a culture of integrity throughout the organisation.
Strengthen your internal control systems and implement regular monitoring procedures to identify potential red flags and unusual activities that could indicate fraud. This can include advanced technological solutions such as data analytics and fraud detection software.
Establish relationships with law enforcement agencies and regulatory bodies to facilitate information sharing and reporting of suspected fraudulent activities. This collaboration can aid in investigations and legal proceedings.
Regular external audits and reviews are conducted by independent parties to assess the effectiveness of internal controls and identify any gaps or weaknesses that need to be addressed.
How can case management software help prevent committing a failure to prevent fraud offence?
Case management software can be crucial in reducing the risks of committing a “failure to prevent fraud” offence by enabling you to implement adequate preventive measures. Here are some ways in which case management software can help:
Centralised Data Management: Case management software will allow you to store and manage case-related data in a centralised and secure manner. This facilitates easy access to relevant information and promotes transparency, making detecting and investigating potential fraudulent activities easier.
Automated Audit Trails: The software can automatically generate audit trails that document every action taken within a case, including who performed it and when. This creates a comprehensive record that can be reviewed and analysed to identify suspicious or unauthorised activities.
Role-Based Access Control: Case management software often provides role-based access control, ensuring that only authorised personnel can access sensitive case information. This helps prevent unauthorised individuals from tampering with or misusing data that could lead to fraudulent activities.
Compliance Workflows: Software solutions can offer customisable workflows that align with regulatory requirements and internal policies. These workflows can incorporate checks and balances, such as mandatory approvals and document reviews, to ensure adherence to fraud prevention measures.
Reporting and Analytics: Case management software can provide robust reporting and analytics capabilities, allowing organisations to monitor key performance indicators and identify patterns or anomalies that may indicate potential fraudulent activities. This enables proactive detection and intervention.
Document Management and Version Control: By providing a secure and organised system for document management, case management software helps prevent fraud related to unauthorised document alterations or substitutions. Version control features to track changes and maintain a clear audit trail of document revisions.
Collaboration and Communication: The software’s effective communication and collaboration tools facilitate internal information sharing and reporting of suspicious activities. This promotes timely detection and response to potential fraud risks.
Hoowla’s case management software is well-equipped to assist organisations in preventing “failure to prevent fraud” offences. With our advanced case management software, Hoowla offers a range of features that enhance fraud prevention efforts.
Hoowla’s centralised data management system ensures that case-related information is securely stored and easily accessible. This enables organisations to maintain a comprehensive record of activities, preventing any suspicious or unauthorised actions that may lead to fraudulent activities. Additionally, Hoowla’s automated audit trails provide a detailed log of actions taken within a case, helping to establish accountability and deter fraudulent behaviour.
By streamlining processes and maintaining transparency, Hoowla’s software empowers organisations to proactively mitigate fraud risks and minimise the likelihood of committing a “failure to prevent fraud” offence. Furthermore, Hoowla’s robust workflows and role-based access control ensure proper checks and balances. These features help organisations implement and enforce fraud prevention procedures by defining clear guidelines, mandating approvals, and restricting access to sensitive information.
With Hoowla’s comprehensive fraud prevention tools, organisations can take proactive steps towards compliance and protect themselves from fraudulent activities’ potential legal and financial consequences.
–
This new legislation is not expected to come into force until late 2024, and further changes to the wording of the offence may occur.