A New Era in Corporate Accountability

The Economic Crime and Corporate Transparency Act 2023 (ECCTA), which received Royal Assent on 26 October 2023, marks one of the most comprehensive overhauls in UK corporate law in recent decades. Its twin objectives are to combat economic crime—including fraud and money laundering—and to improve the integrity of corporate information via reforms at Companies House.

Key Measures Affecting Fraud Prevention

1. New Corporate Offence: “Failure to Prevent Fraud”

From 1 September 2025, large organisations (those meeting at least two of the following:

• more than 250 employees
• turnover greater than £36 m
• balance sheet greater than £18 m)

could face unlimited fines if an employee, agent, or associated person commits fraud benefitting the organisation, and the organisation lacked reasonable procedures to prevent it. The only defence of having reasonable procedures to prevent is like the defences under the UK Bribery Act 2010 (failure to prevent bribery), and the Corporate Criminal Offence 2017 (failure to prevent tax evasion).

The UK government has stated that “if an employee commits fraud under UK law, or targeting UK victims, their employer could be prosecuted, even if the organisation (and the employee) are based overseas.”

Therefore, the offence could impact global organisations without UK presence or operations. Again, this would be consistent with the scope of the Bribery Act 2010 and the Corporate Criminal Offence 2017.

The proposed offence will apply to a wide range of fraudulent activity, covering multiple areas of a company’s workforce. Some examples include: fraud by false representation, such as mis-selling a product to a customer; false statements by company directors, such as misrepresenting the financial position of the company to shareholders; and false accounting or fraudulent tax returns.

What Companies Should Do Next: Practical Steps

To stay ahead and demonstrate compliance, companies—especially large ones—should take these proactive steps:

1. Undertake a Fraud Risk Assessment

Identify vulnerabilities, critical processes, and personnel or third-party touchpoints where fraud may occur. Undertaking a strategy workshop with all internal stakeholders to identify risks associated with the business is a good starting point.

2. Align with the Six Principles (Borrowed from Bribery Prevention Frameworks)

Ensure procedurtes are:

• Proportionate to the risk,
• Backed by top-level commitment,
• Based on thorough risk assessment,
• Supported by due diligence on associated persons,
• Reinforced with communication and training,
• Continuously monitored and reviewed These mirror principles in Bribery Act guidance and are applicable in fraud prevention.

3. Revise Policies, Contracts, and Training

The matter should be reviewed by the Board of Directors to ensure that there is clear top-level engagement. If required, you should update internal policies and third-party agreements to reflect fraud prevention expectations. To ensure that there is adequate understanding and to reflect adequate procedures you should launch staff training on fraud awareness and reporting protocols.

4. Document Everything

Keep evidence of risk assessments, policy updates, training sessions, and decision-making rationale. In any enforcement case, showing you “had reasonable measures in place” can be a robust defence.

Final Thoughts

With the failure to prevent fraud offence looming and identity verification becoming compulsory, ECCTA reshapes the landscape of corporate criminal liability in the UK. Businesses must shift from reactive to preventive postures: embed anti-fraud culture, reinforce policies, and demonstrate unwavering compliance through documented, risk-based efforts. Given the timetable for the legislation to take effect, companies need to urgently undertake the above steps to avoid risk and to provide a “shield” to the board of directors in case of a fraud taking place by an employee which benefits the company. In addition, the negative impact on a company’s reputation if found to be in breach of these types of rules, should never be underestimated.