Guidance on the failure to prevent fraud offence (ECCTA 2023)(FtPF)

The 𝙀𝙘𝙤𝙣𝙤𝙢𝙞𝙘 𝘾𝙧𝙞𝙢𝙚 𝙖𝙣𝙙 𝘾𝙤𝙧𝙥𝙤𝙧𝙖𝙩𝙚 𝙏𝙧𝙖𝙣𝙨𝙥𝙖𝙧𝙚𝙣𝙘𝙮 𝘼𝙘𝙩 2023 (ECCTA 2023) has introduced a new Failure to Prevent Fraud (FtPF) offence, holding firms criminally liable for fraud committed by employees or associated persons—whether they were aware of it or not!

Section 199 of the ECCTA 2023 sets out a corporate criminal offence for failure to prevent fraud.

KEY FACTS

1. Who is in scope? Firms meeting at least 2 of these criteria:
   • £36M+ turnover
   • £18M+ balance sheet
   • 250+ employees
2. 𝙒𝙝𝙖𝙩 𝙩𝙧𝙞𝙜𝙜𝙚𝙧𝙨 𝙡𝙞𝙖𝙗𝙞𝙡𝙞𝙩𝙮?
   • Fraud by an employee, subsidiary, or third-party agent acting for or on behalf of the firm
   • The fraud must be intended to benefit the firm or its customers
3. 𝘿𝙚𝙛𝙚𝙣𝙘𝙚𝙨 𝙖𝙜𝙖𝙞𝙣𝙨𝙩 𝙡𝙞𝙖𝙗𝙞𝙡𝙞𝙩𝙮:
   • Having “reasonable prevention procedures” in place
   • Proving it was not reasonable to have such procedures
4. 𝗛𝗼𝘄 𝘁𝗼 𝗦𝘁𝗮𝘆 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝘁 - Follow the guidance as follows and implement

• • Conduct a Risk Assessment
  • Implement Proportionate Prevention Procedures
  • Strengthen Due Diligence & Monitoring
  • Provide Fraud Awareness Training
  • Establish Tone from the Top

Guidance

1. Following the ECCTA 2023 UK, the Home Office, under section 204 of the Act, issued guidance
1. UK GOVT = https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta/economic-crime-and-corporate-transparency-act-2023-guidance-to-organisations-on-the-offence-of-failure-to-prevent-fraud-accessible-version
2. Following the above, UK FINANCE developed financial services guidance on behalf of its members to supplement guidance issued by the home office
1. UK FINANCE = https://www.ukfinance.org.uk/system/files/2025-02/UK%20Finance%20Failure%20to%20Prevent%20Fraud%20industry%20guidance.pdf
3. This UK Finance sector-specific guidance is not statutory but advisory only. If there is a conflict between this sector-specific guidance and the Home Office guidance, the Home Office guidance will take priority.
4. This UK Finance sector-specific guidance document sets out sector-specific guidance for interpretation of the failure to prevent fraud offence and to set out examples of

• • (i) Reasonable prevention procedures and
  • (ii) Circumstances where it would not be reasonable for a firm to have prevention procedures in place.

 5. This guidance was developed in conjunction with and for use by UK Finance members of the financial             services sector only.  It provides a guide to firms (and their legal advisors and representatives) in                their understanding and interpretation of the Act

• • [Part 1], the types of reasonable prevention procedures that might be proportionate in the circumstances
  • [Part 2], and
  • [Part 3].  The circumstances where reasonable prevention procedures would not be reasonable

 6. This guidance is not intended to be exhaustive; firms do not need to specifically consider this                       guidance in determining their own approach to either addressing the offence or establishing                        reasonable prevention procedures. It does not in any way limit the prevention procedures or                       circumstances that can be evidenced by a firm in defence of the failure to prevent fraud offence. 

Source

• UK GOVT = https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta/economic-crime-and-corporate-transparency-act-2023-guidance-to-organisations-on-the-offence-of-failure-to-prevent-fraud-accessible-version
• UK FINANCE = https://www.ukfinance.org.uk/system/files/2025-02/UK%20Finance%20Failure%20to%20Prevent%20Fraud%20industry%20guidance.pdf