Jurisdiction(s):
United Kingdom

Preparing Non-UK Multinationals for the UK Failure to Prevent Fraud Offence: Scope, Associated Persons and Reasonable Procedures

Published on: 12 March 2025

Published by a Law360 reporter

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Article summary

What is the failure to prevent fraud offence?

The FTPF offence arises where a large organisation gains from fraud carried out by its associated persons. The entity may incur liability if an associated person commits a specified fraud offence intending to benefit the organisation, whether that benefit is obtained directly or indirectly.

A 'large organisation' is defined by reference to three size tests; it qualifies if at least two are met:

(1) more than 250 employees
(2) more than £36m turnover
(3) more than £18m in total assets

An 'associated person' broadly includes anyone who provides services for or on behalf of the relevant organisation, such as officers, directors, employees and agents, together with subsidiaries and employees of subsidiaries.

Under the new offence, an organisation can be liable—and face an unlimited fine—for a wide range of fraud offences, including fraudulent misrepresentation, financial misstatements or fraudulent trading, when committed by its associated persons with the aim of benefiting the organisation. In short, exposure turns on the associated person’s intention to confer a benefit on the organisation. Liability may still arise even where that benefit is not the associated person's principal purpose, for instance if the person is mainly acting for their own gain...

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