Jurisdiction(s):
United Kingdom

ECCTA 2023 failure to prevent fraud: undefined 'benefit' and 'victim', broad offences, but limited to large organisations

Published on: 21 February 2024

Published by a Law360 reporter

Legal News

Article summary

This piece considers these questions by exploring the scope—and the inherent ambiguity—of the new offence...

The new offence

Section 199 of the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) states that a large organisation commits the failure to prevent fraud offence if it does not stop an associated person from committing a fraud offence, where that associated person intends to benefit, directly or indirectly, either:

the organisation
the person to whom, or to whose subsidiary, the associated person provides services on the organisation’s behalf

Qualifying fraud offences are set out in ECCTA 2023, Schedule 13. An organisation is not guilty of the failure to prevent fraud offence if it is, or is intended to be, the victim of the fraud itself. There is a defence where, at the time the fraud offence occurred, the organisation had reasonable fraud prevention procedures in place. Although the failure to prevent fraud offence is tightly framed as to who may commit it—namely, only large organisations—it is drafted widely, and with uncertainty, as to the ways in which it can be committed. ECCTA 2023, section 201 defines a large organisation as one in which two or more of three...

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