From 1 September 2025, a significant legal change has taken effect in the UK under the Economic Crime and Corporate Transparency Act 2023: the introduction of a new corporate offence - "Failure to Prevent Fraud."
This development has serious implications for HR, compliance, and senior leadership teams across large UK organisations.
What Is the New Offence?
Under the new law, a company can now be held criminally liable if an employee, agent, or associate commits fraud for the benefit of the company, even if leadership was unaware of it.
Unless the business can prove it had "reasonable prevention procedures" in place, it could face prosecution, unlimited fines, reputational damage, and more.
This law only applies to "large organisations", defined as meeting at least two of the following:
- More than £36 million in turnover
- More than £18 million in assets
- More than 250 employees
Source: Travers Smith, Sept 2025
What Counts as "Fraud"?
The offence covers a wide range of criminal activity, including:
- False accounting
- Fraud by abuse of position
- Cheating the public revenue (e.g., tax fraud)
- Misrepresentations made during sales or tendering
- Dishonest handling of client or supplier contracts
Even if senior leaders had no knowledge of the fraud, the organisation itself can still be prosecuted if proper safeguards weren't in place.
What HR and People Teams Need to Do
Although this is a legal and compliance issue at its core, HR plays a key role in helping organisations meet their obligations under this new law.
Review and Update Policies
Ensure all employee policies clearly outline expectations around fraud, ethics, and integrity. Policies should be updated to align with the new offence.
Introduce Targeted Training
Develop or expand training programs on fraud awareness, whistleblowing, and ethical behaviour, especially for high-risk teams like sales, procurement, and finance.
Embed a Speak-Up Culture
Encourage employees to report suspected fraud or misconduct without fear. Consider anonymous reporting tools and manager training on how to handle concerns.
Conduct Risk Assessments
Work with legal and compliance teams to identify parts of the business that are vulnerable to fraud, and map out "reasonable prevention procedures" accordingly.
Reinforce Tone from the Top
Leadership must communicate a strong anti-fraud message. HR can support this through internal comms, executive training, and cultural reinforcement.
Why Acting Now Matters
The UK government is taking corporate fraud more seriously than ever. Enforcement is expected to increase, especially in the wake of economic pressures and public scrutiny.
Organisations that fail to act could face:
- Unlimited fines
- Criminal conviction
- Loss of public and investor trust
But those that prepare early - with robust policies, training, and a culture of transparency - will reduce risk and stand out as ethical, modern employers.
Final Thoughts
The "Failure to Prevent Fraud" offence is a clear message from regulators: ethical governance is no longer optional.
HR departments have a unique opportunity to lead-not just in compliance, but in shaping a culture where fraud has no place to hide.
Now is the time to partner across compliance, legal, and leadership teams to safeguard your people- and your business.
