Search for:

An addition to the roster of corporate criminal offences in the UK

In brief

On 11 April 2023, the UK government announced in a Factsheet the introduction of a new criminal offence of failure to prevent fraud for organisations profiting from fraud committed by their employees or agents acting on their behalf. Violations can result in unlimited fines for organisations involved. Introduced as an amendment to the Economic Crime and Corporate Transparency Bill 2022, the new offence will come into force on the day the Act is passed.


The offence is applicable to all large corporations and partnerships operating across all sectors, wherever incorporated or formed. In addition to businesses, this includes large not-for-profit organisations such as charities, and incorporated public bodies. “Large organisations” is defined as satisfying two or more of the following conditions in the financial year preceding the year of the fraud offence: i) turnover of more than GBP 36 million; ii) balance sheet total of more than GBP 18 million; and iii) number of employees more than 250.

A defence to the offence is either (i) having in place prevention procedures as it was reasonable in all the circumstances to expect the body to have in place, or (ii) to demonstrate that it was not reasonable in all the circumstances to expect the body to have any prevention procedures in place. In scope businesses should undertake the necessary risk assessments to ensure that they have reasonable prevention procedures in place. 

Background

The new offence follows on from recommendations made by the Law Commission’s review of corporate criminal liability in June 2022. Fraud accounts for a significant 41% of crime in the UK as of the year ending September 2022. In a bid to clamp down on financial crime, the UK government is introducing this offence as part of a set of measures to protect victims and drive a corporate cultural shift towards better fraud prevention. Its introduction is backed by the Serious Fraud Office and the Crown Prosecution Service. The Economic Crime and Corporate Transparency Bill 2022 has the overarching aims to combat economic crime and improve transparency over corporate entities. See our previous alert on the topic here.

In more detail: the offence

Applicable fraud offences

The specific fraud offences in the draft legislation are included in Schedule 10 of the Economic Crime and Corporate Transparency Bill 2022. The offence captures the following fraud and false accounting offences:

  • fraud by false representation 
  • fraud by failing to disclose information 
  • fraud by abuse of position
  • obtaining services dishonestly 
  • participation in a fraudulent business 
  • false statements by company directors 
  • false accounting 
  • fraudulent trading 
  • cheating the public revenue. 

In Scotland, the following common law offences would also apply: fraud, uttering; embezzlement.

The specified offences list will be reviewed after the offence comes into force and may be updated in the future. The Schedule listing the offences may be amended to add or remove an offence. For an offence to be added, it must be

  • an offence of dishonesty,
  • an offence that is otherwise of a similar character to those listed, or
  • a relevant money laundering offence (i.e., an offence under ss. 327 (concealing), 328 (arrangements), or 329 (acquisition, use and possession)).

An organisation’s benefit

A corporation will only be liable under this offence if a specified fraud offence is committed for its benefit.

The government has not yet released guidance on how a benefit will be defined and whether there will be separate offences for each benefit an organisation gains. It may be the case that this is left undefined under the offence and open to interpretation. 

Reasonable fraud prevention procedures

Whilst lack of knowledge will not be a defence, a reasonable procedures defence can be raised. The government will publish guidance on what constitutes reasonable procedures. In this regard it is useful to recall the government guidance issued for the other corporate criminal offences in the past (please see below).

Recommended actions 

What constitutes “reasonable procedure” is not defined by the draft legislation. This is similar to the other ‘failure to prevent’ offences. HMRC has published some guidance on what constitutes “reasonable procedures” in the context of the failure to prevent the facilitation of tax evasion known as the Corporate Criminal Offence (CCO) (link available here). This largely followed guidance issued by the UK Ministry of Justice on the failure to prevent bribery (the “Section 7 Offence“) (link available here) in relation to “adequate procedures” in respect of the UK Bribery Act 2010.  

The same six guiding principles of corporate compliance, which are relevant to the CCO and Section 7 Offence, are highly likely to also be applicable to the failure to prevent fraud offence: 

  • Risk assessment
  • Proportionality  
  • Top level commitment
  • Due Diligence
  • Communication (including training)
  • Monitoring and review.

As noted in our previous alert, as of January 2023 the UK had nine live CCO investigations and another 26 investigation opportunities under review, covering businesses sectors such as software providers, labour provision, transport, accountancy and legal services. Large organisations can prepare for the increase in corporate liability by undertaking risk assessments to ensure reasonable prevention procedures are in place. If you have more questions on the topic, please get in touch with a member of our team.

Author

Jennifer Revis is a partner in Baker McKenzie's London office and co-leads our EMEA Customs Team.
Jennifer focuses her practice on the public regulation of international trade, particularly in a wide range of customs compliance issues. She regularly advises clients on import matters, including customs valuation, rules of origin, and classification. She has worked with clients designing and implementing their compliance programs, policies, procedures and risk assessments, and assisting them in customs audits. She has significant experience in managing global customs projects and disputes, particularly in the area of customs valuation (transfer pricing; assists; royalties). Jennifer also advises on FTAs and trade remedies matters.
Jennifer has been consistently recognised as a "Leading Individual" for Customs & Excise and “Next Generation Partner” for Trade, WTO Anti-Dumping And Customs. Clients describe her as "an outstanding customs lawyer and litigator with fantastic experience. She is also easy to work with and leads her team with aplomb", "without a doubt, one of the best customs lawyers in the business (…) with an exceptionally deep knowledge of customs valuation concepts, as well as considerable experience applying those concepts in a variety of jurisdictions."
Jennifer has been on secondment to the UK customs authorities (Her Majesty's Revenue and Customs) in their tax and excise litigation department and to the Firm's European Law Centre in Brussels.

Author

Sunny Mann is the global chair of our International Trade Practice Group. He is a partner based in the London office, and has also worked in our Firm's Washington DC, New York, Sydney and Hong Kong offices.
Sunny advises clients (including numerous FTSE 100 and Fortune 100 businesses) on compliance and investigations with respect to export controls, trade sanctions and anti-bribery rules. Sunny is ranked as a Band 1 practitioner by both Legal 500 and Chambers, and was described as "excellent, with a calm and very practical approach”. Legal 500 most recently noted that Baker McKenzie “have a great team led by Sunny Mann, who has a reputation for being a strong and fair leader with fantastic people management skills to complement his undoubted trade controls expertise”.
Sunny also chairs our Geopolitical Risks Taskforce and oversaw our Firm’s support to clients responding to Russia’s invasion of Ukraine. The team was at the forefront of the market, having advised around one quarter of each of the Fortune 100, FTSE 100, CAC 40 and DAX 30 communities.
Sunny is a Visiting Professor at King’s College, London (teaching sanctions on the LLM course) and was for 15 years a Visiting Professor at the College of Europe, the leading institute for post-graduate European studies, where he taught an LLM course on Corporate Compliance.
Sunny has also served as a board member and trustee at Battersea Dogs and Cats Home, one of the oldest animal shelters.

Author

Tristan is a Partner at Baker McKenzie, advising clients on sanctions and export controls, anti-bribery and corruption and other corporate compliance risks. He provides compliance advice to clients across these risk areas, including in the context of complex cross-border transactions, as well as supporting clients in the management of related internal and external investigations. Tristan has advised clients in respect of investigations by the Serious Fraud Office, the Office of Financial Sanctions Implementation (OFSI), the National Crime Agency, HM Revenue & Customs, and the Competition and Markets Authority, as well as in related investigations by overseas agencies, including the US Department of Justice and the Office of Foreign Assets Control (OFAC). He also counsels clients in the design and implementation of their corporate compliance programmes.
Tristan is the UK head of Baker McKenzie’s market leading international trade practice, which is ranked as Tier 1 by Legal 500 and Band 1 by Chambers UK. He is personally ranked as a Leading Individual for ‘Trade, WTO, Anti-dumping and Customs’ by Legal 500 and for ‘Sanctions’ by Chambers UK. He is the EMEA Chair of the firm's Investigations, Compliance & Ethics practice.
Tristan also advises clients – including multinationals, private equity, SOEs and SWFs – on the impact of national security policy and regulation on their business and transactional strategy, and has supported clients on numerous filings under the UK National Security and Investment Act, as well as coordinating strategy and national security filings before multiple other European and non-European agencies.

Author

Rini joined Baker McKenzie after six years with the Canadian government, having worked on Brexit policy, as well in trade and tax litigation. She obtained her legal training with the Canadian government with the Trade Law Bureau and the Department of Justice. Her background in trade matters spans legal advisory, litigation and policy, having worked on free trade agreements, WTO litigation on market access and trade remedies issues. Prior to joining the Canadian government, she was a government affairs associate at one of Canada's most recognizable brands.

Author

Henry is a partner in the Baker McKenzie Dispute Resolution team and Co-Chair of the Investigations, Compliance & Ethics practice in London. Henry's practice focuses on investigations and business crime related issues with particular expertise in advising companies and individuals in relation to multijurisdictional fraud, bribery, corruption, and whistleblowing investigations and criminal and civil litigation. Henry is also well versed in supporting companies with their compliance processes and procedures. Henry worked in our San Francisco office for an extended period with our US white collar crime team and has been seconded to the investigations team of a well-known bank in London. During his secondment, Henry played a leading role in the internal legal team on a number of high-profile investigations. Henry has also been seconded to the UK Serious Fraud Office, during which time he was the Case Lawyer on a high profile and significant multi-million-pound investigation. Henry is recognised as a “Next Generation Partner” in Legal 500, which notes he is “intelligent and a good team player” and “extremely good in putting together both enforcement agency perspectives and the practical real life requirements and incidents”. He is also listed as a Future Leader in the Lexology Index for Investigations and was awarded Lexology’s Client Choice Award for Investigations in 2024.

Author

Mark heads the Financial Services & Regulatory (FSR) practice group in London and co-leads the FinTech group. He also acts as Chair of the FSR practice for the EMEA region and sits on the Global FSR Steering Committee. Mark is ranked as a Leading Individual in Legal 500 2022 for Financial Services (Non-Contentious Regulatory) and is individually ranked in Chambers 2022 for FinTech. He is described in these publications as being "very knowledgeable" and "very approachable" with "a wonderful range of FinTech experience" and as someone who is "clear, commercial and pragmatic and understands all the issues in detail." He has authored a number of articles and contributions for leading journals and other publications, most notably the Journal of International Banking and Financial Law, the International Guide to Money Laundering Law and Practice, and A Practitioner's Guide to the Law and Regulation of Financial Crime.

Author

Charles is a partner in the Baker McKenzie Dispute Resolution team based in London. Charles has substantial experience of managing a broad range of high-value, multijurisdictional commercial disputes and investigations, particularly those involving fraud and white-collar crime, contentious trusts and complex banking and finance disputes. He leads the Business Crime Unit, and he is particularly well known for his experience of advising on criminal law issues, and the interaction between criminal and civil law processes. Chambers cite clients in describing Charles as "extremely knowledgeable, user-friendly and always willing to go the extra mile," while Legal 500 similarly remark that he is "a great strategic thinker and a thorough pleasure to work with." Charles is also listed as a Rising Star in Litigation by Legal Week and is also listed in Global Investigations Review as a leading expert in conducting investigations.