A reminder about the UK’s Economic Crime and Corporate Transparency Act (ECCTA)
The new corporate offence of ‘failure to prevent fraud’ came into effect on 1st September 2025. It requires organisations to have ‘reasonable fraud prevention measures’ in place, or risk criminal liability. The ECCTA aligns with two previous Acts. The Bribery Act (2010) and the Criminal Finances Act (2017) which introduced similar ‘failure-to-prevent’ offences.
ECCTA applies to:
ECCTA applies to organisations, and their subsidiaries, with two of the following:
- over 250 employees
- turnover that exceeds £36m
- assets above £18m
If this sounds like you, you can read more here
This legislation aims to strengthen corporate accountability and reduce economic crime. To do this, the Government has outlined six key principles for a robust fraud prevention framework. We explain this in more detail here.
Organisations which fail to implement ‘reasonable’ fraud prevention procedures could face significant penalties, including unlimited fines, reputational damage and legal actions.
Key points to note:
Strict Liability: The offence applies even if senior management was unaware of the fraudulent activity.
Broad Scope: Fraudulent conduct includes false accounting, fraudulent trading, and conspiracy to defraud, among other offences.
Reasonable Procedures Defence: Companies can avoid liability by demonstrating that they had adequate fraud prevention measures in place.
The introduction of this offence marks a shift in corporate liability, meaning organisations cannot rely solely on reactive measures. Instead, they must proactively implement and maintain robust fraud prevention systems. This means that businesses need to consider fraud risk across multiple operational areas, from financial reporting and accounting to procurement, sales and third-party partnerships.
