Hot Topic Highlight – Failure to Prevent Fraud
- Jen Lemen
- 14 minutes ago
- 3 min read
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What is this blog about?
In this week’s blog, we look at the new corporate criminal offence, the ‘failure to prevent fraud’, established by the Economic Crime and Corporate Transparency Act 2023 and effective from 1 September 2025.
This is essential knowledge for all RICS APC and AssocRICS candidates, as well as qualified Chartered Surveyors.
Who can commit the ‘failure to prevent fraud’?
The offence relates to large organisations or companies, also known as a relevant body (see Section 199 of the Act). These are organisations who meet two of the following three requirements:
>250 employees
Turnover >£36m
Balance sheet total >£18m
This also includes large not-for profit organisations, incorporated charities and incorporated public bodies. It does not, however, apply to police forces or Government departments.
What is the ‘failure to prevent fraud’?
A relevant body commits the offence of a ‘failure to prevent fraud’ if (UK Gov, 2025):
‘A specified fraud offence is committed by an employee, agent or other ‘associated person’, for the organisation’s benefit,
The organisation did not have ‘reasonable’ fraud prevention procedures in place’.
Liability is strict, so there is no need to prove that senior management within the firm knew about or ordered that the fraud took place.
If an organisation has reasonable fraud prevention measures in place, then this is the only defence against the offence in Court.
The six principles underlining what reasonable measures entail are:
Top-level commitment
Risk assessment
Proportionate procedures
Due diligence
Communication and training
Monitoring and review
How does this sit alongside existing legislation?
An organisation can now be prosecuted for failing to prevent fraud, alongside the individual who committed the fraud being prosecuted individually. The new legislation thus sits alongside existing legislation relating to fraud.
The aim of the new legislation is, therefore, to make organisations responsible for fraud offences committed by employees (with the intention of benefitting the organisation) and to improve corporate culture and fraud prevention measures.
What fraud offences are covered by the Act?
The Government website confirms the following fraud offences apply under the Act:
Fraud offences under section 1 of the Fraud Act 2006 including:
Fraud by false representation (section 2 Fraud Act 2006)
Fraud by failing to disclose information (section 3 Fraud Act 2006)
Fraud by abuse of position (section 4 Fraud Act 2006)
Participation in a fraudulent business (section 9, Fraud Act 2006)
Obtaining services dishonestly (section 11 Fraud Act 2006)
Cheating the public revenue (common law)
False accounting (section 17 Theft Act 1968)
False statements by company directors (section 19 Theft Act 1968)
Fraudulent trading (section 993 Companies Act 2006)
Where can I find out more?
We recommend reading the full summary of the legislation on the Government website, as well as keeping an eye on the RICS website for future updates.
You should also head to our blog for a summary of the existing RICS guidance on fraud.
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Stay tuned for our next blog post to help build a better you.
N.b. Nothing in this article constitutes legal, professional or financial advice.
