Failure to Prevent Fraud Law Guidance – 9 Key Actions to Protect Your Business

WHAT IS THE NEW ‘FAILURE TO PREVENT FRAUD’ LAW?

Fraud continues to damage trust in business, imposes substantial costs and causes harm to the public purse.

CIFAS, the UK’s leading Fraud prevention service, reported a record 421,000 fraud cases in 2024, while the Association of Certified Fraud Examiners (ACFE) estimates organisations lose around 5% of revenue to fraud each year.

In response, the UK government introduced the ‘Failure to Prevent Fraud’ offence under the Economic Crime and Corporate Transparency Act, which came into force on 1 September 2025.

WHAT IS THE ‘FAILURE TO PREVENT FRAUD’ OFFENCE?

The new offence makes an organisation liable if it fails to prevent a specified fraud offence where:

• An employee or agent, or other associated person, commits the fraud; and
• The fraud is intended to benefit the organisation or a person to whom services are provided on behalf of the organisation

The law covers a wide range of offences, including false representation, failing to disclose information, abuse of position, obtaining dishonest services, false accounting, fraudulent trading, and cheating the public revenue.

Failure to comply with the new Failure to Prevent Fraud Law could lead to criminal investigations by the SFO or CPS, with organisations facing unlimited fines and serious reputational harm.

WHO WILL THE ‘FAILURE TO PREVENT FRAUD’ OFFENCE LAW APPLY TO?

The offence aims to hold large organisations accountable for profiting from fraud. It applies to corporate businesses, partnerships, certain not-for-profits, and public bodies that meet at least two of the following criteria.

• Turnover above £36m.
• Assets of at least £18m.
• More than 250 employees.

Smaller organisations should still review their anti-fraud procedures, as they may be seen as an ‘associated person’ of a larger company and required to have reasonable measures in place to prevent fraud.

HOW TO PREPARE FOR THE NEW ‘FAILURE TO PREVENT FRAUD’ LAW

Under the new law, organisations can be held criminally liable if they lack ‘reasonable fraud prevention procedures’. Simply having anti-fraud or anti-bribery policies isn’t enough, businesses must show these measures work in practice.

A key requirement is a strong, trusted whistleblowing system that’s clear, confidential, and free from retaliation. Firms should review their policies and consider aligning with the BS ISO 37002 whistleblowing standard to ensure effective reporting and protection for those who speak up.

FAILURE TO PREVENT FRAUD LAW GUIDANCE

9 KEY ACTIONS BUSINESSES SHOULD TAKE

1. Performing effective audit and monitoring processes including undertaking a comprehensive fraud risk assessment, mapping where fraud might occur both internally and externally.
2. Reinforcing and tailoring financial controls to ensure that any potential red flags are picked up and comprehensively reviewed.
3. Reviewing and updating whistleblowing policies.
4. Ensure internal and external safe reporting channels are available for all employees including all of the organisations associated parties.
5. Ensure that there is board/senior management accountability for both fraud prevention and whistleblowing.
6. Provide comprehensive anti-fraud and whistleblowing staff training making sure everyone knows their rights and responsibilities.
7. Review all third-party contracts and associated persons. This can include agents, suppliers and all associated third parties whose actions could potentially implicate the organisation.
8. Review due diligence processes and ensure regular internal review of systems and controls.
9. Review whistleblowing case management system to ensure that it is fit for purpose. The system should support all steps of the whistleblowing and fraud investigation process.

WHAT THE ‘FAILURE TO PREVENT FRAUD LAW’ MEANS FOR YOUR BUSINESS

The ‘Failure to Prevent Fraud’ law represents a major shift in corporate responsibility. It increases legal risk for organisations but also creates a strong incentive to build robust whistleblowing reporting systems, not just as a moral or ethical tool, but as a legal and procedural necessity.

For businesses, this means taking stock now, undertake a call to action and ensuring policies are more than just words on paper.  Organisations that do so will stand a far better chance of demonstrating ‘reasonable fraud prevention procedures’, the essential defence under the new regime.

The offence is UK-wide in scope.  Large organisations operating in England, Scotland, Wales and Northern Ireland must comply with the same requirements.

There are no direct equivalent laws in the Republic of Ireland (ROI). However, if a business is incorporated in ROI and has UK operations, services UK clients, or uses UK-based third parties, they may be within scope of the new UK laws.   

HOW AAB CAN HELP: FAILURE TO PREVENT FRAUD LAW GUIDANCE

At AAB, we help businesses stay one step ahead of fraud. Our fraud advisory team combines expertise in workplace investigations, criminal law, and compliance to help you meet the new ‘Failure to Prevent Fraud’ requirements with confidence.

From carrying out detailed fraud risk assessments to strengthening internal controls and whistleblowing procedures, we work with you to protect your business, your people, and your reputation.

We also provide practical fraud awareness training for staff and leadership teams, helping to build a culture where integrity comes first. Whether you need support with prevention, detection, or recovery, AAB is here to help you take proactive steps that make a real difference.

To learn more about how AAB can help with Failure to Prevent Fraud Law guidance, contact Sean Mcauley, a member of our people team or your usual AAB contact.

Winners of Large Firm of the Year and Tax Team of the Year at the Accounting Excellence Awards 2025.