Failure To Prevent Fraud—Statutory Guidance

The UK Government has published guidance on the "Failure to Prevent Fraud" (FTPF) offence, which came into effect in 2023. This offence holds companies liable if they fail to implement reasonable procedures to prevent fraud committed by individuals associated with them, such as employees or agents.

The guidance sets out that companies can avoid liability if they have reasonable procedures in place to prevent fraud or if it was unreasonable to expect such procedures. It lists six key principles for businesses to follow: (i) top-level commitment, (ii) risk assessment, (iii) proportionate, risk-based procedures, (iv) due diligence, (v) communication, and (vi) monitoring and review. These principles are similar to those found in the Bribery Act 2010. However, the guidance provides little practical advice on what constitutes "reasonable" fraud prevention, which makes it challenging for businesses to determine the exact measures to take.