The Economic Crime and Corporate Transparency Act 2023 (the "ECCTA") received Royal Assent on 26 October 2023. The ECCTA expands the basis upon which companies can be held criminally liable for failing to prevent fraud.

New offence: FTP fraud

Under section 199 of the ECCTA, a relevant body (defined broadly, to include companies, LLPs, partnerships and other business structures) which is a "large organisation" may be criminally liable where a person "associated" with it, for example an employee, subsidiary or agent, commits a fraud intending to benefit: (i) the relevant body or (ii) any person to whom, or to whose subsidiary, the associated person provides services on behalf of the relevant body ("the FTP fraud offence").

"Large organisation" is defined as a relevant body which meets two or more of the following criteria:

  • Turnover of more than £36million.
  • Balance sheet total of more than £18million.
  • More than 250 employees.

Where the relevant body is not itself a large organisation but is a subsidiary of a body which is a large organisation, it will nonetheless be within scope for the FTP fraud offence.

The FTP fraud offence can apply to a non-UK constituted relevant body if it fails to prevent a fraud in the United Kingdom.

Defence

It is a defence to the FTP fraud offence if the relevant body is able to show that:

  1. there were prevention procedures in place that were reasonable in all the circumstances for the body to have in place to prevent fraud; or,
  2. it was not reasonable in the circumstances to expect such prevention procedures to be in place.

How can my organisation prepare for the FTP fraud offence?

The Government has committed to publishing guidance on prevention procedures before the FTP fraud offence comes into force.

By reviewing fraud prevention procedures now, businesses will: (i) ensure they are ready for the FTP fraud offence when it does come into force, and, (ii) mitigate against the risk of being involved in facilitating fraud meantime, with the reputational, legal and financial risk that such facilitation entails.

Other aspects of the ECCTA

Brodies colleagues have blogged on other aspects of the ECCTA. For an update in relation to identification requirements and limited partnership reforms please see here.

Brodies will be publishing regular updates on the ECCTA including in relation to the anticipated consultation on fraud prevention procedures. In the meantime, if you have any questions on how the offence might impact on your organisation, please do not hesitate to get in touch.

Contributors

Ramsay Hall

Legal Director

Tony Convery

Associate