Failure to Prevent Fraud (Section 199 Economic Crime and Corporate Transparency Act 2023)

Failure to Prevent Fraud is an offence under s.199 Economic Crime and Corporate Transparency Act 2023. A relevant body which is a large organisation is guilty of an offence if, in a financial year of the body, a person associated with the body commits a fraud offence intending to benefit, whether directly or indirectly, the relevant body or any person to whom, or to whose subsidiary undertaking, the associate provides services on behalf of the relevant body (s.199(1)). A relevant body is also guilty where one of its employees commits a fraud offence intending to benefit it and the body is a subsidiary undertaking of a parent undertaking which is a large organisation (s.199(2)). A "fraud offence" is an offence listed in Schedule 13, or aiding, abetting, counselling or procuring one (s.199(6)). A "large organisation" is a relevant body which satisfied two or more of the following in the preceding financial year: turnover of more than £36 million, balance sheet total of more than £18 million, more than 250 employees (s.201(1)). It is a defence for the body to prove that it had in place such prevention procedures as it was reasonable in all the circumstances to expect, or that it was not reasonable to expect it to have any (s.199(4)). Maximum sentence: on conviction on indictment, a fine; on summary conviction in England and Wales, a fine (s.199(12)). The section came fully into force on 1 September 2025 (S.I. 2025/349, reg. 3).

In practice

This is an either-way offence: it may be tried at the magistrates' court or the Crown Court. Mode of trial depends on the seriousness and the defendant's election. Investigation is typically led by the Serious Fraud Office (SFO), National Crime Agency (NCA), or specialist economic crime units. This is a corporate offence: the prosecution is of the organisation, not individual employees (though individuals may face separate charges). Key evidence includes the organisation's fraud prevention procedures (or absence thereof), evidence of the underlying fraud, and the relationship between the associated person and the organisation. The suspect must be cautioned in accordance with Code C PACE 1984 before any questions about the offence are put to them. Interviews must be audio-recorded (Code E) or, for indictable offences, may be visually recorded (Code F).