Starting 1 September 2025, large organisations must comply with new legal requirements concerning criminal liability for fraud pursuant to the Economic Crime & Corporate Transparency Act 2023.
Under these new requirements, organisations can be held liable if their associated persons commit fraud to benefit the organisation or its clients.
There is a statutory defence for in scope organisations if they can show that they had reasonable fraud prevention procedures in place at the time the associated person committed the relevant fraud offence.
Organisations should be assessing whether they are in scope and determining who their associated persons are. To demonstrate reasonable fraud prevention procedures, organisations will need to be able to display top-level commitment, carry out proper fraud risk assessments, train staff, conduct due diligence, monitor controls, and keep the whole system under review.
In relation to due diligence, effective use of appropriate anti fraud clauses in compliance provisions of commercial service contracts (with the ability to terminate in the event of a breach) will form an important part of an organisation's reasonable fraud prevention procedures defence. Organisations are therefore encouraged to review and implement such clauses where appropriate in their relevant contracts.
If you would like Clarion to assist with preparations for new prevention procedures, review your contracts or include additional anti-fraud provisions, please don’t hesitate to contact our Commercial and Regulatory teams who can support you with a connected approach.