Legal background Failure to Prevent Fraud
The new offence of failure to prevent fraud is intended to mirror the existing offences of failure to prevent bribery and failure to prevent the criminal facilitation of tax evasion contained in sections 7, 8, and 9 of the Bribery Act 2010 (BA 2010) and Part 3 of the Criminal Finances Act 2017 (CFA 2017) respectively.
	The offence will apply where the fraud is committed by an employee or associate of the organisation with a view to benefiting the organisation.
	The offence will only apply to large organisations (defined by reference to their turnover, balance sheet total and number of employees).
	A defence would be available where "reasonable procedures" for the prevention of fraud have been implemented by the organisation (thus mirroring the approach taken in the CFA 2017 for failure to prevent the facilitation of tax evasion), with provision that in some circumstances it may be reasonable for no such procedures to be in place. The statutory defence in the Bribery Act 2010 (BA 2010) (failure to prevent bribery) is "adequate procedures" but this has been interpreted as meaning no more than "reasonable in all the circumstances" in other words, equivalent to ‘reasonable procedures’.
	The offence will only apply where the employee or associated person commits a relevant fraud offence under the law of part of the UK. This usually requires that one of the acts which was part of the fraud took place in the UK, but for some offences, it is enough that the intended gain or loss occurred, or was intended to occur, in the UK.
	If a UK-based employee commits fraud, the employer could be prosecuted, wherever the organisation is based.
	If an employee or associated person of a company based overseas commits fraud in the UK, or targeting British victims, the organisation could be prosecuted.
	British companies will not generally be liable for their overseas employees or subsidiaries in relation to offending that takes place abroad (with no UK nexus).
	The burden of proving that the organisation had put in place reasonable prevention procedures, or that it was reasonable not to have any such procedures, will lie with the defence (that is, the organisation).
	If convicted on indictment, an organisation could receive an unlimited fine. As set out in the sentencing guidelines, courts will take account of all the circumstances in deciding the appropriate level for a particular case.
	If convicted on summary conviction, the organisation will receive a fine. In Scotland and Northern Ireland, this fine may not exceed the statutory maximum.
	The Government will publish guidance on the procedures organisations can put in place to prevent fraud. As an organisation’s defence depends on demonstrating that it has reasonable procedures, where applicable under the circumstances, it is likely that where an organisation has complied with this guidance this will be enough to demonstrate that it had reasonable procedures in place.