Senior Associate James Broomhall has provided comment in Compliance Week on the steps that companies must take to ensure they are compliant with the new offence of failure to prevent fraud, which has now come into effect as part of the Economic Crime and Corporate Transparency Act.

Discussing whether the new offence will pave the way for more whistleblowing reports, James noted: “Failure to prevent offences will certainly pave the way for more whistleblowing reports, however this is only if companies create systems people actually trust. Large organisations will face strict liability if an associated person commits fraud for their benefit and they can’t show ‘reasonable procedures’ were in place – prosecutors won’t need to prove intent or knowledge, and strong internal reporting and whistleblowing procedures will be critical to mounting a defence.”

“With the new failure to prevent fraud offence, the old ‘directing mind and will’ requirement no longer limits corporate prosecutions. If staff fail to report suspected fraud, bribery, or tax evasion, they not only increase the risk of corporate liability and significant financial penalties but may also expose themselves to personal risk.

“Personal liability arises where an employee is directly involved in the wrongdoing – by committing it, assisting others, or deliberately ignoring clear warning signs – or where they are under a statutory duty to report, such as in anti-money laundering cases.”

James went on to comment on how companies can best facilitate incident reporting, stating: “Companies must do more than copy and paste an existing policy. The guidance is clear – it’s advisory, not a safe harbour, and procedures must be tailored to the company’s specific risks, which may include confidential reporting channels, the option for anonymity, independent and well-resourced investigations, and robust anti-retaliation measures.

“A risk assessment is essential, and any decision not to implement specific controls should be documented. Above all, companies must build a culture where people believe they will be protected and listened to if they raise concerns, that’s what will make the difference in defending against this new offence.”

James’ comments were published in Compliance Week, 29 August 2025.