Emma RadmoreThe Government has finally set out its proposals and published a fact sheet about its proposals for the new “failure to prevent” offence. It will be introduced in the Economic Crime and Corporate Transparency Bill (which is still at Committee Stage in the Lords and scheduled to stay there at least until 11 May). It will cover only failure to prevent fraud (which will be widely defined and will include dishonest sales practices, false accounting and hiding important information from consumers or investors).
A relevant organisation will be liable where a specified fraud offence is committed by an employee or agent for the organisation’s benefit, if the organisation does not have reasonable fraud prevention procedures in place, and the government will publish guidance on reasonable measures in due course. Knowledge or agreement to the fraud by management is not required. There will be an element of extra-territoriality, in that a company may be prosecuted where they and/or their employee is overseas, if a fraud is committed under UK law.
The offence will apply to all large bodies corporate and partnerships, including not-for-profit corporations and public bodies, but will apply only to organisations that meet the Companies Act criteria for being large companies (that is, meeting at least 2 of having more than 250 employees, turnover over £36m and total assets of more than £18m).
The sanction will be an unlimited fine, and only the corporate will be liable, and not additionally any individuals within it.
The Government says, bizarrely, that money laundering offences are not included because “relevant organisations” must already have AML procedures in place and be regulated by the FCA.
Assuming the offence as proposed survives the legislative process, it cannot take effect until the Government guidance is published.