A unique insight into business’ fraud risk and preparedness

Robert Brooker

Head of Forensics and Fraud, PKF GM

“The findings contained in this report are enlightening, if not unsurprising. It reflects that, despite a widely held view that fraud is prevalent across many industries, there is a distinct lack of awareness of what constitutes fraud and how to prevent, deter and detect it.

In particular, the number of businesses needing to act more than once during the past 12 months, demonstrates that despite previous incidents, adequate preventative measures were not put in place, or they were not implemented across the organisation.

The report states only 20% of organisations employ a dedicated fraud prevention specialist and only 24% employ 3rd party consultants to undertake these duties, this reflects a widespread weakness in fraud prevention capability. The Economic Crime and Corporate Transparency Act requirements may determine that all organisations that fall within the relevant criteria, should have this resource as a minimum. Additionally, for those that fall outside of the criteria it is clearly “best practice” and will only help to reduce the threat of fraud and its devastating impact

Further, many foresee the SFO’s newly appointed Director, with his extensive background in policing, adopting a more proactive approach, to investigations and prosecution, to complement the anticipated increase in cases that the new legislation may bring.”

Andrew Bird KC

Barrister, 5 St Andrew’s Hill Chambers

“Make no mistake. What Parliament wants to do is to make it easier to prosecute companies, convict and fine them, and extract more money from them by way of confiscation and compensation. Parliament wants to provide the means for a Court to destroy the company if that is appropriate. Thus, the new Economic Crime and Corporate Transparency Act will do two important things.

Firstly, it creates a new offence (strict liability subject to statutory defences) of failing to prevent fraud, which in effect imposes a positive burden to have policies and procedures in place which are not merely box-ticking or window-dressing, but actually effective. Secondly (and quite separately) it changes the established rules about the persons for whose acts a company will find itself criminally liable.

As one who has seen the sharp end, in the Crown Court, of the effect of the failing to prevent bribery offence, with not only multi-million-pound fines but also multi-million-pound confiscation orders on top, I can heartily recommend the common sense of getting these matters addressed, and sooner rather than later. The effect of a conviction can be devastating not only on a company’s immediate finances, but also on its ability to do business abroad, or to seek investment.  In the event of a conviction there is also a lot of explaining to do – to shareholders, banks, regulators, employees, creditors and customers.  It is crucial that all companies who will be affected by the new legislation take positive steps to ensure that they are not an early target for prosecution.”

Dr Samantha Bourton

Senior Lecturer in Law, University of the West of England

“The prevalence of fraud is increasing annually and it is now the most common crime in the United Kingdom (UK). Indeed, the UK Fraud Strategy highlights that, in 2022, one in fifteen adults were a victim of fraud and, by 2020, one in five businesses were a victim of fraud in the past three years. Aside from causing significant financial losses, it is also important to recognise that fraud creates substantial non-monetary costs with the proceeds of fraud often used to fund organised crime and terrorism. Accordingly, the Government has recently introduced a series of initiatives designed to respond to this growing threat. This includes the Economic Crime and Corporate Transparency Act, which is designed to reform the methods used to attribute criminal liability to companies that facilitate, or fail to prevent, fraud offences. With the imminent enactment of the Act, this important research by Foot Anstey provides a much-needed insight into the perspective of businesses on fraud risks and measures taken to prevent them. In revealing that 39% of senior managers are currently unaware of the new failure to prevent fraud offence, this report also provides a vital contribution to businesses by explaining the scope of the offence and its likely impact, as well as an insight into how organisations can protect themselves against the significant costs of fraud and criminal liability.”

Matthew Field

Head of Fraud Advisory Panel, Fraud Advisory Panel

“This report, which the Fraud Advisory Panel welcomes, demonstrates how fraud affects businesses of all sizes and the importance of a robust prevention strategy. The Economic Crime & Corporate Transparency Act presents an opportunity for companies to take a proactive stance against economic crime and to adopt policies and procedures that will enhance their resilience to the threats.

Whilst the Bill will only apply to “large” organisations, fraud is a crime that all are exposed to regardless of the number of employees, turnover or assets. Without taking steps to counter it, vulnerability increases. Counter fraud measures should not be presented as an additional burden. The threat remains and the harm caused is significant, so taking preventative measures is the best defence available.

This report outlines how companies are prepared to take steps in combatting fraud, and the conditions placed within legislation are not a barrier to supporting all with those efforts.

Daniel White

Barrister, Citadel Chambers

“Successive Governments have pledged to tackle the pandemic that is fraud for decades. The much-debated Economic Crime and Corporate Transparency Act and its “failure to prevent offence”, represents a large step forward in the fight, by putting larger Corporations, whose employees or agents commit fraud, within the cross hairs of prosecutors.

It’s surprising that an average loss of 5% of turnover to fraud within these organisations wasn’t enough to trigger a more widespread response to this threat previously. Hopefully this legislation will enhance the fraud prevention and detection strategies within companies of all sizes, through the implementation of better policies and using the latest anti-fraud technologies available.”