Overview
- The UK Economic Crime & Corporate Transparency Act 2023 sets out two major reforms making it much easier for UK authorities to prosecute corporate wrongdoing:
- it substantially increases the circumstances in which a company can be held liable for crimes committed by their employees. Now, relevant offences committed by a company’s ‘senior managers’ can be attributed to the company.This reform came into force on 26 December 2023; and
- it introduces a new corporate offence of ‘failure to prevent fraud’, which criminalises companies that fail to prevent persons associated with them from committing a range of fraud offences. A company has a full defence where it had in place ‘reasonable procedures’ to prevent the fraud from occurring.On 6 November 2024, the UK government published its long-awaited guidance as to the new offence and the meaning of ‘reasonable procedures’; at the same time, it announced that the offence will come into force on 1 September 2025.
- These reforms constitute the most significant change to corporate criminal liability in the UK for decades. In addition, both of these provisions have extra-territorial effect, meaning that the actions of individuals and companies located abroad can be prosecuted in the UK as long as there is a sufficient link to the UK.
- This article summarises these key aspects of the new legislation and (i) sets out what companies can do now in order to mitigate risks already posed by the ‘senior manager’ reform; and (ii) outlines what companies should be doing to prepare for the new ‘failure to prevent’ offence coming into force.
