Failure to Prevent Fraud Offence Comes Into Effect

The Economic Crime and Corporate Transparency Act 2023 (ECCTA), which came into force on 1 September 2025, reforms the law of corporate criminal attribution for economic crimes across a broad spectrum. It makes provision for:

• economic crime and corporate transparency;
• companies, limited partnerships and other kinds of corporate entity; and
• the registration of overseas entities.

Most notably, Section 199 of the ECCTA creates a new corporate criminal offence of “failure to prevent fraud” (FTPF), which is intended to hold large organisations to account if they profit from fraud. A “large organisation” meets at least two of the following three criteria:

• a turnover of more than GBP36 million;
• a balance sheet total exceeding GBP18 million; or
• more than 250 employees.

Under the offence, large organisations may be held criminally liable where an employee, agent, subsidiary or other “associated person” commits a fraud intending to benefit the organisation, and the organisation did not have reasonable fraud prevention procedures in place. It extends strict corporate liability to a range of fraud offences, including fraud by failing to disclose information, fraud by false representation, and fraud by abuse of position.

According to the Home Office, examples may include dishonest sales practices, the hiding of important information from consumers or investors, or dishonest practices in financial markets. In the event of prosecution, an organisation would have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time when the fraud was committed.

The fraud prevention framework should be informed by six principles:

• top-level commitment;
• risk assessment;
• proportionate risk-based prevention procedures;
• due diligence;
• communication (including training); and
• monitoring and review.

Procedures to prevent fraud should be proportionate to the risk.

The FTPF offence makes it easier to hold organisations to account for fraud committed by employees, or other associated persons, which may benefit the organisation, or, in certain circumstances, their clients. The offence is also designed to encourage more organisations to implement or improve their prevention procedures, driving a fundamental shift in corporate culture to help prevent fraud.

The introduction of the FTPF offence in the ECCTA marks a further step in the evolution of corporate criminal responsibility for white-collar crime offences. It is a natural progression from the offence of failure to prevent bribery under Section 7 of the UK’s Bribery Act 2010, where an “associated person” commits bribery on an organisation’s behalf, as well as the Criminal Finances Act (CFA) 2017, which introduced corporate offences for businesses that fail to prevent their “associated persons” from criminally facilitating tax evasion.

The overriding intention of the new legislation – to provoke companies into taking action, stepping up their compliance procedures, improving their processes, being prepared and doing a much better job of fraud prevention – is both pragmatic and prudent. On the theme of deterrence, Serious Fraud Office (SFO) Director Nick Ephgrave outlined his agency’s plans to prosecute FTPF offences earlier in 2025:

“Come September, if they [companies] haven’t sorted themselves out, we’re coming after them. I’m very, very keen to prosecute someone for that [FTPF] offence. We can’t sit with the statute books gathering dust – someone needs to feel the bite.”

First Prosecution for Failing to Prevent Tax Evasion Under the Criminal Finances Act

On 5 August 2025, Bennett Verby Ltd, an accountancy firm based in Stockport, became the first business to be charged under the Criminal Finances Act (CFA) 2017 with failing to prevent the facilitation of tax evasion. The CFA introduced new powers to charge companies and partnerships that failed to prevent their employees or associates from facilitating tax evasion, irrespective of where the tax was evaded.

It was reported that a significant HMRC investigation involving more than 100 investigators had led to the prosecution of Bennett Verby under Section 45 of the CFA. The charge relates to alleged tax fraud involving research and development (R&D) tax credits and bounce-back loans, introduced by the UK government to support businesses affected by the COVID-19 pandemic. The combined value of the alleged fraud is around GBP16 million.

Following a brief hearing at Manchester Crown Court, a provisional trial date was set for September 2027. Six individuals, who also appeared in court alongside representatives from Bennett Verby, were charged with criminal offences including cheating the public revenue and money laundering.

No pleas have yet been entered by any of the defendants. However, recent media reports quote Bennett Verby as publicly denying the charges: “The business faces a single technical regulatory offence connected to its monitoring procedures; this is not part of the principal case before the court. We can confirm that the matter is denied and will be vigorously defended.”

Despite the CFA offences having been in force for eight years, there have not been any previous decisions to prosecute. As of 31 December 2024, according to information published by HMRC, 114 “opportunities” had already been reviewed and dismissed, while 11 live investigations were under way and 28 “live opportunities” were still under review.

Prior to the charges brought in August 2025, MPs had criticised HMRC’s apparent reluctance to bring charges against companies that facilitate tax evasion. Margaret Hodge MP, formerly Chair of the Public Accounts Committee, said that the lack of enforcement had rendered the CFA “a paper tiger”. Following the charges in the Bennett Verby case, has that tiger finally roared?

Businesses commit a criminal offence under the CFA if they fail to prevent an associated person (an employee, agent or third party) from facilitating tax evasion by a third party. As strict liability offences, which cover both domestic and overseas tax evasion, it is not necessary to prove that senior management knew that evasion took place. If a business has facilitated tax evasion, the only viable defence to CFA offences is having “reasonable” preventative procedures in place.

For UK tax evasion, it is not relevant where the corporate entity is based or where the conduct of the parties has taken place. Although more complex, non-UK tax evasion rules generally necessitate a connection to the UK. If convicted, a business can face unlimited fines, reputational damage and, potentially, loss of regulatory approval.

The prosecution of Bennett Verby serves as a timely reminder that HMRC intends to progress suitable cases that involve facilitation of tax evasion offences to prosecution.

Joint SFO/CPS Corporate Prosecution Guidance

In anticipation of the ECCTA, which came into force on 1 September 2025, the SFO and the Crown Prosecution Service (CPS) updated their guidance on corporate prosecutions in August 2025.

Together, they published a joint SFO-CPS Corporate Prosecution Guidance, which outlines the common approach of the Director of Public Prosecutions (DPP) and the Director of the SFO to the prosecution of corporate offending under the ECCTA, including the new FTPF offence. Co-ordination is central to the new guidance: wherever possible, the SFO and CPS aim to avoid potential conflict with domestic regulators, Eurojust, and foreign prosecutors.

According to the joint guidance: “The prosecution of corporate entities, in appropriate cases, is an important part of the enforcement of criminal law and ensures the full range of criminality can be captured. Such prosecutions have a deterrent effect, protect the public, support ethical business practices and lead to increased confidence in the criminal justice system.”

For crimes listed under Schedule 12 ECCTA, a lower attribution threshold makes it easier for prosecutors to hold companies criminally liable under Section 196 of the ECCTA when a senior manager commits a listed offence. Notably, prosecutors are now required to prefer the ECCTA rather than the common law identification doctrine, which required conduct to be attributable to an individual who represents the “directing mind and will” of a company. The revised test relies on the relevant conduct of a “senior manager”.

The guidance outlines the new FTPF offence alongside existing Bribery Act and CFA offences. The only available defences are proving that procedures are “adequate” for bribery or “reasonable” for tax or fraud offences.

Although the CPS still applies the Full Code Test, other factors must also be considered, such as:

• systemic compliance failings;
• prior warnings or sanctions;
• board-level knowledge or wilful blindness; and
• harm to market integrity or unidentified victims.

Mitigation factors listed in the guidance include early self-reporting, a mature compliance culture and genuine remediation.

Deferred Prosecution Agreements (DPAs) remain an effective option. Full co-operation, including timely disclosure of internal investigation materials, is mandatory. Inadequate co-operation risks prosecution while parallel prosecutions of individuals have become commonplace. 

In relation to early self-reporting, genuine co-operation and robust compliance programmes, the new guidance largely aligns with the SFO’s pre-existing Corporate Guidance. However, there are differences. Entities that are incorporated by statute, for example, do not specifically feature in the SFO’s earlier guidance. The new guidance brings them into scope: this expands potential liability beyond typical corporate structures, and signals that statutory bodies must maintain adequate standards of compliance and be in a strong position to co-operate fully with investigations.

The SFO’s previous Corporate Guidance detailed expectations at a granular level with examples that contrasted co-operative and uncooperative behaviour, in addition to engagement and investigation timelines. The new joint guidance is more strategic, focusing on high-level statutory changes and public interest factors that serve to influence prosecution decisions.

Transparent early engagement is identified as a priority in both sets of guidelines. However, the joint guidance goes further in its assessment of co-operation, emphasising cross-border co-ordination and multi-agency alignment.

Underlining the message that self-reporting and proactive co-operation are of paramount importance, the new guidance confirms that enforcement is increasingly rigorous for every type of corporate entity.

Potential Abolition of Jury Trials for Fraud Cases

This is arguably the most consequential potential reform to the criminal justice system since the Criminal Justice Act 1948, which abolished penal servitude, hard labour and the sentence of whipping. The recently proposed abolition of jury trials for fraud cases certainly divides opinion among lawyers and the wider public.

Asked by the government to formulate proposals to tackle a record courts backlog, Sir Brian Leveson, who previously served as the President of the Queen’s Bench Division and Head of Criminal Justice, undertook an Independent Review of the Criminal Courts.

In addressing the crisis in English and Welsh criminal courts, his subsequent report, published in July 2025, calls for significant investment and structural reforms. Among its 45 recommendations, a core recommendation is that all serious and complex fraud cases should be tried by judge alone.

Only defendants who face minor offences in a magistrates’ court are denied the right to a jury trial: this has been synonymous with the right to a fair trial in England and Wales since the Magna Carta was signed in 1215. However, if Leveson’s recommendations were to be implemented, that right could be removed – not only for fraud, but also for a range of other serious offences.

In addition to myriad challenges facing the criminal justice system, Leveson identifies an increase in the volume and type of evidence, and the amount of data in serious and complex fraud trials. However, it is not clear whether the jury system itself is central to the backlog problem.

Practically, there are many who would question whether the upheaval caused by the abolition of juries in fraud trials justifies such a fundamental change. Philosophically, many more would object to the idea of removing juries, unnecessarily and unjustifiably, and dispensing with a core feature of the UK’s criminal justice system that has endured for more than 800 years. 

The idea of abolishing juries in fraud cases is not new: it was first ventilated in the 1983 Roskill Report and later in the 2001 Auld Review. The latter led to Section 43 of the Criminal Justice Act 2003, which allowed prosecution applications for trials to be conducted without a jury. Although this legislation was enacted, provisions to permit trial without a jury in complex fraud cases did not come into force on the passage of the Act.

Arguments for retaining and dispensing with jury trials are well rehearsed. Nevertheless, judges in fraud trials can also be prone to making mistakes.

In July 2025, the Supreme Court unanimously overturned convictions of conspiracy to defraud of two traders, Tom Hayes and Carlo Palombo, who had been convicted, respectively, of manipulating the London Inter-Bank Offered Rate (LIBOR) and the Euro Inter-Bank Offered Rate (EURIBOR).

The Supreme Court found that their trial judges’ directions to the juries were “inaccurate and unfair” and that the Court of Appeal was wrong to reject the “previously uncontroversial proposition that a LIBOR or EURIBOR submission typically involved a selection from within a range of borrowing rates”.

Delivering the Supreme Court judgment, Lord Legatt noted that the judge’s directions which “conflated the question whether the submission of a rate complied with the LIBOR definition with the question whether it represented the genuine opinion of the submitter… usurped the jury’s function and undermined the fairness of the trial”. The judgment concluded: “It is not possible to say that, if the jury had been properly directed, they would have been bound to return verdicts of guilty. The convictions are therefore unsafe and cannot stand.”

HMRC Uptick in Criminal Investigations

In the speech accompanying her Spring Statement, delivered in March 2025, Chancellor Rachel Reeves said that HMRC will “crack down on tax evasion” and raise approximately GBP7.5 billion in revenue. She outlined measures designed to close the “tax gap”: the difference between the amount of tax that should be paid to HMRC and what is actually paid. By investing in the HMRC’s “capacity to crack down on tax avoidance”, she added, the government aims “to increase the number of tax fraudsters charged by 20%.”

Under the heading “Prosecute more tax fraudsters”, the full text of the Spring Statement provides context and background to this broad ambition:

“HMRC is expanding its counter fraud capability to increase the number of annual charging decisions for the most harmful fraud by 20%, compared to current levels, from 500 to 600 per year by 2029–30. Additional criminal investigations will focus on delivering a strong deterrent. This will include tackling those who undermine legitimate trade and small business, fraud committed by the wealthy, fraud facilitated by those in large corporations, and by individuals and companies who make it possible for others to hide money offshore. Investigations will also address organised criminal attacks, focusing on illicit finance and complex money-laundering schemes.”

HMRC has responsibility for conducting criminal investigations in order to gather the necessary evidence; this is then passed to the relevant prosecuting authority which makes the decision on whether a case should proceed for prosecution. Meeting the higher charging decisions target outlined in the Spring Statement will inevitably increase the number of HMRC criminal investigations.

Most cases are investigated on a civil basis by HMRC, typically leading to fines and penalties. Invariably, because of cost, resources and the higher burden of proof applied compared to civil investigations, criminal investigations only apply in the most serious cases.

To combat tax evasion and fraud, Rachel Reeves announced the recruitment of an additional 5,000 compliance officers last year. To date, around 500 have been recruited. In practice, HMRC reviews every case of suspected tax evasion or fraud to assess their suitability for criminal investigation. Given the government’s target, it is inevitable that more cases will become criminal investigations. Equally, more civil investigations (Code of Practice 9) are likely to become criminal investigations, particularly if there is inadequate co-operation or disclosure.

The Spring Statement also announced that a new HMRC reward scheme for informant whistle-blowers will be launched “targeting serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes”. The scheme will be modelled on successful US and Canadian whistle-blower schemes, which reward informants with a sum linked to a percentage of any tax taken as a result of their actions.

Closing the “tax gap” remains a key government priority. Taxpayers can therefore expect an increasingly active HMRC that focuses on ramping up compliance activity and, where appropriate, launching more investigations, both civil and criminal. Over time, the expansion of its counter-fraud capability will increase the number of decisions to prosecute.