A softly, softly approach to fraud that may still shake the boardroom

Like the Bribery Act before it, prosecutions under the new failure to prevent fraud offence may be ‘few and far between’ – but the behavioural impact across organisations will be no less significant, predicts leading regulatory lawyer Tim Williamson.

Tim, a partner at Clarke Willmott LLP, believes the new rule – part of the Economic Crime and Corporate Transparency Act 2023, coming into force on 1 September – will act as a quiet catalyst for change, prompting a shift in board-level behaviour.

Failure to prevent fraud applies to large, incorporated bodies and partnerships that meet two of three criteria: more than 250 employees, a turnover over £36 million, or total assets exceeding £18 million, and applies to the entire organisation, including subsidiaries, regardless of location.

“The likely impact of the Act will be that it softly prompts a shift in behaviour among senior management, much like we saw with the Bribery Act, which took effect in 2011, where prosecutions for breaches have been few and far between,” said Tim.

“The Bribery Act got people to change how they acted because they were concerned about the consequences of getting caught. Now, it’s standard across industries to work with clients who have a set of policies and procedures in place to tackle bribery and corruption.”

Tim says it will be interesting to see how things pan out over the next six months.

“One would expect the regulators, and it’s clear it’s either going to be the Serious Fraud Office or the police at the form of the Crown Prosecution Service, to take their time to identify the worst offenders, because they will want to ensure any initial prosecutions pack a punch.

“Investigating and prosecuting fraud is time-consuming, and with no additional resources allocated to regulators for these new offences, existing workloads will become even more demanding, but I suspect it’s the soft power effect, driving behaviour change, because of what might happen.

“The market expects responsible businesses to engage meaningfully with anti-bribery and corruption practices; the market expects businesses to engage meaningfully in environment and social governance issues; to interrogate its supply chain, to ascertain whether those businesses have a similar philosophy, and that all comes from the market.

“I expect that the new rules will certainly create risk for businesses, certainly for larger in scope businesses, but it will probably not manifest itself in prosecution for some time, certainly not unless one is the worst offenders.

“But what it will do is ensure or improve the chances of organisational change being affected in many different sectors, because it will be considered ‘the right thing to do’.”

Tim, alongside the regulatory team at Clarke Willmott, has compiled a guide to help businesses get ready for the new regulations.

It can be found here: Clarke Willmott’s Guide to Getting Business Ready for New Regulation on Corporate Offences and Fraud.

Tim advises clients across sectors including sports, ports, retail, energy, infrastructure, and space, helping them mitigate regulatory risks and maintain compliance.

Clarke Willmott LLP is a national firm and has offices in Birmingham, Bristol, Cardiff, London, Manchester, Southampton, and Taunton.