On September 1, 2025, the UK will introduce a landmark corporate offence under the Economic Crime and Corporate Transparency Act 2023: the “failure to prevent fraud”. This offence places a clear obligation on large organisations to take proactive steps to prevent fraud committed by their employees and other associated persons to the benefits of the company or its customers.
This may be critical juncture for companies to evaluate their internal risk control and more specifically, how they vet individuals who act on their behalf.
Let’s learn more about this new offence and how you can take steps to mitigate your risk.
What Is the New Offence?
The offence holds large organisations criminally liable if a person associated with them commits fraud to benefit the organisation or its clients. Large organisations may be held criminally liable where an employee, agent, subsidiary, or other “associated person,” commits fraud with intent to benefit the organisation.
Examples of culpable acts might include:
- Dishonest sales practices
- Hiding/Failure to disclose important information from consumers or investors
- Dishonest practices in financial markets
An “associated person” includes not only direct employees, but also contractors, agents, subsidiaries, and any individual or organisation performing services on the company’s behalf.
Hence, as part of their fraud prevention measures, organisations shall consider their background screening program: employers need to know who is representing them and what risks they might pose.
Who’s Affected?
The offence applies to companies or partnerships meeting two of the following criteria:
- More than 250 employees
- Over £36 million in turnover
- Over £18 million in total assets
Even subsidiaries of qualifying organisations may be brought within scope.
The Compliance Challenge: Proving “Reasonable Procedures”
Organisations will not be liable, however, if they can demonstrate they had “reasonable procedures” in place to prevent fraud. The government has issued draft guidance built around six principles:
- Top-Level Commitment
- Risk Assessment
- Proportionate Procedures
- Due Diligence
- Communication and Training
- Monitoring and Review
Due diligence and proportionate procedures are precisely where employment screening plays a vital and measurable role.
Employment Screening as one of the Key Defence Strategies
Fraud may be enabled by failure to understand an individual’s background. Screening may provide the foundation for trust and a documented process for risk mitigation.
Here’s one example how pre-employment and ongoing screening can support your compliance:
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- Checking the identity of all staff and contractors is the first line of defence.
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- It’s essential to identify individuals with a history of criminal records, especially for high-trust roles.
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- Gaps, inconsistencies, or red flags in a candidate’s work history can reveal potential issues before they can become liabilities.
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- For roles with financial responsibilities, credit checks and directorship screenings can highlight conflicts of interest or financial distress, a known fraud risk factor.
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- Screening shouldn’t stop after hiring. Ongoing checks can help mitigate new risks, such as criminal convictions or directorship changes, in real-time.
Why Act Now?
With the UK’s new law coming into force on 1 September 2025, organisations are encouraged to begin reviewing their fraud risk strategies. While legal teams focus on governance and policies, HR and compliance teams play a vital role in embedding due diligence processes at the point of hiring.
In recent news, leading food delivery organisations have committed to further strengthening security checks on delivery riders to prevent illegal working in the gig economy. These efforts support the UK governments push to crack down on illegal working and further highlights the need to prevent fraud through a comprehensive screening program.
As a background screening provider, we help to provide tools to help our customers to design risk-based, proportionate procedures that meet both their legal expectations and practical needs. This means for employers aligning checks with role-specific risk, ensuring processes are well-documented, and helping to create a culture of transparency.
Conclusion
The new “failure to prevent fraud” offence doesn’t just create a new legal risk: it’s a clear signal that the government expects businesses to actively prevent financial crime. Screening is one of the critical components of fraud prevention and corporate compliance.
By taking a proactive approach to employment screening, your organisation can better protect itself, not only from legal exposure but from reputational damage, financial loss, and the erosion of trust.
If you’d like help reviewing your current screening processes or want to explore tailored risk-based solutions, contact our team today!
