What the UK’s Economic Crime & Corporate Transparency Act (ECCTA) Means for You

The UK’s Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduces a significant legal development for organisations operating in the UK. One of the key provisions is the new corporate offence of ‘failure to prevent fraud’, which places an obligation on organisations to take reasonable steps to prevent fraudulent activities conducted by employees or associated persons. This legislation aims to strengthen corporate accountability and reduce economic crime.

Who is affected and when does the ECCTA take effect?

The law is coming into force on 1st September 2025 and will apply to both UK and non-UK organisations provided a UK nexus exists, meeting at least two of the following criteria

• More than 250 employees,
• More than £36 million in turnover,
• More than £18 million in total assets.

(These thresholds apply in respect of the financial year preceding the alleged fraud).

Organisations failing to implement “reasonable fraud prevention measures” could face significant penalties, including unlimited fines, reputational damage and legal actions. Said differently, proof that “reasonable” measures were in place provides a defence if a case reaches court.

Understanding the ‘Failure to Prevent Fraud’ offence

The ECCTA aligns with two previous Acts. The Bribery Act 2010 and the Criminal Finances Act 2017 introduced similar failure-to-prevent offences. Under this new provision, an organisation will be held criminally liable if a person associated with it (such as an employee, agent, or subsidiary) commits fraud for the organisation’s benefit, and if the organisation failed to implement reasonable fraud prevention procedures.

Key points to note:

• Strict Liability: The offence applies even if senior management was unaware of the fraudulent activity.
• Broad Scope: Fraudulent conduct includes false accounting, fraudulent trading, and conspiracy to defraud, among other offences.
• Reasonable Procedures Defence: Companies can avoid liability by demonstrating that they had adequate fraud prevention measures in place.

The introduction of this offence marks a shift in corporate liability, meaning organisations cannot rely solely on reactive measures. Instead, they must proactively implement and maintain robust fraud prevention systems. Failure to do so could result in severe legal, reputational and financial consequences.

To protect themselves, businesses must recognise the varied nature of fraud. The offence encompasses a broad range of fraudulent activities, including false accounting, fraudulent trading, and misrepresentation or deception to gain financial benefits. This means that businesses need to consider fraud risk across multiple operational areas, from financial reporting and accounting to procurement, sales and third-party partnerships.

How geoficiency can help ensure compliance

If you are affected by this new Act, geoficiency has the technology you need. We can give you a quick demo and show how it will work with your existing systems to give your financial team full oversight. Not only does it offer improved efficiencies, it also makes compliance easy.