Resumed FCPA Enforcement
Question: What is the new UK corporate offence under the Economic Crime and Corporate Transparency Act 2023?
Answer: On September 1 2025, the new UK corporate offense of “failure toprevent fraud” will come into force as part of the Economic Crime and Corporate Transparency Act 2023. Detailed guidance for organizations on this new offense is provided by the Home Office[1]. This development may be relevant to Israeli companies with subsidiaries, representative offices, employees or distributors or agents that are based in the UK.
The new offence intends tohold companies accountable for fraud committed by its employees, or other associated persons, which may benefit the company itself or its clients. The aim of introducing this new offense is to encourage more companies to implement or improve internal controls and fraud prevention procedures. If eventually prosecuted, a company may have a valid defense if it is able to demonstrate that it had implemented the reasonable procedures to prevent fraud. This approach resembles other offenses (and related defenses), such as failure to prevent bribery and failure to prevent facilitation of tax evasion.
Failure to prevent fraud relates to the underlying fraud offenses, such as false representation, failure to disclose information, abuse of position, participation in fraudulent business, obtaining services dishonestly, cheating the public revenue, false accounting, false statements by company directors, fraudulent trading. It is important to note that the company does not have to receive a benefit for the offence to apply. It is sufficient that the underlying fraud offence was committed with the intent of benefiting the company. Furthermore, the underlying fraud offence can be committed by a “person associated with the relevant body,” meaning individuals or entities who perform services for or on behalf of the company, including employees, subsidiaries, agents, contractors or partners. This underscores the importance of having a properly functioning third party management procedures.
With respect to the geographical reach of failure to prevent fraud offense, the underlying fraud should have a UK connection. Either one of the elements of fraud should have taken place in the UK or economic benefit to the company resulting from the underlying fraud should have occurred in the UK. Israeli companies with subsidiaries, representative offices, employees or distributors or agents that are based in the UK should therefore be especially diligent.
In general, this new development yet again underscores the importance of effective corporate compliance programs in the areas of corruption, money laundering, and prevention of fraud.
[1] November 24, Economic Crime and Corporate Transparency Act 2023: Guidance to organizations on the offense of failure to prevent fraud: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://assets.publishing.service.gov.uk/media/67f8ef1845705eb1a1513f35/Failure+to+Prevent+Fraud+Guidance+-+English+Language+v1.6.pdf
*The contents of this message, current at the date of publication, are for reference and general informational purposes only and do not constitute legal advice. You should contact your attorney to obtain advice with respect to any particular legal matter. You should not act or refrain from acting on the basis of information in this publication without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.
Question: What is the new UK corporate offence under the Economic Crime and Corporate Transparency Act 2023?
Answer: On September 1 2025, the new UK corporate offense of “failure toprevent fraud” will come into force as part of the Economic Crime and Corporate Transparency Act 2023. Detailed guidance for organizations on this new offense is provided by the Home Office[1]. This development may be relevant to Israeli companies with subsidiaries, representative offices, employees or distributors or agents that are based in the UK.
The new offence intends tohold companies accountable for fraud committed by its employees, or other associated persons, which may benefit the company itself or its clients. The aim of introducing this new offense is to encourage more companies to implement or improve internal controls and fraud prevention procedures. If eventually prosecuted, a company may have a valid defense if it is able to demonstrate that it had implemented the reasonable procedures to prevent fraud. This approach resembles other offenses (and related defenses), such as failure to prevent bribery and failure to prevent facilitation of tax evasion.
Failure to prevent fraud relates to the underlying fraud offenses, such as false representation, failure to disclose information, abuse of position, participation in fraudulent business, obtaining services dishonestly, cheating the public revenue, false accounting, false statements by company directors, fraudulent trading. It is important to note that the company does not have to receive a benefit for the offence to apply. It is sufficient that the underlying fraud offence was committed with the intent of benefiting the company. Furthermore, the underlying fraud offence can be committed by a “person associated with the relevant body,” meaning individuals or entities who perform services for or on behalf of the company, including employees, subsidiaries, agents, contractors or partners. This underscores the importance of having a properly functioning third party management procedures.
With respect to the geographical reach of failure to prevent fraud offense, the underlying fraud should have a UK connection. Either one of the elements of fraud should have taken place in the UK or economic benefit to the company resulting from the underlying fraud should have occurred in the UK. Israeli companies with subsidiaries, representative offices, employees or distributors or agents that are based in the UK should therefore be especially diligent.
In general, this new development yet again underscores the importance of effective corporate compliance programs in the areas of corruption, money laundering, and prevention of fraud.
[1] November 24, Economic Crime and Corporate Transparency Act 2023: Guidance to organizations on the offense of failure to prevent fraud: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://assets.publishing.service.gov.uk/media/67f8ef1845705eb1a1513f35/Failure+to+Prevent+Fraud+Guidance+-+English+Language+v1.6.pdf
*The contents of this message, current at the date of publication, are for reference and general informational purposes only and do not constitute legal advice. You should contact your attorney to obtain advice with respect to any particular legal matter. You should not act or refrain from acting on the basis of information in this publication without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.
