“Failure to prevent fraud” set to become an offence

The government is set to add a “failure to prevent fraud” offence to the Economic Crime and Corporate Transparency Bill which is currently going through Parliament.

The new offence could put white collar professionals – including lawyers – at risk of prosecution.

Security minister Tom Tugendhat told MPs during the Bill’s second reading in the Commons that it will be aimed at intermediaries that do not have reasonable or adequate measures in place to prevent money laundering, fraud, and false accounting.

The Bill is also set to lift the £25,000 cap on the SRA’s power to fine firms following breaches of economic crime regulations with the idea of referring cases to the Solicitors Discipliniary Tribunal deemed “time-consuming and resource-intensive”.

There is also set to be a new clause allowing the regulator to “proactively request information” from firms and solicitors in order to monitor compliance.

Robert Buckland MP, who initially introduced the amendment with the aim of making failure to prevent fraud an “individual liability”, said:

“I do not want the government to adopt new criminal offences only to find that their use becomes sporadic or ineffective.

However, the offences I propose help to further drive a culture of compliance and lawfulness where corporates behave responsibly.”

Serious Fraud Office chief Lisa Osofsky said the new offence has the “potential to transform prosecution” of fraud, adding that a similar offence brought in to combat bribery was a “game-changer”.

The Bill is now set to be debated in the House of Lords.

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