Fraud is the most common crime committed in the UK, yet corporate prosecutions remain rare.

That’s about to change.

The UK government has introduced a new UK corporate offence, failure to prevent fraud, as part of the Economic Crime and Corporate Transparency Act. From September 2025, large organisations could face prosecution if an associated person commits a fraud offence for the firm’s gain, unless they can show they had reasonable prevention procedures. Firms can receive unlimited fines, with the specific amount depending on the nature of the case. 

In this article, we'll outline what this offence means for your firm. Or, if you're ready to start putting the appropriate compliance policies in place, download our new checklist: How to comply with the new 'Failure to prevent fraud' offence.

Who’s in scope for the ‘failure to prevent fraud’ offence?

The failure to prevent fraud offence applies only to large organisations. In simple terms, that means meeting at least two of these three thresholds in the financial year before the fraud offence took place:

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

This definition covers incorporated law firms, LLPs, and partnerships, including non-UK companies with a UK presence. Smaller firms are out of scope for direct prosecution. However, that doesn’t mean they can ignore the law. If you act as an associated person for a larger client, you could still be caught indirectly through contractual obligations or as part of a client’s fraud prevention procedures.

Example:

A boutique litigation firm with 40 staff advises a FTSE 250 client on a transaction. If the client’s policies require its advisers to adopt certain fraud prevention measures, the smaller firm will need to meet those standards, even though it isn’t a large organisation under the Act.

What counts as ‘failure to prevent fraud’

At its core, the offence is about fraud committed by an associated person that benefits your firm or its clients. An associated person is anyone who performs services for or on behalf of your firm. These include employees, partners, agents, subsidiaries, or even certain contractors.

If that person commits a fraud offence while acting in that capacity, and your firm did not have reasonable fraud prevention procedures in place, you could be prosecuted. Crucially, prosecutors don’t need to prove that senior managers knew about the act. The liability comes from the act itself and the absence of such procedures.

Fraud offences covered include:

• False accounting under the Theft Act 1968
• Fraud by false representation, failing to disclose information, or abuse of position under the Fraud Act 2006
• Fraudulent trading under the Companies Act 2006
• Participating in a fraudulent business or obtaining services dishonestly

Examples:

• A solicitor manipulates billable hour records to increase fees, benefiting both themselves and the firm.
• A partner makes a misleading statement in a tender to win a major client.
• An associate files a false claim in litigation to gain leverage for a client.

In each case, the failure to prevent fraud offence could apply (even if the sole or dominant motivation was personal gain) if the act also benefited the firm or its clients.

The strict liability element

The failure to prevent fraud offence is a strict liability corporate offence. That means the prosecution doesn’t need to prove that your firm’s senior managers ordered, encouraged, or even knew about the fraudulent behaviour. If an associated person commits a fraud offence for the benefit of your firm or its clients, and you can’t show you had reasonable prevention procedures in place, the liability is automatic.

There are only two defences:

1. Proving you had reasonable fraud prevention procedures in place at the time.
2. Showing it was not reasonable, in all the circumstances, to have such procedures.

The second defence will be rare. In most cases, firms will need to show they had a proportionate fraud prevention framework in operation, backed by evidence such as risk assessments, training records, and documented compliance processes.

Example:

If a partner submits false statements to a regulator on a client’s behalf, claiming they meet certain criteria when they don’t, the firm could face criminal liability (unless it can demonstrate active, proportionate controls to prevent fraud offences of that nature).

Why law firms are particularly exposed

Law firms operate in environments where fraud risks are often high and the scope for fraudulent behaviour is broader than it might seem. They regularly act as intermediaries in high-value transactions, prepare regulatory filings, and make representations to third parties.

Each of these activities creates opportunities for committing fraud. For example, if a solicitor overstates a client’s compliance with environmental standards in tender documents to help win a government contract.

The Act also applies if the fraud committed benefits a client you represent, not just your firm. For instance, if a litigator knowingly presents misleading evidence to court, strengthening a client’s case while also indirectly benefiting the firm’s reputation.

This makes it possible for liability to arise from dishonest conduct in negotiations, litigation, or advisory work, even if no money passes through the firm’s accounts.

For law firms, being prosecuted under this new offence could be as damaging reputationally as it is financially. The SRA and other regulators will expect firms to maintain robust fraud prevention policies in line with the government guidance notes. Even an investigation could significantly undermine client trust and lead to costly remediation.

Final thoughts

The failure to prevent fraud offence marks a significant shift in corporate criminal liability for law firms. If an associated person commits a fraud offence for your firm’s or a client’s benefit, the only shield is being able to prove you had reasonable fraud prevention procedures in place.

Acting now will reduce the risk of facing prosecution under this new offence. Use our free checklist to identify the gaps in your fraud prevention framework and take confident, proportionate steps to comply.

Download the checklist today. 

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