Economic Crime and Corporate Transparency Act 2023

199 Failure to prevent fraud U.K.

(1) A relevant body which is a large organisation (see sections 201 and 202) is guilty of an offence if, in a financial year of the body (“the year of the fraud offence”), a person who is associated with the body (“the associate”) commits a fraud offence intending to benefit (whether directly or indirectly)—

(a) the relevant body, or

(b) any person to whom, or to whose subsidiary undertaking, the associate provides services on behalf of the relevant body.

(2) A relevant body is also guilty of an offence under subsection (1) if—

(a) an employee of the relevant body commits a fraud offence intending to benefit (whether directly or indirectly) the relevant body,

(b) the fraud offence is committed in a financial year of a parent undertaking of which the relevant body is a subsidiary undertaking (“the year of the fraud offence”), and

(c) the parent undertaking is a relevant body which is a large organisation.

(3) But the relevant body is not guilty of an offence under subsection (1)(b) if the body itself was, or was intended to be, a victim of the fraud offence.

(4) It is a defence for the relevant body to prove that, at the time the fraud offence was committed—

(a) the body had in place such prevention procedures as it was reasonable in all the circumstances to expect the body to have in place, or

(b) it was not reasonable in all the circumstances to expect the body to have any prevention procedures in place.

(5) In subsection (4) “prevention procedures” means procedures designed to prevent persons associated with the body from committing fraud offences.

(6) A “fraud offence” is an act which constitutes—

(a) an offence listed in Schedule 13 (a “listed offence”), or

(b) aiding, abetting, counselling or procuring the commission of a listed offence.

(7) For the purposes of this section a person is associated with a relevant body if—

(a) the person is an employee, agent or subsidiary undertaking of the relevant body, or

(b) the person otherwise performs services for or on behalf of the body.

(8) For the purposes of this section a person is also associated with a relevant body if the person is an employee of a subsidiary undertaking of the relevant body; but for the purpose of determining whether an offence is committed by virtue of this subsection, subsection (1) has effect with the omission of paragraph (b) (and the “or” preceding it).

(9) Whether or not a particular person performs services for or on behalf of a relevant body is to be determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between that person and the body.

(10) Where a relevant body is liable to be proceeded against for an offence under subsection (1) in a particular part of the United Kingdom, proceedings against the body for the offence may be taken in any place in the United Kingdom.

(11) Where by virtue of subsection (10) proceedings against a relevant body for an offence are to be taken in Scotland—

(a) the body may be prosecuted, tried and punished in a sheriff court district determined by the Lord Advocate, as if the offence had been committed in that district, and

(b) the offence is, for all purposes incidental to or consequential on the trial or punishment, deemed to have been committed in that district.

(12) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine;

(b) on summary conviction in England and Wales, to a fine;

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(13) In this section—

• “relevant body” means a body corporate or a partnership (wherever incorporated or formed);

• “sheriff court district” is to be read in accordance with the Criminal Procedure (Scotland) Act 1995 (see section 307(1) of that Act).

(14) In this section “financial year”—

(a) in relation to a UK company, has the meaning given by the Companies Act 2006 (see section 390 of that Act);

(b) in relation to a relevant body that is not a UK company means—

(i) any period in respect of which a profit and loss account of the relevant body is required to be made up (by its constitution or by the law under which it is established), whether that period is a year or not, or

(ii) if the body is not required by its constitution or the law under which it is established to draw up a profit and loss account, a calendar year.

Commencement Information

I1 S. 199 in force at Royal Assent for specified purposes, see s. 219(1)(2)(b)