Small businesses across the UK are being urged to take note of new fraud prevention measures set to become law this autumn.
Effective from September
From September 1, the new “Failure to Prevent Fraud” offence, under the terms of the Economic Crime and Corporate Transparency Act (ECCT), will make large companies legally responsible for stopping fraud committed within their own organisations.
While the law will apply only to businesses with more than 250 staff, a turnover of above £36m or assets exceeding £18m, experts believe its principles will become best practice for firms of all sizes.
Prime Accountants Group, which has offices in Solihull, Birmingham and Coventry, is encouraging smaller firms to recognise the early signs of fraud and to strengthen their own internal controls.
Professionals issue warnings
Forensic accountant Shannon Walden said: “Businesses will protect themselves from being the victim of fraud if it’s due to the actions of a third party, such as a cyber fraud, or if it’s a recognised fraud, such as an employee stealing from the business.
“The type of fraud which this new offence looks to prevent is fraud which the business benefits from – for example, fraudulent misreporting which artificially inflates the company’s value.
“What we’re seeing is that these are the types of fraud which actually bring businesses down.”
She warned that pressures placed on staff can lead to small manipulations that escalate over time.
“By adding on a few extra thousand each year to meet targets, the holes get bigger year after year, and the business can be left with a huge gap in their accounts to plug,” she said.
Fraud triangle
Walden pointed to the Fraud Triangle model – pressure, opportunity and rationalisation – as a useful tool for small firms to assess their risk.
Further guidance for business owners is available at primeaccountants.co.uk
Government guidance on failure to prevent fraud can be found here: https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta
Lord David Hanson, Minister with Responsibility for Fraud, said: Fraud is a pernicious crime, and we are determined to root it out wherever it takes place.”
Nick Ephgrave QPM, Director of the Serious Fraud Office (SFO), said: “Corporate fraud significantly damages confidence in UK companies and ultimately costs the taxpayer.”
