The government is warning tier 1 construction companies to take note of its new rules on corporate fraud.
The Economic Crime and Corporate Transparency Act 2023 introduces a new corporate criminal offence of failure to prevent fraud. This will hold organisations to account if they profit from fraud committed by their employees.
Under the new offence, an organisation will be liable where a specified fraud offence is committed by an employee or agent, for the organisation’s benefit, and the organisation did not have reasonable fraud prevention procedures in place. It does not need to be demonstrated that company bosses ordered or knew about the fraud.
The government is working with leading construction industry organisations to raise awareness of the new offence, which will mainly affect tier 1 contractors.
“This new offence will apply to companies that are incorporated and have more than 250 employees, or turnover of more than £36m, or assets of more than £18m,” a Home Office spokesperson said.
“The offence will come into effect when guidance is published, which is expected to be this spring, and the implementation period of four to six months is complete.”
Improving corporate fraud prevention
The Home Office is currently working on the guidance, which is expected to be similar to that for the offences of failure to prevent bribery, and failure to prevent the criminal facilitation of tax evasion. The government has published a fact sheet on the offence.
The government says the new rules will improve fraud prevention and protect victims, closing loopholes that have allowed organisations to avoid prosecution in the past.
Eddie Tuttle, head of policy at CIOB, said: “Construction companies need to be aware of the Economic Crime and Corporate Transparency Act 2023 and the new corporate criminal offence of failure to prevent fraud. Tier 1 contractors will be particularly affected and should check they have the right prevention procedures in place to discourage fraud among their employees and suppliers.”
