Deloitte comments on 'failure to prevent' fraud guidance

Commenting on the ‘failure to prevent’ guidance that was issued today, Jules Colborne-Baber, partner and head of forensic at Deloitte UK, said:

“The ‘failure to prevent’ fraud legislation – alongside the change to the identification doctrine – marks the biggest changes to the law in this area for a generation. This could be a game-changer in tackling corporate fraud. For the new legislation to be a success, authorities must use their powers to enforce it.

“The legislation will compel organisations to look at fraud from a new perspective. Most fraud prevention frameworks focus on risks to the organisation, but the new Act requires them to address fraud where they are the intended beneficiary, rather than the victim. This shift in focus means they must consider risks they might not have looked at before, and that should ultimately lead to better outcomes for consumers and the economy.

“The new legislation is already on organisations’ radars, but it’s essential to drive home how important this is and how wide its impact could be. Though it only applies directly to large organisations, many smaller entities will find themselves subject to it if they provide services to in-scope organisations and meet the definition of an ‘associated person’. Overseas subsidiaries and entities with a UK nexus can be in-scope too, and they must consider whether the legislation will affect them.

“The response from organisations so far shows that they are taking this seriously. There have been tangible efforts from businesses to invest in fraud protection controls, with early signs that they’re conducting fraud risk reviews and putting in place fraud prevention procedures.”