How the UK’s ECCTA “failure to prevent fraud” Provision Impacts US Companies

Sep 9, 2025 | Regulatory Updates

Starting September 1, 2025,  UK’s Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduced significant reforms in corporate criminal liability, introducing a new “failure to prevent fraud” offense for large organizations, including corporations, individuals and associated persons. The act also introduces identity verification for filings, restricts corporate directors, and gives law enforcement new tools to seize crypto-assets, all aiming to increase transparency and combat economic crime.

Key Changes and Their Impact

A pivotal shift in corporate accountability
The “failure to prevent fraud” provision imposes strict criminal liability and potentially unlimited fines on large organizations if fraud is committed by employees, agents, subsidiaries, or associated persons for the company’s benefit, regardless of whether senior management was aware or complicit. Large corporations are defined with the following criteria: have “more than 250 employees, turnover of more than £36 million, and a balance sheet total of more than £18 million”.

Mandatory robustness in anti-fraud frameworks
Large organizations must now demonstrate to courts that they had reasonable anti-fraud measures in place at the time of the misconduct. This requires a comprehensive approach covering risk assessments, policies, training, third-party oversight, and whistleblower mechanisms as stipulated in official guidance

Significant consequences of non-compliance
Failure to protect your organization against fraud can lead not only to unlimited financial penalties, but also criminal investigation and reputational harm. Enforcement agencies, including the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) are empowered to act swiftly and decisively under the new regime. Organizations that fail to implement adequate anti-fraud procedures risk prosecution, steep fines, and lasting damage to their reputation, all of which can significantly impair investors and stakeholder trust.

Impacts on U.S. Corporations

Expanded Corporate Liability for Fraud Abroad
Under ECCTA, “large organizations”, including entities whose parent companies qualify as such; even if the company itself is not UK-based can be held criminally liable if an associated person commits fraud intended to benefit the organization. Importantly, liability attaches regardless of senior management’s knowledge or involvement, unless the company can prove it had reasonable prevention procedures in place.

U.S. firms with UK subsidiaries or wholly owned by UK parent companies, must evaluate whether they fall within this scope. If so, they face prosecution in the UK unless they can demonstrate robust anti-fraud frameworks in place.

Senior Managers Regime Extends Accountability
ECCTA also instituted a senior managers regime, effective December 26, 2023, which holds organizations accountable when senior managers commit relevant offences (including fraud, bribery, or sanctions violations) within their actual or apparent scope of authority. U.S. corporations with senior leadership operating in or overseeing UK businesses should be mindful that their actions, or failure to act, can implicate the entire organization.

Necessity for Global Anti-Fraud Governance
To mitigate risk, affected U.S. corporations must adopt comprehensive, documented, and demonstrable fraud prevention measures across all corporate layers, including policies, training, third-party risk controls, and escalation channels. This approach aligns with the UK’s standard for a “reasonable steps” defense under the new offense.

Even without a physical presence in the UK, a U.S. corporation could be prosecuted if its UK connected entities or associated persons commit fraud intended to benefit the organization. The law shifts the burden to corporations to prove they acted responsibly, rather than presuming innocence.

Peridot Eight Can Help

At Peridot Eight, we stand ready to support your organization in navigating this heightened regulatory landscape. Whether it’s conducting tailored fraud-risk assessments, refining controls, developing policies, training staff, or strengthening whistleblowing frameworks, our expertise ensures your organization is not only compliant—but resilient.

We’ve created an 𝗘𝗖𝗖𝗧𝗔 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗣𝗹𝗮𝘆𝗯𝗼𝗼𝗸 to help your team hit the ground running. Don’t wait for enforcement to ramp up. A𝗰𝗰𝗲𝘀𝘀 𝘆𝗼𝘂𝗿 𝗳𝗿𝗲𝗲 𝗽𝗹𝗮𝘆𝗯𝗼𝗼𝗸 and empower your compliance strategy today.

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    Would you like PeridotEight to help you design and implement an anti-fraud compliance program that aligns with the new law and positions your organization with confidence in this new era of corporate accountability? Contact Us today!

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