Now might be the right time to assess if the steps taken by your business to comply with the new failure to prevent fraud offence are reasonable, and to consider if you need to review historic procedures put in place to prevent bribery and the facilitation of tax evasion, particularly in the latter case with HMRC's recent commencement of its first prosecution of a business for failure to prevent the facilitation of tax evasion.
What is failure to prevent fraud?
The new failure to prevent fraud offence holds large organisations criminally liable if an employee, agent or other associated person commits fraud for the benefit of the organisation or a client, and the business has not put in place reasonable procedures to prevent such activity. This means that even if the senior management was unaware of the fraudulent conduct, the business itself can be prosecuted unless it can demonstrate that it has reasonable fraud prevention procedures in place to deter and detect fraud.
What about failure to prevent the facilitation of tax evasion?
Corporate criminal offences for failure to prevent the facilitation of tax evasion were introduced i by the Criminal Finances Act 2017,These offences are also strict liability in nature. A prosecutor need not prove intent or knowledge on behalf of the business, but a business , will be criminally responsible if an associated person facilitates tax evasion while providing services for or on behalf of the business. This is even if the business itself was unaware of the underlying conduct. A business has a defence if it can show that it has reasonable preventative measures in place not to facilitate tax evasion or it was unreasonable to have those preventative measures in place.
HMRC has recently confirmed its first prosecution for this offence (which we have written about here,) This is part of HMRC's increased focus on using these offences to deter tax evasion.
As at autumn 2025, HMRC had 11 live investigations for failure to prevent tax evasion, with a further 27 opportunities under review across sectors including software providers, labour provision, professional services and transport
How can I protect my business?
Most businesses act responsibly and embrace good corporate social responsibility practices. Many businesses also see the value in embedding responsible tax strategies as part of their business plans and wider environmental, social and governance ("ESG") strategies, which may include adopting the Fair Tax mark accreditation.
Notwithstanding a genuine business intention to comply with the law, there are steps that businesses should take to protect themselves against a corporate criminal investigation and charge. Common to both fraud and tax evasion "failure to prevent" offences referred to above is a defence that the business had reasonable prevention procedures in place to prevent fraud and tax evasion
Businesses need to have adequate prevention procedures in place to benefit from a defence if faced with a failure to prevent bribery investigation. This is a higher test than for reasonable prevention procedures.
Government guidance on prevention procedures for all three failure to prevent offences are consistent in highlighting six guiding principles to be incorporated into a business' governance framework. Those principles are:
- top level commitment;
- risk assessment;
- proportionate risk-based prevention procedures;
- due diligence;
- communication, including training; and
- monitoring and review.
It is clear from these Government guidance's that simply applying existing procedures tailored to addressing a different risk is not necessarily a sufficient response to tackle the risk of fraud, tax evasion or bribery.
Each issue requires a thorough assessment tailored to the nature of the business. What might have been reasonable or adequate in the past may no longer be so as the risk landscape changes.
Risk assessments should therefore be reviewed periodically, with additional assessments triggered when there are events that could change the risk profile (such as a change in business, IT or labour provision or a merger or acquisition). All assessments and action taken should be properly recorded.
The above is important as in the event of a criminal investigation or prosecution for a failure to prevent offence , the business would have the evidential burden of proving that reasonable (or adequate in the case of bribery) prevention procedures were in place to successfully defend a failure to prevent offence.
