The government has proposed a new bill which will make it easier to prosecute a large organisation if an employee commits fraud for the benefit of a business.
Under the Economic Crime and Corporate Transparency Bill, businesses which fail to deter fraud will face enforcement action and fines.
Prosecutors will not have to prove that company bosses ordered or knew about a worker’s fraudulent activity. An organisation convicted of the offence could receive an unlimited fine.
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The bill is currently going through the House of Lords and will be discussed again tomorrow (18 April).
Under the current law, a company can only be convicted if the person who commissioned the offence was “directing mind and will” of the company.
However, it can be difficult to identify a company’s “directing mind”, particularly in large, multinational companies.
Matt Jenkin, employment partner at law firm Moorcrofts, said employers must put prevention procedures in place in order to avoid prosecution.
Speaking to HR magazine, he said: “Before the new offence comes into force, the government will publish guidance providing organisations with more information about these reasonable procedures.”
Even before guidance is published, Jenkin advised organisations to start reviewing their fraud prevention procedures now.
He said: “It is likely that training will play a key part in showing that reasonable procedures are in place. As a result, large organisations should revisit their fraud prevention and make sure that regular up-to-date training is provided.”
Sybille Raphael, legal director at UK whistleblowing charity Protect, said employers’ best fraud prevention asset is whistleblowing.
Speaking to HR magazine she said: “To detect and deter fraud, employers have a very effective and cost-efficient mechanism: their staff, when they’re willing to speak up and report concerns.
“Research shows that over 40% of all fraud is detected by tip-offs and over half of those come from employees.
“Whistleblowers prove to be better and much quicker than internal audit at identifying fraud.”
She added: “Any “reasonable steps” defence to the new offence should include evidence that the employer has introduced effective whistleblowing arrangements.”
