Government amendment 84A to the Economic Crime and Corporate Transparency Bill introduces a new ‘failure to prevent fraud’ offence. This implements an important part of the Law Commission’s recommendations on reform to the UK’s corporate liability framework.
However, the amendment departs from the Law Commission’s recommendations in an important respect on how failure to prevent offences should be designed – by stipulating that the offence will only apply to “large organisations”. This includes companies who meet two out of the following three criteria:
- a turnover of more than £36 million;
- a balance sheet of more than £18 million; and
- more than 250 employees.
It is not clear however on what basis this assessment has been made or what the evidence base is to support it. In particular it is not clear why the threshold is necessary given the construction of the offence or why the introduction of the offence would create a disproportionate burden on smaller organisations.
This parliamentary briefing puts forward arguments as to why the government should reconsider the exemption for SMEs in the new offence, and what the risks of having a threshold for SMEs are.
You can read the full briefing below.