Amicus stresses need to prepare for new fraud offense

Companies in the food industry in the United Kingdom have been urged to make sure they are prepared for upcoming legislation around fraud.

Under the Economic Crime and Corporate Transparency Act, the failure to prevent fraud offenses comes into effect on Sept. 1 and will apply to organizations that meet at least two of the following criteria: More than 250 employees, more than £36 million ($48.8 million) annual turnover, or more than £18 million ($24.4 million) in total assets.

Martin Polaine, a director at Amicus Legal Consultants, said: “The failure to prevent approach began with the Bribery Act in 2010 and it proved to be a successful deterrent. This new offense of failure to prevent fraud is following the same pattern. The underlying rationale is to try to ensure companies have in place sufficient procedures to prevent fraud.

“The offense is a strict liability offense, you don’t have to prove knowledge or intent on the part of a company. That is a policy decision, the idea is that it will encourage companies to have in place reasonable procedures to prevent fraud. There is a statutory defense if you as a company can show you had reasonable procedures in place or that it wasn’t appropriate in any event for you to have any such procedures.

“False claims and false labeling falls into the notion of making false representations, and whereas before there would be the risk of breaching consumer law or certain food regulatory provisions, you’ve now got the added concern around the criminal offense of fraud.” 

Reasonable procedures defense

According to advisory guidance from the Home Office, firms should consider top level commitment, risk assessment, proportionate risk-based prevention procedures, due diligence, communication, and monitoring and review as part of a reasonable procedures defense.

The offense will hold organizations accountable for fraud committed by their employees, agents, subsidiaries or other associates who provide services for or on behalf of the company, where the fraud was committed with the intention of benefiting the company or its clients. It does not have to be proven that the company actually benefited or that the organization’s senior executives or directors ordered, or knew about, the fraud.

While the act only applies to large companies, Polaine, who is also a practicing barrister, said a small organization can be an associated person.

“One of the issues for companies is that when it comes to rolling out awareness of procedures, anti-corruption policies and providing training, they need to look not just at their own staff but all those other associated persons that they do business with on a day-to-day basis,” he said.

The key requirement is that one of the acts which was part of the base fraud took place in the UK, or that that the gain or loss occurred in the UK. An organization can be liable no matter where it is based or incorporated. The penalty on conviction is an unlimited fine — to be determined by factors including the company’s engagement with having procedures to prevent fraud and testing their effectiveness.

Getting prepared
Polaine said it is a massive change in the sense that the obligations to be introduced are not there at the moment.

“Having said that, some companies will have very good anti-fraud procedures in place and because the Bribery Act’s been around for some time now, some anti-corruption procedures are, in effect, anti-fraud as well. The reality is for companies generally in the food and beverage industry it will be a question of looking and assessing what is there by way of policies and procedures. I would have thought for just about every company that meets the size threshold, it will be a question of making some changes to policies and certainly on training, risk assessment and ongoing monitoring and review,” he said.

“Because we are able to stress test procedures and give training to staff and other third parties we’re finding we are getting these requests now from companies who are getting themselves into a state of preparedness.”

Polaine encouraged companies to start acting on plans to prepare for the change.

“One of the realities is whatever set of procedures you have, when you use them for the first time in real life almost certainly one bit of them won’t work as they should, which is why we like to have these stress tested in a safe, secure environment. Underlying this is human behavior and human error so you have to build in for that. We’ve found some things need to be done but it’s by no means a bleak picture. Where we’ve found companies really benefit is around training and sensitizing staff and others in a practical way,” he said.

“The flip side is proportionality, I wouldn’t want companies to start running for the hills. It is a question of a risk-based and sensible approach. A lot of what’s required is a company sitting down and evaluating, as objectively as possible, where its vulnerabilities are, where there are gaps in procedures and what needs to be told to staff and others.”

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Source: https://www.foodsafetynews.com/2025/05/amicus-stresses-need-to-prepare-for-new-fraud-offense/