Failure To Prevent Fraud Offence: What Do Professional Sports Teams Need To Know?

• Law Firm: Norton Rose Fulbright
• Subject Matter: Corporate/Commercial Law, Media, Telecoms, IT, Entertainment, Criminal Law, Corporate and Company Law, Sport, White Collar Crime, Anti-Corruption & Fraud
• Author: Ms Pamela Reddy and Naomi Miles
• Published date: 07 August 2023

In an amendment to the Economic Crime and Corporate Transparency Bill (the Bill), the UK Government is set to introduce a new failure to prevent fraud offence. Like the UK Bribery Act 2010 (the UKBA) more than a decade earlier, this new offence is likely to bring about significant changes to corporate criminal liability in the fraud space and will significantly affect the compliance and regulatory landscape for large sports organisations.

The proposed offence shifts the focus from organisations as the victim of fraud (inward fraud) to make it easier for organisations to be prosecuted for fraud committed by their employees or agents for the organisation's benefit (outward fraud).

The offences proposed in the Bill will carry strict liability meaning liability will be automatic unless organisations can evidence that they had "reasonable" procedures in place to prevent fraud from arising. This places an additional burden on organisations to carry out a risk assessment and ensure compliance, prior to the introduction of the offence.

What is the offence?	Who is affected?
The proposed offence will impose liability on large corporate bodies or partnerships if they fail to prevent any of the listed fraud offences, and where such fraud is committed (i) by an employee, agent or third party, and (ii) with the intention to benefit the organisation.	'Large' corporate bodies and partnerships i.e., those that satisfy any two or more of the following criteria: more than 250 employees; more than '36 million turnover; and more than '18 million in total assets.
What frauds are covered?
Fraud by false representation Fraud by failing to disclose information Fraud by abuse of position Obtaining services dishonestly Participation in a fraudulent business False statements by company directors False accounting Fraudulent trading Cheating the public revenue
Where will the offence apply?	What defences are there?
While the exact jurisdictional scope of the proposed offence remains unclear, the offence would extend beyond companies incorporated or formed in the UK and, instead, creates liability for any overseas large organisation and subsidiaries of large organisations.	Like other failure to prevent offences, an organisation can avoid liability by demonstrating it had put in place "reasonable" procedures to prevent the fraud being committed. Given the breadth of fraud offences under this new offence, it will be useful to see what guidance the government...