David Houghton, head of forensic accounting at Azets, gave the warning after the new Economic Crime and Corporate Transparency Act (ECCT Act) changed the scope of failure to prevent fraud for large businesses. 

As a result, a large UK business will be liable for prosecution if fraud is committed by someone acting on its behalf – even if senior leadership was not directly involved. Employees, subsidiaries, agents and other “associated persons” are all in the scope of Act as those who could act on a business’s behalf.

“Businesses who are found to be in breach of the new compliance requirements can face prosecution, reputational damage, and significant financial penalties – even if senior management had no idea the fraud was happening,” Mr Houghton added. “Firms need to act now to ensure they’re not at risk.”

He recommends companies review and strengthen their internal fraud prevention measures to comply with the ECCT Act: 

• Conducting fraud risk assessments to identify vulnerabilities  
• Reviewing and updating internal controls, systems, and reporting lines  
• Ensuring staff training and awareness around fraud risks and responsibilities  
• Establishing clear procedures for reporting concerns or suspicions 

Mr Houghton said: “Government agencies are expected to take a proactive approach to enforcing this, and it is likely that the number of investigations will rise sharply now the legislation has taken effect.

“But by making these changes, firms can ensure their risk of falling foul of the new requirements is lowered, and that their fraud prevention is as strong as possible.”

Under the ECCT Act, a “large organisation” is defined as one that meets at least two of the following criteria: 

• Employs more than 250 staff
• Turns over more than £36 million a year
• Has assets worth more than £18m

While smaller businesses fall outside the immediate scope, future expansion of the ECCT Act to medium-sized entities has not been ruled out.  

Figures from the Scottish Government show that there were 2,425 large (250+ employees) businesses in Scotland as of March 2024. These firms provided 44.1% of private sector employment and accounted for 58.3% of private sector turnover.