The UK’s new ‘failure to prevent fraud’ offence: Bob’s guide to rebuilding your defenses

The UK’s financial sector is on the cusp of a major regulatory shift. Starting September 1st, a new “Failure to Prevent Fraud” (FtPF) offense will fundamentally redefine corporate liability, holding companies responsible for fraudulent acts committed by their employees or agents.

For our expert, Bob, this isn’t just another compliance deadline—it’s a wake-up call for the entire industry. This is the end of simply reacting to fraud; it’s the beginning of a new era of proactive, institutional responsibility.

As Bob, our nerdy compliance expert, puts it: “This law is a game-changer. It’s the legal system’s way of telling us that fraud prevention is no longer a ‘nice-to-have’—it’s a ‘must-do,’ and a failure to do it effectively can now cost a company its reputation and its bottom line.”

What is the New FtPF Offence?

The core of the new offense is simple yet powerful: a company can now be held criminally liable if an employee or affiliate commits fraud to benefit the company, even if senior management was unaware of the act. The only defense is to prove the company had “reasonable procedures” in place to prevent the fraud.

Bob’s key takeaway: This puts the onus squarely on the organization to be proactive. A “reasonable procedures” defense is not a passive one; it requires a demonstrable, documented, and actively enforced anti-fraud program.

Beyond a Checklist: Bob’s 3 Pillars for a Proactive Anti-Fraud Strategy

Merely having a policy is no longer enough. Bob has identified three key pillars that every firm must master to build a “reasonable procedures” defense that will stand up to regulatory scrutiny.

1. The Tech Stack: From Reactive to Predictive

Fraudsters are using AI and sophisticated social engineering tactics. Your defenses need to be just as advanced.

• Bob’s Insight: “If your fraud detection system is only built to react to past scams, it’s already obsolete. The new law requires a shift to predictive analytics and real-time monitoring. You need solutions that can analyze transaction data at scale, identify anomalous behavioral patterns, and flag suspicious activities before a fraud event occurs. Investing in AI and machine learning for fraud prevention isn’t just smart business—it’s now a legal necessity.”

2. The Human Firewall: Culture is Your Biggest Asset

The vast majority of fraud is enabled by human error or, in some cases, malicious insiders. The new law makes it clear that a firm’s culture is a key part of its anti-fraud strategy.

• Bob’s Insight: “Your employees are your first and best line of defense, but only if they are properly trained and empowered. This means moving beyond a one-time training module. You need a continuous, multi-layered education program that teaches employees to recognize emerging threats, from deepfake social engineering to sophisticated phishing campaigns. You also need to create a culture where employees feel safe and encouraged to report suspicious activity without fear of reprisal.”

3. The Governance Framework: Boardroom Accountability

The FtPF offense places accountability at the highest levels. The board and senior leadership must not only endorse the anti-fraud program but also actively oversee its implementation and effectiveness.

• Bob’s Insight: “This new law forces fraud prevention into the boardroom. Your anti-fraud strategy can no longer be delegated and forgotten. Senior leadership needs to be regularly briefed on emerging fraud trends, the effectiveness of your controls, and your firm’s overall fraud-risk posture. You need to prove that you’re not just taking action—you’re strategically leading the charge against fraud.”

The Path Forward

The new “Failure to Prevent Fraud” offense marks a major turning point for the UK financial sector. Bob’s message to fintech leaders is clear: “The time to be proactive is now. Building a ‘reasonable procedures’ defense requires more than a compliance check; it requires a strategic investment in technology, culture, and governance. The firms that embrace this challenge as an opportunity to build trust and strengthen their defenses will be the ones who thrive in the next era of digital finance.”