Fraud warning – act now or fall foul of ECCT Act changes
Larger companies in the UK could be at risk of failure to prevent fraud if they don’t meet new compliance requirements, a senior accounting professional warned today.
Paul Barwick, a forensic accounting partner at UK top 10 accountancy and business advisory firm Azets, commented after the Economic Crime and Corporate Transparency Act (ECCT Act) changed the scope of failure to prevent fraud for large businesses from this month.
As a result, a large business, of which there are 8,250 in the UK out of 5.45 million businesses, 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.
An experienced forensic accountant practising in southern England, Paul said: “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. Larger companies need to act now to ensure they’re not at risk.”
London-based Paul has specialised as a forensic accountancy practitioner for more than 18 years and assists clients with fraud and financial investigations.
He recommends companies review and strengthen their internal fraud prevention measures to comply with the ECCT Act, including:
- 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
“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 – employing more than 250 staff, turning over more than £36m a year and with assets worth more than £18m.
While smaller businesses fall outside the immediate scope, future expansion of the ECCT Act to medium-sized entities, of which there are 37,800 in the UK with 50 to 249 staff, has not been ruled out.
Paul added: “The ECCT Act might pose a conundrum for companies hovering around 250 staff and which meet at least one of the other criteria as well – do they try to keep the payroll number below the threshold of 250 staff to avoid the extra compliance costs?”