On September 1, 2025, a new corporate criminal offence came into force in the United Kingdom — the “Failure to Prevent Fraud” offence under the Economic Crime and Corporate Transparency Act 2023. This new regulation fundamentally changes corporate criminal liability in the UK and has significant implications for German companies that operate there, maintain subsidiaries, or engage in business relationships with British partners.
The new law aims to hold companies accountable for fraudulent acts committed by persons or entities associated with them, unless the company can demonstrate that it had adequate procedures in place to prevent fraud. This development reflects an international trend toward greater corporate responsibility in the field of economic crime.
A New Corporate Offence
DThe “Failure to Prevent Fraud” offence applies to large organizations that, in the financial year preceding the offence, exceed at least two of the following thresholds:
- more than £36 million in annual turnover,
- more than £18 million in total assets, or
- more than 250 employees.
For corporate groups, the consolidated figures are decisive. Consequently, restructuring to circumvent these thresholds is excluded.
The term “associated person” is intentionally defined broadly: it includes not only employees but also subsidiaries, agents, representatives, or other third parties providing services for the company. If such a person commits a fraudulent act for the benefit of the organization, the company itself can be held criminally liable.
The range of covered offences is extensive and includes:
- fraud by false representation, failure to disclose information, or abuse of position,
- false accounting,
- false statements by company directors,
- fraudulent trading (carrying on business while insolvent),
- and tax fraud (“cheating the revenue”).
Thus, the scope of application is considerably broader than the narrower German understanding of fraud under the Strafgesetzbuch (German Criminal Code, StGB).
International Scope
The provision does not apply solely to British companies. It also takes effect when a fraudulent act is committed outside the United Kingdom but has effects within the UK.
Two examples illustrate this:
- Financial Services: An employee of a German financial services provider sells a product to UK investors using false information about its risk profile and ESG characteristics. Although the act takes place in Germany, the harm occurs in the United Kingdom. The company can therefore be prosecuted.
- Automotive Industry: A UK subsidiary of a German automotive supplier falsifies procurement documents to artificially inflate prices. The profit benefits the German parent company. Since the fraud occurred in the UK, both the subsidiary and the parent company may be held criminally liable.
These examples demonstrate that German companies can fall within the scope of the law even without a physical presence in the United Kingdom.
Defense Through Preventive Measures
The offence establishes a form of strict liability: a company is automatically liable once a qualifying fraud occurs, regardless of whether management was aware of it. The only defence is to demonstrate that adequate prevention procedures were in place at the time of the offence.
The British government has formulated six key principles for this:
- Leadership and Responsibility: Company management must actively support prevention efforts.
- Risk Assessment: Companies must identify their specific fraud risks.
- Proportionate Procedures: Preventive measures must reflect the nature and extent of the identified risks.
- Due Diligence: Business partners, agents, and employees must be carefully vetted.
- Communication and Training: Policies must be clearly communicated and reinforced through training.
- Monitoring and Review: Systems must be regularly monitored and updated.
A mere “policy on the shelf” is not sufficient; prevention must be practically implemented, meaning it should be integrated into daily business operations.
Assessment from a German Perspective
The new regulation is also being closely observed in Germany. Although it applies directly only to companies with a UK connection, it fits into an international trend toward stricter corporate liability.
German law already provides mechanisms under Sections 30 and 130 of the OWiG to hold companies accountable for offences committed by their management personnel. Practical experience—such as conducting internal investigations or implementing compliance management systems—can help German companies adapt their systems to meet the UK requirements.
Allerdings ist der Betrugsbegriff im Vereinigten Königreich weiter gefasst als im deutschen Strafrecht. ZudThe law also covers a wide range of “associated persons,” meaning that existing compliance systems often need to be expanded. Measures that may be necessary include:
- Contract reviews and the inclusion of anti-fraud clauses,
- Reporting obligations and sanction mechanisms for partners,
- Extension of compliance measures to external actors in the United Kingdom.
Even smaller companies without direct exposure may be indirectly affected, as larger business partners will require adherence to preventive measures.
Risks of Non-Compliance
The risks for companies are significant:
- Criminal sanctions with substantial fines,
- Reputational damage,
- Exclusion from public contracts in the United Kingdom,
- Civil liability toward investors, business partners, or competitors,
- Liability of management for inadequate compliance measures.
What makes this particularly critical is that management knowledge or involvement is not required; the act of a single employee or business partner can be sufficient to trigger liability.
Recommendations for German Companies
A stepwise approach is recommended as follows:
- Risk Assessment: Systematically identify and analyze fraud risks across the entire organization.
- Gap Analysis: Compare existing systems with the UK requirements.
- Implementation: Strengthen internal controls, whistleblower systems, due diligence, and compliance obligations.
- Contractual Safeguards: Include anti-fraud obligations in contracts with UK partners.
- Integration: Align with existing compliance systems (e.g., anti-corruption, anti-money laundering, tax compliance).
- Continuous Review: Document and regularly update measures.
Many medium and large German companies already have robust compliance structures. However, these need to be reviewed and tailored to meet the requirements of the new law. For smaller companies, the adaptation effort may be greater, especially if they act as an “associated person” of a larger corporation.
Opportunities Through Strong Compliance
The new offence is not only a challenge but also presents opportunities. Companies that implement robust systems early enhance their resilience against economic crime, gain trust with regulators and business partners, and secure a competitive advantage in the UK market.
Experience with the UK Bribery Act and the offence of facilitating tax evasion shows that the cultural impact is often greater than the number of prosecutions: compliance becomes a matter for the board and an integral part of corporate governance. For German companies, this offers an opportunity to strengthen their international market positionthrough strong preventive measures.
Pragal & Prinzenberg: Expertise in Compliance and Preventive Advisory
Pragal & Prinzenberg Attorneys at Law have extensive experience in preventive criminal law advisory and compliance. In addition to supporting complex internal investigations, we regularly advise clients on the implementation and adaptation of compliance systems, including with regard to foreign legal frameworks and international standards.
If you would like to assess whether your company is prepared for the new requirements of the UK “Failure to Prevent Fraud” offence or need assistance in implementing appropriate preventive measures, we are happy to assist you.
Contact us for a confidential consultation.
This article is based on a professional interview regarding the introduction of the new British corporate criminal offence, “Failure to Prevent Fraud.” In addition to our partner Dr. Oliver Pragal, the following experts participated:
- David Hamilton, Partner at Howard Kennedy LLP in London, specializing in white-collar crime, compliance, and internal investigations.
- Dr. Philipp Engelhoven, Attorney at Esche Schümann Commichau in Hamburg, specializing in compliance, antitrust law, and internal investigations; moderator of the discussion.
