The Charity Commission has sent a regulatory alert to charities that could be affected by upcoming changes in legislation around fraud prevention.
A new offence of failure to prevent fraud will come into force on 1 September to ensure large organisations are held to account if they profit from fraud.
It forms part of the Economic Crime and Corporate Transparency Act 2023 and will affect large, incorporated charities that meet at least two criteria: over 250 employees; over £36m in income; and over £18m in total assets.
The commission is urging affected charities to read the Home Office guidance and “enhance their approach to fraud prevention and seek professional legal advice” where necessary.
Criminal liability
The guidance says an organisation might be “criminally liable where an employee, agent, subsidiary, or other associated person, commits a fraud intending to benefit the organisation and the organisation didn’t have reasonable fraud prevention procedures in place”.
“In certain circumstances, the offence will also apply where the fraud offence is committed with the intention of benefitting a client of the organisation,” it reads.
“It doesn’t need to be demonstrated that directors or senior managers ordered or knew about the fraud.”
It says the offence will make it easier to hold organisations to account and encourage more organisations to implement or improve prevention procedures, “driving a major shift in corporate culture to help prevent fraud”.
Although the offence will only apply to large organisations, the guidance states that the principles “represent good practice and may be helpful for smaller organisations”.
The commission also advised charities to read its guidance about internal financial controls alongside a short guide on protecting charities from fraud.
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