Law firm Fox Williams has warned travel companies to prepare for a new offence of failure to prevent fraud due to come into force next year.
The previous government introduced a new corporate criminal offence under the Economic Crime and Corporate Transparency Act of 2023, targeting companies which fail to prevent fraud, in what marks a significant shift” in how companies should manage fraud risk, according to Fox Williams.
The offence applies to ‘large’ organisations which meet two of three criteria – an annual turnover of £36 million or more, 250 or more employees or total assets of £18 million or above.
However, Fox Williams notes smaller companies such as travel agents may be required to comply by a trade partner.
The law firm warned in a recent bulletin to travel businesses that “various activities are at-risk under the new offence – including dealings with regulators [and with] insolvency protection providers such as bond obligors and trade associations, shareholders, investors, banks, acquirers and consumers”.
A fraud may be committed by a company employee, agent or service provider and could involve false representation, failing to disclose information, abuse of position, obtaining services dishonestly, false accounting, participation in a fraudulent business, false statements by company directors, fraudulent trading or ‘cheating the public revenue’.
Fox Williams notes companies will be accountable “irrespective of whether the company’s management knew about the fraudulent act [and] had no knowledge of the fraud being committed,” with an offence punishable by an unlimited fine.
The law firm warns: “Many travel companies operating in the UK will fall within the scope of this legislation . . . [and] this strict liability approach underscores the importance of having robust preventative measures in place.”
It adds: “Small companies may wish to consider implementing fraud prevention measures as best practice. They may also be required to do so by a trade partner.
Fox Williams advises travel companies to “develop a system that demonstrates due diligence in preventing fraud”.
It notes: “One of the key defences will be the implementation of reasonable procedures designed to prevent fraud . . . [which should be] tailored to the company’s operations and should stem from a comprehensive risk assessment.”
The government has promised guidance on the steps companies should take to comply with the legislation before it comes into force in 2025.