In an era of rising scrutiny around greenwashing and ESG compliance, new guidance on the failure to prevent fraud offence highlights how closely fraud and regulatory failings now overlap.
Regulators are increasingly treating breaches in environmental, social, and governance obligations as potential fraud where there is a financial element or misleading information. Mislabelled food, inaccurate environmental reporting, and misleading green claims can all constitute fraud if dishonesty is involved.
Recent legal reforms, including the Economic Crime and Corporate Transparency Act 2023, have also made it easier to prosecute corporate fraud by lowering the threshold for attributing criminal liability and introducing the new failure to prevent offence (in force from September 2025). This significantly increases risk exposure for large companies, particularly around ESG-related issues such as greenwashing.
The guidance emphasises that corporates must review and strengthen their fraud risk assessments and prevention procedures, ensuring they adequately address overlaps between regulatory compliance and fraud risk. Existing ESG or regulatory controls may not be sufficient on their own.
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