Understanding the upcoming “Failure to Prevent Fraud” offence: key takeaways for the UK hospitality sector
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The UK hospitality sector is set to undergo significant changes with the introduction of the “Failure to Prevent” (FTP) fraud offence, established under the Economic Crime and Corporate Transparency Act (ECCTA) of 2023.
The Government has now confirmed that this legislation will come into force on 1 September 2025 and has published detailed guidance on how it will interpret the law, outlining new standards for in-scope organisations. The Act targets large businesses, requiring them to prevent fraud by employees or third parties acting on their behalf, but its principles are also beneficial for smaller entities aiming to enhance their fraud prevention strategies. For hospitality businesses, which often rely on a diverse network of suppliers, contractors, and temporary staff, these requirements add new layers of complexity to risk management and compliance efforts.
In this article, we summarise the legislative requirements, offer guidance on preventive measures, and provide insights from Capcon Chairman Ken Dulieu and Managing Director Marcus Jones on what these changes mean for hospitality leaders.
What Is the "Failure to Prevent" fraud offence?
The FTP fraud offence holds large organisations accountable if fraud is committed by an associated person – such as an employee, agent, or contractor – acting to benefit the organisation or, in some cases, its clients. The Government’s guidance, released on 6 November 2024, details the expectations for organisations to implement reasonable fraud prevention procedures. If a company fails to meet these standards, it can be prosecuted for negligence, even if senior management were unaware of the fraudulent actions.
In defining “large organisations,” the Act targets entities meeting at least two of the following criteria:
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More than 250 employees
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Annual turnover exceeding £36 million
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Total assets over £18 million
While smaller hospitality businesses may not be legally bound to these rules, implementing similar fraud prevention measures aligns with industry best practices and could protect against reputational risk and financial loss.
Key principles for hospitality businesses under the new legislation
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Risk assessment and proportional response
Hospitality companies are encouraged to undertake detailed risk assessments to identify fraud risks specific to their operations. This might include evaluating areas prone to fraud, such as procurement, payroll, and guest services. As Marcus Jones suggests: “An effective risk assessment considers both the likelihood and impact of fraud risks, with procedures that reflect the complexity of the hospitality business.”
- 2
Clear communication and staff training
For businesses in hospitality, with a high volume of part-time and contract staff, clear communication and training are essential. Staff must be made aware of their role in upholding fraud prevention measures, and training on detecting and reporting fraud should be incorporated into onboarding processes. Ken Dulieu says: “Training at all levels creates an informed and vigilant workforce, a crucial defence against fraud.”
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Due diligence with third parties
Given the hospitality sector’s reliance on external suppliers and contractors, due diligence is critical. Ensuring suppliers are reputable and contractually bound to fraud prevention policies is essential. To address this, companies might require contractors to complete integrity checks or fraud risk training.
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Leadership commitment
Fraud prevention must start at the top. Leadership should demonstrate an active commitment to fraud prevention, establishing a zero-tolerance culture. As Ken Dulieu explains: “A proactive stance from the board or senior management communicates a powerful message about the importance of integrity within the business.”
Preparing for compliance: recommended actions for hospitality leaders
Implementing practical fraud prevention procedures
Capcon’s Marcus Jones advises that prevention procedures should be designed based on the unique risk profile of each business. Suggested procedures include:
- Segregation of Duties: Limit fraud opportunities by dividing critical responsibilities among multiple individuals.
- Transaction Monitoring: Regularly review large and unusual transactions to flag potential fraud.
- Whistleblowing Mechanisms: Ensure staff are comfortable reporting concerns anonymously if necessary.
Engaging and training employees
Given the turnover rate in hospitality, ongoing training is crucial. As Ken Dulieu notes: “Continuous training helps sustain a culture where employees feel empowered to identify and report fraud.” Periodic refresher sessions and updates on company policies help maintain awareness of fraud prevention.
Conducting supplier and partner checks
Whether working with seasonal workers or long-term vendors, regular due diligence is essential. Marcus Jones suggests “auditing suppliers for compliance and integrity, particularly those with access to critical data or financial transactions.”
Compliance timetable and key deadlines
With the legislation taking effect on 1 September 2025, hospitality businesses have a nine-month window to ensure their fraud prevention procedures are in place. To stay ahead, companies should aim to complete the following by mid-2025:
- Complete a full risk assessment
- Implement fraud prevention measures aligned with the Act’s standards
- Establish and communicate a whistleblowing policy
- Initiate training programmes to educate staff on their role in fraud prevention
Moving forward with a new standard in fraud prevention
The “Failure to Prevent” offence introduces a legal and ethical framework aimed at reducing fraud in UK organisations. For hospitality businesses, this marks an important shift, necessitating a proactive approach to fraud prevention across staff, suppliers, and leadership. As Ken Dulieu advises: “This legislation offers hospitality businesses a chance to adopt a standard that will enhance trust with patrons, suppliers, and employees alike.”
By committing to robust, clear, and well-communicated fraud prevention measures, the UK’s hospitality sector can both meet legislative requirements and foster a culture of integrity that resonates with clients and partners alike.
How Capcon supports UKHospitality members
The upcoming “Failure to Prevent” fraud offence presents a unique set of challenges for the hospitality industry, but Capcon is here to support UKHospitality members in navigating these new compliance requirements. As a trusted UKHospitality supplier, Capcon offers a range of services tailored specifically to the hospitality sector, ensuring your business is well-prepared to meet the new legislation’s standards.
Services include comprehensive risk assessments to identify vulnerabilities within your operations, bespoke anti-fraud training programmes to educate staff at all levels, regular audits to maintain robust prevention strategies, due diligence services extending to vetting suppliers, third parties, and new hires, as well as ongoing monitoring of existing staff. Marcus Jones comments: “Our goal is to provide hospitality businesses with practical, actionable steps to safeguard their operations and protect their reputations.”
Whether you need help implementing effective fraud prevention measures, conducting due diligence on third-party suppliers, or enhancing staff awareness, Capcon’s expertise can guide you through every step, helping you address the new regulations to avoid financial and reputational risk, and ensuring your business remains compliant and resilient against fraud.
For more information or to schedule a consultation, please contact Marcus Jones at Capcon:
Phone: 07939 436841
Email: [email protected]
