Turning compliance into confidence: What the Failure to Prevent Fraud Offence means for charities

At the same time, developments in the Crime and Policing Act reinforce the direction of travel by strengthening the attribution of the corporate criminal liability through senior managers, increasing the importance of clear accountability for fraud prevention at a leadership level.

The challenge when it comes to compliance with this legislation is not understanding that fraud risk exists, most finance leaders and trustees already recognise this. The challenge is translating broad legal expectations into something practical and actionable. What do 'reasonable procedures' actually look like in a charity context? Moving beyond compliance as a tick-box exercise.

For many organisations, compliance is still seen as reactive and is usually triggered by incidents, auditor recommendations or regulatory pressure. That approach often leads to fragmented controls and inconsistent oversight.

The Failure to Prevent Fraud framework encourages a different mindset. It asks organisations to take a proactive, organisation wide view of fraud risk, focusing on prevention rather than response. This includes actively identifying fraud risk indicators and using continuous or regular data analysis to detect emerging issues at an early stage, rather than waiting for concerns to crystallise.

Crucially, this is not about asking organisations to reinvent the wheel. Instead, it is about building on and strengthening existing control frameworks, ensuring that fraud risk is explicitly considered and embedded within them.

Done well, this is not about creating more policies. It is about expanding existing controls and procedures and embedding clarity and accountability. For example:

• Do we understand where fraud risk genuinely sits in our organisation?
• Are controls designed around those risks, or inherited over time?
• Is there clear ownership of fraud prevention at senior management and trustee level

When these questions are addressed, compliance stops being a burden and becomes a source of assurance for management, trustees and stakeholders.

What 'reasonable procedures' look like in practice 

There is no one size fits all answer. What is 'reasonable' depends on the size, complexity and risk profile of the charity. The guidance released by the Home Office in November 2024 states that procedures should be 'risk-based and proportionate'. To have an effective approach to the implementation of a robust fraud prevention framework organisations should consider the following characteristics of their plan:

Anonymised case study: strengthening confidence through structure

A medium-sized organisation operating across multiple locations had experienced several low-value but recurring control issues. Examples of these issues were expense irregularities, inconsistent procurement approvals, circumvention of procurement procedures and limited oversight of local operations.

There was no single significant fraud incident that occurred, but the cumulative effect raised concerns at board level. The organisation began to ask itself when the new Failure to Prevent Fraud Offence went live: 'would our existing framework meet expectations under the new Offence?'

A targeted review identified that the issue was not a lack of controls, but a lack of consistency and clarity. Controls differed between teams, risk ownership was unclear, and escalation and reporting were limited.

In response, the organisation:

• carried out a focused fraud risk assessment aligned to its operating mode
• standardised key financial controls across teams
• updated existing policies to ensure consistency across the organisation
• communicated updates to processes and policies to all employees
• introduced clearer reporting on fraud risk to the audit committee
• delivered practical training to operational staff

The result was not a dramatic overhaul, but a more consistent, coherent and transparent framework. Board members reported increased confidence in their oversight, and management had greater clarity on fraud risk exposure.

Turning change into opportunity

The Failure to Prevent Fraud Offence may feel like an additional regulatory pressure. But it provides a useful lens through which to reassess existing arrangements.

For charity finance leaders and trustees, the key question is not 'are we compliant?', but 'do we genuinely understand and manage our fraud risks?'.

Organisations that take the opportunity to answer that question will not only strengthen their compliance position but will also build resilience, improve decision-making, and protect the resources entrusted to them.

*This article was first published on Charity Finance Group’s Knowledge Hub on Monday 29 June 2026. Link to the article here: Charity Finance Group | Knowledge Hub