What sports organisations need to know about the new failure to prevent fraud offence
In an amendment to the Economic Crime and Corporate Transparency Bill (“Bill”), the UK Government is set to introduce a new failure to prevent fraud (“FTPF”) offence1. Like the UK Bribery Act 2010 (“UKBA”) more than a decade earlier, this new offence is likely to bring about significant changes to corporate criminal liability in the fraud space and will significantly affect the compliance and regulatory landscape for sports organisations.
The proposed offence shifts the focus from organisations as the victim of fraud (inward fraud) to make it easier for organisations to be prosecuted for fraud committed by persons associated with them - such as agents and employees - for the organisation’s benefit (outward fraud).
The offence proposed in the Bill will carry strict liability meaning liability will be automatic unless organisations can evidence that they had “reasonable” procedures in place to prevent the underlying fraud from occurring. This places an additional burden on organisations to carry out a risk assessment and ensure compliance, prior to the introduction of the offence.
By way of example, one of the underlying offences listed in the Bill is fraud by false representation. If an agent representing a football club dishonestly made a false representation to a player to secure a signing for the club during the transfer window – winning a commission and benefitting the club in the process – not only would the agent have committed fraud but the club itself would have committed the offence of failing to prevent the agent’s fraud.
Another underlying offence is “fraud by abuse of position”. This occurs when a person occupies a position in which they are expected to safeguard against the financial interests of another person but then abuse this position with the intention of making a gain (either for themselves or another). Managers and senior individuals of a sports club are in a position of power and have access to information that could be used for private gain, such as through betting. By virtue of this position, they are expected to safeguard the club’s financial interests and not act against them. Any abuse of this position, through activities such as match fixing, would leave the organisation liable under this offence if it cannot show it had in place “reasonable” procedures to prevent the fraud.
This article discusses the new offence and sets out key steps for sports organisations to consider when preparing for the new offence coming into force.
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Pamela Reddy is a partner at Norton Rose Fulbright LLP and is a white-collar crime and investigations lawyer based in London who is able to advise on the full spectrum of criminal and regulatory law.
Naomi is a senior associate at Norton Rose Fulbright LLP and is a white collar crime lawyer based in London. She focuses on complex multi-jurisdictional investigations, risk mitigation, and compliance. Her practice covers all aspects of business crime including anti-bribery, anti-money laundering, market manipulation and market abuse, suspicious activity reporting, whistleblowing, and anti-modern slavery.