Failure to prevent fraud offence coming into force

With Nick Ephgrave well over a year in post as Director of the Serious Fraud Office, 2025 will be the year in which the market gets a clearer picture of how the SFO will operate under his leadership and the extent of any reforms he may introduce as part of the SFO’s ambitious five year plan.

The Economic Crime and Corporate Transparency Act (ECCTA) 2023 will continue to be significant, as firms ensure compliance with the new ‘failure to prevent fraud’ duty, which takes effect in September.

Many businesses have already taken steps to comply but for those that are yet to begin, there is still time to devise the necessary policies and train staff. International supply chains, including operations in jurisdictions where fraud is more common, will need to be combed for potential risks and weaknesses, since fraud often manifests itself in outsourced accounting and finance functions.

While early enforcement activity may begin in 2026, the first cases are more likely to emerge in 2027. Regardless, the failure to prevent duty will hang over the market throughout 2025 and beyond.

Freezing injunctions in 2025: A powerful legal weapon

Where we might be left waiting for the first failure to prevent enforcement cases, in 2025, we expect to see an increase in freezing injunction proceedings thanks to a significant court ruling significantly reducing the bar for a successful application (Dos Santos v Unitel SA).

Long considered the nuclear option, successful applications previously had the challenging task of proving a ‘good arguable case’. Now applicants need only demonstrate that there is a serious issue to be tried, a significantly lower evidential threshold.

The use of freezing injunctions is not always well reported in the legal press so an increase in their use will be difficult to detect. However, the new legal threshold provides lawyers with a new, more readily available weapon in their arsenal, which could fuel an increase in applications.

APP fraud in 2025: Will banks face a legal backlash?

The Payment Systems Regulator mandatory reimbursement framework for authorised push payment fraud (APP) will remain important in 2025. Individuals who have lost sums exceeding the £85,000 cap could end up reaching for litigation targeted at receiving banks.

History suggests that such claims will encounter a high bar to clear and, looking ahead, it is difficult to see how any future claims could enjoy a different outcome. With more than half a billion pounds lost to APP fraud in the first half of 2024 alone, banks are likely to invest more heavily in checks and systems to detect and prevent fraud to mitigate the risk of hefty reimbursement bills.

Increased insolvency litigation to reveal fraudulent activity

Economic uncertainty in 2025 may lead to an increase in insolvencies, often revealing fraudulent activity in the business.

The uncovering of fraud within private businesses, with attendant creditor prioritisation claims, will be a feature of 2025 as insolvency practitioners potentially uncover evidence that owner-operators took steps to protect their own financial positions above those of their creditors.