Are Your Contracts Ready?
By Lucy Allen, Solicitor – Commercial Law, KMC Legal
From 1 September 2025, the rules around corporate fraud liability will shift significantly under the Economic Crime and Corporate Transparency Act 2023.
If you’re a large organisation, you’ll soon be legally responsible for fraud committed by your “associated persons”, including employees, contractors, agents, and even some suppliers, if the fraud benefits your organisation or your clients.
This isn’t just a compliance box-tick. It represents a significant shift in how corporate liability for fraud is approached. And if you’re not prepared, the consequences could be severe.
Who’s at Risk?
The new law applies to large organisations that meet at least two of the following criteria:
• More than 250 employees
• More than £36 million in turnover
• More than £18 million in total assets
If that includes you or if you’re on the edge of qualifying, it’s time to take notice.
What’s Changing?
Under the new law, your organisation can be prosecuted for fraud committed by an associated person, even if senior management didn’t know about it.
However, there is a statutory defence:
You won’t be liable if you can prove that you had reasonable fraud prevention procedures in place at the time the fraud occurred.
What Counts as “Reasonable” Prevention?
The law doesn’t set a fixed list of requirements, but best practice is already emerging.
You’ll need to show that your organisation has:
• Clear top-level commitment to preventing fraud
• Thorough, up-to-date fraud risk assessments
• Practical and regular staff training
• Proportionate due diligence on associated persons
• Robust monitoring and review of your fraud controls
• Well-drafted commercial contracts that include enforceable anti-fraud provisions
Why Contracts Matter
Too often, contracts are the weak link in compliance.
To form part of a valid defence, your commercial agreements should include:
• Specific anti-fraud clauses
• A clear expectation of ethical conduct
• Termination rights in the event of a breach
• Provisions for cooperation if fraud is suspected or investigated
“Strong contracts are one of the simplest but most powerful tools in fraud prevention,” explains Lucy Allen, head of commercial at KMC Legal. “These clauses aren’t just about protecting your organisation; they help show regulators that you took reasonable steps.”
What Should You Be Doing Now?
If you’re a large organisation, you should be:
1. Assessing whether you’re in scope
2. Identifying your associated persons: staff, contractors, suppliers, agents
3. Auditing current contracts for missing or outdated anti-fraud clauses
4. Reviewing your internal fraud procedures
5. Planning staff training before the September deadline
How KMC Legal Can Help
Our Commercial and Regulatory teams work closely together to give you a joined-up approach.
We can:
• Audit and update your commercial contracts
• Draft bespoke anti-fraud clauses tailored to your sector
• Support you in building or refining internal prevention procedures
• Deliver staff training and board-level briefings
📞 Call us on 0800 9494 667
📧 Email hello@kmc-legal.co.uk
🌐 Visit www.kmc-legal.co.uk
Let’s make sure you’re protected and ready.
