New 'Failure to Prevent' Offence Proposed for UK Online Platforms
A new report proposes extending corporate criminal liability to online platforms in the UK for failing to prevent fraud by their third-party users, raising significant compliance questions.
A report by Jonathan Fisher KC, 'Fraud in the Digital Age,' proposes creating a new corporate criminal offence in the UK for providers of regulated user-to-user services who fail to prevent fraud committed by their users. This would extend the 'failure to prevent' liability model, recently expanded under the Economic Crime and Corporate Transparency Act 2023, from acts by a company's 'associated persons' to those of independent third-party users.
This represents a material potential expansion of corporate criminal liability, creating novel risks for technology companies. The proposal raises complex questions about how the new offence would interact with existing duties under the Online Safety Act 2023, which already mandates that platforms implement systems to tackle fraudulent content. Key challenges for counsel include the uncertain territorial scope for global platforms and defining the necessary connection between a service and a fraud that may cross multiple platforms. The government is formally considering the report's recommendations. Counsel for affected platforms should monitor for a government response and begin assessing how current fraud controls would measure up to a 'reasonable prevention procedures' defence.