A strong fraud prevention framework relies on more than just policies and controls, it relies on the buy-in and implementation from an engaged workforce. Under the Economic Crime and Corporate Transparency Act (ECCTA), the quality of training and internal communications will be an important indicator of whether an organisation has implemented reasonable procedures to prevent fraud. For procedures to be considered “reasonable”, firms must go beyond awareness and seek to create a culture of vigilance and accountability, reinforced through regular training and comprehensive communication.
How Can Firms Embed Fraud Prevention Through Culture?
One of the six core components of reasonable procedures is “Tone from the Top”. This refers to the demonstration of a clear commitment from senior leadership to prevent fraud through the implementation of clear governance structures and resourcing that supports a strong control culture. Clear and consistent messaging from senior leadership is essential and management must demonstrate an ongoing commitment to fraud prevention and ethical conduct, and reinforce the importance of speaking up. A visible tone from the top helps to build trust among employees and associated persons and sends a clear message to stakeholders and regulators that fraud prevention is a core part of the firm’s values.
Training Fraud Prevention Within Firms
Fraud prevention training should be tailored to the needs of the firm and should be conducted regularly for all relevant parties. Training should be risk-based and embedded into daily operations, not just included as a one-off compliance exercise. This ensures that all internal employees and associated persons understand what fraud is and how it can manifest in their particular scope of work. Firms should aim to:
- Deliver training that reflects relevant fraud risks for each business unit or function
- Regularly update training materials to reflect evolving risks and regulations
- Integrate fraud awareness into the wider compliance and organisational training programmes
Communication for Fraud Prevention
In addition to training, clear and regular communication is essential for fostering a culture of fraud prevention and meeting the requirements for reasonable procedures. Firms must actively reinforce their fraud awareness policies and training materials through regular reminders, internal messaging and accessible documentation. A key part of the communication for fraud prevention is the promotion of a robust, internal whistleblowing framework. Under the ECCTA, the ability of an organisation to detect and act on fraud relies on the confidence of employees and third parties feeling empowered to speak up. Whistleblowing policies should be well-communicated, clearly signposted and fully supported by organisational processes that ensure confidentiality, protection from retaliation and a commitment to actively follow through on reported concerns. Firms should:
- Regularly circulate whistleblowing and fraud awareness policies across all teams and functions
- Make sure that reporting channels are visible, accessible and available to all associated persons
- Clearly demonstrate that whistleblowing is not only supported but is actively encouraged as part of the firm’s commitment to upholding ethical standards of transparency
An effective whistleblowing policy can help to identify potential fraud risks early which can reduce legal and reputational exposure. It can also serve as evidence of reasonable procedures put in place by the firm which may be used as an acceptable defence against the charge of Failure to Prevent Fraud. Firms also benefit from a culture of open communication which can build trust and strengthen a shared sense of responsibility across the operational structure. As regulatory expectations are expected to rise under ECCTA, training and communication play a vital role in a firm’s frontline against fraud. By investing in communication, training and education as well as developing robust whistleblower frameworks and policies, firms can demonstrate a credible and consistent commitment to fraud prevention. These efforts not only support compliance and demonstrate reasonable procedures, but they can also foster a culture of integrity and transparency that can be beneficial to operational resilience and stakeholder engagement.
Contact us to learn more about Novatus Global’s ECCTA Offering and how it can support your organisation in delivering effective training and communication strategies.
