By Glen Small, VAT & Indirect Tax Director, Johnston Carmichael.
The construction and property sector now face a new blueprint for accountability. The Economic Crime and Corporate Transparency Act 2023 (ECCTA) has made ‘failure to prevent fraud’ a corporate offence, shifting the burden from chasing wrongdoers retroactively to proving you stopped them in the first place.
It’s part of a bigger legislative shift, joining the ranks of ‘failure to prevent bribery’ and ‘failure to prevent tax evasion’, that holds businesses directly accountable for economic crime committed by anyone acting for them, unless they can prove they had the right safeguards in place.
And ‘anyone’ really does mean anyone – employees, agents, subcontractors, suppliers. In a sector built on multitiered supply chains and joint ventures, that means the risk doesn’t stop at your front door. It permeates every contract, into every site cabin, and through every spreadsheet in your network.
For large contractors, that creates a liability that could be triggered anywhere in the supply chain. For smaller firms, it’s a different kind of pressure. Without demonstrable anti-fraud measures, you risk being cut from lucrative contracts before the tender stage.
Fraud here isn’t just a forged invoice or a stolen payment. It includes bid rigging, procurement collusion, payroll fraud, VAT evasion and creative manipulation of contract variations. And the ECCTA’s message is blunt: if it could have been prevented, it should have been prevented.
That shifts compliance from being a backoffice checkbox exercise to a board-level accountability issue. It’s no longer enough for leadership to know there’s a policy in place; they’ll need to prove they actively enforce it.
The government’s message is clear: lead from the front and make anti-fraud culture impossible to miss. Know your risks – every project, every supplier, every department – and tackle them with procedures that work in the real world, not just on paper. Push your scrutiny further down the supply chain, and keep your defences sharp with constant training, updates, and stresstesting. In short, make compliance a living, breathing part of your business, not a dusty file in a drawer.
These aren’t just legal hoops; they’re operational guardrails. They protect your eligibility for public sector work, defend your margins, and give clients and investors confidence you’re a safe pair of hands.
While headlines often highlight unlimited fines and potential criminal convictions, there is also a constructive opportunity for firms who act early. By putting the right measures in place now, businesses can strengthen their reputation, reassure clients and partners, and demonstrate resilience in a sector where trust and reliability are fundamental.
Implementing an anti-fraud framework is not an overnight exercise. It requires careful planning, from risk assessments and supply chain reviews to contractual updates and staff training. Approached methodically, these steps provide a solid foundation for long-term compliance. Delay may force firms into hurried decisions that risk undermining both compliance and efficiency.
The firms that get this right won’t just pass the legal test – they’ll set the standard for an industry that builds not just structures, but reputations worth keeping.
johnstoncarmichael.com