Preventing business scandal: Are you compliant?

Preventing business scandal: Are you compliant?
Magda Parker
Magda ParkerAmani Consultancy

Posted: Thu 4th Jul 2024

Compliance is crucial for legal protection of brand reputation, fraud prevention, risk management and corporate culture.

Beautify (not a real company)  is a UK-based SME that specialises in high-quality beauty products with a growing customer base in the EU. To manage its European operations, the company partnered with an independent agent, Sarah, who oversaw sales and customer relations in the region.

The problem

Trouble began when Sarah was arrested by Interpol for engaging in fraudulent activities, which included unauthorised discounts to customers in exchange for kickbacks. These actions inflated Beautify’s sales figures but eventually led to a scandal. The backlash was swift with customers and the media criticising Beautify for failing to monitor and prevent fraud. The situation spiralled, damaging Beautify’s reputation and exposing it to legal risks.

This scenario underscores the importance of proactive oversight and fraud prevention.

SMEs like Beautify can benefit significantly from engaging a consultancy that specialises in workplace investigations and compliance services. In today’s complex business landscape, navigating legal requirements is crucial for companies, particularly when it comes to preventing fraud.

The solution

Here’s how a consultancy can help:

  • Preventive audits: Conduct regular audits to identify and address potential issues before they escalate. This approach helps businesses detect irregularities early and maintain compliance

  • Risk management: Provide tailored risk management strategies, helping SMEs like Beautify identify areas of vulnerability and implement measures to mitigate risks

  • Employee training:  Training programmes to help employees recognise and report fraudulent activities. By fostering a culture of transparency, businesses can prevent issues like those experienced by Beautify

  • Reputation management: Help businesses navigate crises and protect their reputations, which is crucial in situations where external partners’ actions impact the business

The situation with Beautify highlights the risks associated with unchecked fraud and emphasises the need for proactive measures.

What is the Failure to Prevent Fraud Offense?

In the United Kingdom, significant legislation targets this issue. This framework includes the Failure to Prevent Fraud Offense outlined in the Economic Crime and Corporate Transparency Bill, an amendment to the Fraud Act 2006.

The legislation introduces a new corporate offence that holds organisations liable if their employees, agents, or third-party service providers commit fraud for the organisation's benefit. The goal is to encourage businesses to implement strong anti-fraud measures.

Scope and application

The offence applies to any organisation conducting business in the UK or incorporated under UK law. This broad definition includes companies, partnerships and other corporate bodies, regardless of whether they are public or private. It addresses situations where an employee or agent commits fraud that benefits the organisation. The fraudulent activities covered range from false representation and failing to disclose information to abusing a position of trust, all defined under the Fraud Act 2006.

Defences and compliance

Organisations can defend against this offence by showing they have reasonable prevention measures in place. The focus is on ensuring that these measures are proportionate to the risks faced by the business. This encourages companies to proactively manage and mitigate the risks of fraud.

Are you compliant with broader regulations?

For businesses trading within the European Union or worldwide, compliance with additional regulations is crucial. This includes the EU Consumer Rights Directive, the General Data Protection Regulation (GDPR), and the Equality Act, among others. Ensuring compliance with these regulations helps protect your business, customers, and employees, while also enhancing your organisation's reputation.


In a constantly evolving business environment, staying ahead of legal requirements is more important than ever. The failure to prevent fraud offences is a clear reminder that businesses must be vigilant and proactive in managing risks.

By understanding and addressing these requirements, businesses can avoid potential legal issues, protect their reputation, and ultimately, foster a culture of integrity and compliance. By engaging Amani Consultancy, SMEs can ensure compliance, stay aware of potential issues, and prevent scandals that harm their businesses.

Relevant resources

Magda Parker
Magda ParkerAmani Consultancy

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