Understanding Consequences of Fraud: Protect Business Reputation and Finances

In April 2025, four workers were found guilty of bribery totalling £600,000 over six years, a form of employee fraud. With 93% of UK companies targeted by fraudsters in 2024, it’s clear that the longstanding legal repercussions on perpetrators aren’t doing much to deter. 

However, the new Failure to Prevent Fraud Act may change the landscape. It places more urgency on organisations to protect their operations and prevent the legal, financial and reputational damage that comes with fraud. And that’s where robust safeguards like Trustpair come in, preventing fraud before the threat can even materialise.

What Are the Business Consequences of Fraud?

From a business perspective, the consequences of fraud can be severe. 

Initial fallout

Depending on the type of fraud, the initial consequences can occur while it’s undiscovered. During this first phase, data breaches and unauthorised payments are common, leading to information and financial losses.

Investigation phase

Upon discovery, organisations are likely to experience operational delays as investigators seek to secure the business environment. During this phase, fraud investigations take place to work out what happened, how it occurred, and the severity of the breach. 

Employees may be interviewed, taking time from their normal working tasks, and the business as a whole may experience a dip in productivity. The goal is to find sufficient evidence, either way.

Here, the legal risks of fraud offences come to light, leading to the possibilities of: 

• regulatory fines
• suspensions or job dismissals if found guilty of causation
• civil penalties

Public disclosure

Finally, a new set of consequences will affect the business once the fraud is made public. These are known as reputational consequences, and can end up having the same level of a financial hit as the initial impacts. 

Publicly-traded companies tend to experience a drop in share value, as the fraud causes trust and perception decline. Similarly, third parties may reduce their reliance or cancel contracts altogether with a company that has fallen victim to fraud. This is because once the security has been breached, it can make partner companies feel more vulnerable to their own breaches. 

For the same reasons, customers cancel their subscriptions or close their accounts, leading to further penalty via financial loss. Workers may be fired, and could find it difficult to secure future employment.

Common Types of Business Fraud

With the explosion of AI, there are lots of different types of fraud that businesses can fall victim to. This includes:

1. Invoice fraud: fraudsters mock up an invoice for work that they have not performed and give false information to dupe the financial department into making the payment
2. Vendor fraud: fraudsters impersonate a company’s real vendors for access to internal systems, for financial gain, or both
3. Employee aka internal fraud: an employee intentionally abuses their access privileges, typically through false accounting or committing investment fraud
4. CEO fraud: bad actors impersonate the CEO or senior staff and put pressure on employees to make payments to accounts quickly
5. Phishing, Smishing and Vishing: fraudsters use social engineering and pretend to be someone known to the company in order to access data, systems or money
6. Business Email Compromise (BEC): fraudsters create fake web pages to harvest email credentials and gain access to the systems or funds

Legal Exposure and Financial Penalties in the UK

Legal penalties will largely focus on those that commit crimes like fraud. But key personnel may also be newly liable for the mistakes that led to the committed fraud.

The UK’s new law, which comes into force in September 2025, is called the Failure to Prevent Fraud Act. This increases the legal obligations on firms, compared to previous legislation, to ensure that they do everything ‘right’ to prevent fraud occurring in business. or face a criminal conviction. 

In practice, the fraud act means: 

• Setting the right internal controls to prevent unauthorised access
• Performing fraud risk assessments to fix any vulnerabilities 
• Installing an accurate detective controls to identify suspicious behaviour early, while preventing false positives
• Planning for fraud events, including scenario testing and response planning
• Creating standards for policies and procedures to minimise the risk of​​ fraud

Individuals who don’t meet the requirements may face criminal proceedings like a criminal conviction or prison sentence in some fraud cases. 

The Failure to Prevent Fraud Act will also increase the monetary penalty, from a previous ceiling of £60,000 to a now unlimited amount. Coupled with legal fees, this could see firms facing fines worth millions, crippling annual profits and creating longer term impacts of the fraud.

Business Liability Under the Fraud and Theft Acts

The Fraud Act (2006) and the Theft Act (1968) were both introduced in order to determine liability after a fraud event occurs to a business or individual. 

Essentially, organisations may be liable not just by acts committed by their own employees, but also associated persons. This includes suppliers, contractors and third parties working on the organisation’s behalf.

One example is this case of corporate fraud that happened between 2011 and 2015. Two senior individuals, who both started at EON and later moved to British Gas, had been found to be accepting bribes for securing professional contracts. The two fraudsters “funnelled payments through business accounts they controlled and provided fake invoices in the company names to conceal the true nature of the payments”, according to the report.

Fortunately, EON had actually identified some of the illegal activity thanks to strong internal control and detection strategies. This meant that they were the organisation that brought it to the police, and were ‘on the right side’ of the investigation. In terms of business liability, this helped keep EON’s reputation intact. 

What Happens During a Corporate Fraud Investigation?

After a corporate fraud event, investigations happen to answer the who, what, where, when and why. 

It starts with an initial understanding period to get an idea of what happened, and try to dig into the finer details. Investigators will probably start by asking about how the fraud was discovered, when, and by who, before working backwards.

But the really intensive part is going to be in evidence gathering. This involves the collection of documents, interviewing of staff for information or admissions, and reviewing of records to support or disprove the theories at large. 

During this phase of the corporate fraud investigation, investigators will check the controls and business fraud prevention mechanisms. They’ll determine who’s responsibilities were who’s, and whether these were followed as planned. Investigators perform an analysis to check for any deviations from fraud prevention plans and general control measures.

Then, investigators will write up their findings and present their report. This should provide an indication of the one or more failings that led to the fraud attempt being successful. 

Depending on the type of investigator, next step recommendations may also be included in the report. For example, internal or police investigators may focus on which team member was at fault. Yet, government or regulatory investigators are more likely to focus on the effect on customers’ personal data.

Protecting Your Business from Future Fraud Risks

As with most of the world, the pace at which fraudsters are evolving is rapid, especially with new tools and AI technologies at their disposal. For businesses, this means expanding your anti-fraud strategy to include future risks, and considering how you will continue to adapt. 

Your IT and risk teams should dedicate a full plan to this section, but here are some ideas:

• Continuous training and education: keep fraud top-of-mind and help employees to learn about emerging threats and trends
• Ongoing landscape scanning: use a tool that can consistently detect differences in ‘normal’ patterns, indicating suspicious behaviours
• Payment account validation: software like Trustpair exists to safeguard your bank accounts, no matter how far fraudsters get inside the business
• Set role-based access controls: ensure that new starters, leavers and movers get the right level of access from their first (or last) day of work

Protecting your business from the future risks associated with fraud means implementing long-term detection, prevention and response plans today.

In conclusion

Fraud isn’t some sort of far-removed tale, it’s a very real and very harmful threat to businesses. The legal, financial and reputational consequences can be incredibly damaging. That’s why it’s so important to put safeguards in place like Trustpair, which protects your financial accounts automatically when something is not quite right.