In today’s rapidly evolving compliance landscape, one principle has become abundantly clear: effective fraud prevention starts at the top. The Economic Crime and Corporate Transparency Act 2023, with its new offense of failure to prevent fraud, has elevated the expectations for senior leadership and boards across large organizations. Fortunately, the UK government has put out a document entitled “Economic Crime and Corporate Transparency Act 2023: Guidance to organisations on the offence of failure to prevent fraud.” (The Guidance). Section 3.1 of the official guidance, titled “Top Level Commitment,” should be required reading for every compliance professional seeking to build a credible, defensible, and sustainable anti-fraud culture. Today, we take a deep dive into what a top-level commitment is.
The Imperative: Leadership’s Role in Preventing Fraud
Section 3.1 places the responsibility for preventing and detecting fraud squarely on those charged with governance, including the Board of Directors, partners, and senior management. This is not simply a perfunctory statement. The Guidance makes it clear: without authentic buy-in and leadership from the very top, even the best-written policies and controls will falter.
A culture of zero tolerance for fraud must be more than a slogan. The board and senior management must actively foster an environment where fraud is not only discouraged but also considered unthinkable, where profit derived from or assisted by fraud is unequivocally rejected.
Visible Commitment: Not Just Words, But Deeds
What does genuine top-level commitment look like? The Guidance offers a clear framework. It is about visible, consistent action that resonates throughout the organization. This includes:
- Publicly rejecting fraud, even at the cost of lost business opportunities. Boards and executives must demonstrate that they will walk away from deals if the price compromises their integrity and values.
- Explaining the business benefits of a strong anti-fraud posture. Protecting the company’s reputation, building trust with customers and business partners, and ensuring long-term sustainability are tangible, valuable outcomes.
- Backing policies and codes of conduct with consequences. There must be clarity about what happens if someone breaches anti-fraud policies—up to and including contractual and disciplinary action.
- Acknowledging and endorsing collective anti-fraud efforts. Participation in industry initiatives or trade body actions against fraud demonstrates seriousness of intent.
A leadership statement is only credible if it is backed by real accountability, named roles, and continuous communication.
Governance: Structuring Responsibility for Real Results
Clear governance is the backbone of any fraud prevention framework. Section 3.1 stresses that organizations should define, document, and communicate who is responsible for every aspect of fraud prevention, from risk assessment to whistleblowing, and from detection to disciplinary actions.
Best practice governance includes:
- Designated responsibility for horizon scanning, risk assessment, policy development, disciplinary action, whistleblowing, investigation, and ongoing review.
- Direct access for compliance leadership to the board or CEO, even if day-to-day reporting is elsewhere. This ensures critical issues don’t get buried in middle management.
- Documentation of decisions and actions. Board minutes should capture key compliance decisions, risk reviews, and follow-up actions.
- Succession planning for compliance leadership. Governance should account for staff turnover and ensure continuity in anti-fraud efforts, even when key personnel are absent or leave the organization.
In some organizations, the board or senior executives will be personally involved in designing fraud prevention measures; in others, they will delegate this responsibility to the Head of Ethics and Compliance while retaining ultimate accountability. The key is active engagement and oversight.
Commitment to Resources: Funding and Training
Fraud prevention is not a costless endeavor. The guidance is explicit: senior management must allocate a reasonable and proportionate budget for compliance leadership, fraud prevention staff, training, and technology, including due diligence tools and platforms. This budget commitment must be sustained for the long term, not just as a one-off initiative.
Training is equally crucial. Senior management must champion not only initial training but also ongoing refreshers and updates, ensuring that all staff, especially those in high-risk roles, are equipped to identify and prevent fraud. Resilience is key: anti-fraud practices must be maintained even when staff are on vacation, sick leave, or when there is turnover.
Leading by Example: The Tone at the Top
The “tone at the top” is more than a catchphrase; it is the bedrock of ethical culture. Senior managers must embody the standards they expect from the rest of the organization. This means:
- Openly challenging rationalizations for fraud. Whether it’s “everyone does it,” “it’s not material,” or “it’s for the good of the business,” these are dangerous myths that must be confronted.
- Encouraging early reporting of concerns. Leadership should foster an open culture where staff feel empowered to speak up, no matter how minor the issue may seem. The earlier a problem is raised, the less likely it will snowball into a major scandal.
- Making ethics a daily practice, not a quarterly campaign. Whether through regular reminders, integration into performance evaluations, or simply modeling the right behaviors, leaders set the ethical weather for the company.
Communication: Reinforcing the Anti-Fraud Message
Top-level commitment must be communicated consistently and credibly to all key audiences, including employees, contractors, agents, suppliers, and business partners. The guidance recommends tailoring the message for different stakeholders; what resonates with employees may differ from what is relevant for contractors or vendors.
Effective anti-fraud communication should:
- Highlight the organization’s commitment to integrity over short-term gains.
- Reinforce the real-world consequences of violating anti-fraud policies.
- Regularly spotlight examples of ethical leadership, transparency, and collective action against fraud.
The Importance of Whistleblowing
Section 3.1 places significant emphasis on whistleblowing—not only establishing clear channels but also creating a culture where speaking up is encouraged and protected. Senior management should ensure:
- There are safe, independent channels for reporting concerns.
- Whistleblowers are protected from retaliation.
- Reports are acted on quickly and transparently.
A strong whistleblowing culture indicates that leadership is committed to identifying and addressing problems before they become systemic.
The “Why” Behind Top-Level Commitment
Why is all of this so critical? Because fraud is adaptive. It thrives in ambiguity, and it flourishes when leadership is distracted, disinterested, or inconsistent. The Economic Crime and Corporate Transparency Act 2023 raises the stakes: organizations now face not just reputational and commercial damage, but also criminal liability if they cannot demonstrate that their prevention procedures were reasonable and implemented with genuine top-level commitment.
The regulators and prosecutors will look for evidence of this commitment. Are senior managers personally invested? Do they walk the talk? Can they demonstrate, with documentation, that anti-fraud policies are embedded in the organization’s DNA?
Practical Steps for Compliance Professionals
What should compliance professionals do today?
- Engage with your board and C-suite. Make sure they understand their personal and collective responsibilities under the Act.
- Audit your current governance structures. Identify gaps in accountability, communication, or resource allocation.
- Refresh your anti-fraud messaging and training. Ensure it is regular, targeted, and endorsed by top management.
- Enhance your whistleblowing framework. Benchmark it against best practices and ensure visible support from leadership.
- Document everything. If it’s not written down, it didn’t happen. Ensure that minutes, decisions, and compliance actions are accurately recorded.
Conclusion: Leadership Sets the Standard
Section 3.1 is clear: fraud prevention is not just the job of compliance or internal audit. It is the duty of those at the top. Authentic leadership means investing in people, systems, and culture; communicating a vision of integrity; and never wavering, even when the pressure to bend the rules is immense.
For the modern compliance professional, this is both a challenge and an opportunity. With exemplary leadership, organizations can move beyond reactive compliance and build an enduring culture where ethical conduct is the norm and fraud has no place to hide.
Join us tomorrow, where we will consider a fraud risk assessment.
Prof. Marc I. Steinberg is a leading expert and prodigious scholar in the field of US securities and corporate law. He is the Rupert and Lillian Radford Chair in Law and Professor of Law at SMU’s Dedman School of Law. He has served as a professor, fellow, or lectured at several other prominent universities, including HKU, the University of Cambridge, Oxford University, King’s College-University of London, Moscow State University, University of Sydney, UCLA, and the University of Pennsylvania.
Tram Anh Nguyen is the chairwoman of the Global Women in AI (GWAI) group and co-founder of the London-headquartered Centre for Finance, Technology and Entrepreneurship (CFTE). GWAI is best thought of as a global community empowering women to shape the future of artificial intelligence. Its mission is to equip women across industries with the skills, networks, and visibility they need to thrive in an AI-driven world.
