Introduction
The Failure to Prevent Fraud (FTPF) offence will officially come into force as part of the Economic Crime and Corporate Transparency Act in September 2025. In a previous article, we explored the government’s guidance around the new offence and considerations for organisations to navigate compliance within these legislative parameters.
Culture underpins how individuals behave, whether this is positive or negative. Pressure to meet targets, a desire to obtain reward or an inability to recognise or report fraudulent behaviour are all driven by company culture. As companies prepare to enhance their procedures, different departments will be assessing risks from varying angles.
In this article, we discuss the critical role company culture plays in either fostering or mitigating fraud. We include practical actions organisations can take when considering culture as part of their assessment of fraud risk, which are in line with the most relevant FTPF principles.
The Role of Culture in Corporate Fraud
When addressing the FTPF guidance, culture can be considered across two of the six principles:
1. Top-level commitment: Leading by example and fostering an open culture.
The upper echelons of management in a company structure are influential in moulding workplace culture. “Culture is contagious” as spoken by the Financial Conduct Authority’s (FCA) Chief Operating Officer, Emily Shepperd in her speech at the recent 10th Annual Culture and Conduct in Financial Services Summit.1Human behaviour demonstrates that it is far more common to follow by action, rather than policy alone. The conduct of leadership needs to be set in tandem with policies and control frameworks.
2. Risk assessment: Consideration of the fraud triangle model when anticipating fraud risks.
The fraud triangle, a model originating from criminologist, Donald R Cressey in the 1950s,2 continues to be a useful depiction of why people commit fraud:
Motivation / pressure and rationalisation impact how people behave (e.g., pressure to meet financial targets accompanied with how the individual interprets compliance or rules). Culture drives conduct and decision-making. Opportunity, on the other hand, relates to a poor control environment. When present with the other two elements, fraud is committed. It is therefore not sufficient when addressing fraud risk to look at controls in isolation.
Pressure to Meet Targets
Pressure can be exerted by senior leadership either through setting aggressive sales targets or influencing employees to conform in a certain way. In the ACFE’s Report to the Nations,3 it was reported that perpetrators of financial statement fraud more commonly faced excessive pressure to perform within the organisation (22% vs 7% of other cases). Additionally, the highest losses reported were associated with excessive pressure from the organisation. Pressure to meet unachievable targets was also referenced in the Deferred Prosecution Agreement (DPA) for the false accounting case against Tesco Stores Limited by the Serious Fraud Office (SFO) in April 2017, where overstated revenues of more than GBP 250m were reported.4
Understand risk appetites: Assess how different business functions (e.g. sales) interpret risk to ensure incentives do not dominate decision-making around performance targets. Implementation of policies and controls is simply not enough, a business also needs to understand how employees interpret and engage with these controls to better understand how they perceive risk.
Circumvention of controls: Recognise that internal controls can be circumvented when pressure from leadership, influence from team members and hard targets are enforced as part of a company’s culture. Companies should not only test whether internal controls are effective but also assess how these could be bypassed.
Creating a Culture of Silence
The presence of bullying and harassment are often observed when investigating fraudulent activity. Exploitation tends to originate from a sense of entitlement and power; behaviours we also observe as rationale to commit fraud. Often, the presence of these behaviours, particularly at senior levels, results in a toxic work environment which can hinder disclosures. In the ACFE Report to the Nations,5 the longest-running frauds uncovered originated from bullying and/or harassment behaviours. When these underlying behaviours are present, fraud is likely to continue to be undetected long after a single perpetrator has been investigated and dismissed.
Investigative insights: Understanding employee engagement to report fraudulent activity (or not) can identify other exploitative behaviours that might be present and increase the risk of repeat fraud. One of the most effective ways to access this information is through the interview process of internal investigations. When deployed correctly, investigative interviews not only identify and verify the tangible facts of a case but also provide insights into behaviours and the working environment to establish where systemic practices might be contributing to fraudulent activity.
Foster an open workplace: Create an environment where misconduct is easily identified as abnormal to encourage employees to raise issues when they occur. This can be achieved through periodic training and regular communications from leadership and middle management. Achieving alignment between the “tone at the top,” “mood in the middle” and “buzz at the bottom” is crucial for cultivating an open and honest culture that is embedded in the business.
Leading by Example
Fraud does not simply occur in a vacuum. In a recent case we investigated, allegations of sexual harassment, racial discrimination, and bullying dominated the whistleblower disclosures above allegations of financial malfeasance. This, amongst many other cases, demonstrates how the behaviours of senior leadership influence the overall working environment, which normalise fraudulent and unethical activity.
Trendspotting: Use insights from investigations and internal data sources (e.g., whistleblowing reports, employee engagement surveys - including the level of response from specific functions - internal audit reports, and HR investigations) to identify patterns to target more in-depth intelligence gathering or additional monitoring.
Invest in resources: Ensure adequate resources are applied to fraud prevention, setting the tone from leadership that this is an important area to the business and reinforcing a zero-tolerance approach.
Conclusion
As companies prepare to reassess the fraud prevention framework, it is imperative to not only strengthen internal controls but consider the role of culture in fighting or fostering corporate fraud. Leadership must actively demonstrate top-level commitment to cultivating an environment where ethical practices are the norm and any issues are swiftly addressed. A culture of pressure, entitlement, or misaligned incentives can, and certainly does, lead to unethical behaviour. Understanding employees' motivations and the broader context of the working environment is fundamental to preventing repeat occurrences of fraudulent activity.
Ankura has a global team of forensic professionals diverse in expertise from forensic accounting, criminology, psychology, and criminal prosecution. Please contact our experts if you would like support.
Sources
[1] https://www.fca.org.uk/news/speeches/culture-contagious
[2] Cressey, D.R. (1953), Other People’s Money: A study in the social psychology of Embezzlement, The
Free Press, Glencoe, Illinois
[3] https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf
[5] https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf
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© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
