The Charity Commission has urged large charities to prepare for an upcoming offence of failure to prevent fraud, which will make organisations criminally liable if an employee commits fraud intending to benefit the organisation.

A failure to prevent fraud offence that comes into force on 1 September will affect large, incorporated charities with either more than 250 employees, an income of £36m or £18m in total assets.

Under the offence, an organisation could be criminally liable where an employee, agent, subsidiary or an associated person commits a fraud intended to benefit the organisation and where the organisation did not have “reasonable” fraud prevention measures in place, the regulator has warned.

The commission added that it does not need to be demonstrated that directors or senior managers either ordered or knew about the fraud.

According to the Home Office’s guidance, an organisation does not need to actually receive any benefit for the offence to apply – it is enough that the organisation was intended to be the beneficiary of the fraud.

It adds that an organisation can also be held accountable if the intention was to benefit clients who receive services, on behalf of the organisation, from the person who committed the fraud.

The intent to benefit the organisation does not have to be the sole or dominant motivation for the fraud, the guidance says. This means the offence can apply if the fraudster’s primary motivation was self-benefit, but their actions will also benefit the organisation.

Organisations will have a defence against the offence if they have reasonable procedures in place to prevent fraud or if they can demonstrate that it was not reasonable in the circumstances to expect the organisation to have prevention procedures in place, the guidance says.

If convicted of the offence, an organisation might receive a fine, but the guidance acknowledges that there are challenges involved when fining charities, public bodies and other organisations that provide services to the public.

“Sentencing guidelines require that when setting a fine, the court must have regard to the impact of that fine on the performance of a public or charitable function,” the guidance says.

The regulator’s guide to protecting your charity from fraud advises charities to adopt an anti-fraud policy and promote it, review their organisation’s fraud risk annually or after a fraud attempt and run checks to ensure financial controls are being followed.

It also advises charities to complete pre-employment checks on staff, discuss fraud risks with organisations they work with and have a fraud response plan in place.

The regulator has also urged charities affected to familiarise themselves with its internal financial controls guidance and, where necessary, to enhance their approach to fraud and seek professional advice.