The Corporate Director Podcast
Episode: What does the “failure to prevent fraud” offense mean for your organization?
Date: September 17, 2025
Host: Dottie Schindlinger (Diligent Institute) & Megan Day (Diligent)
Guests: Neta Meidav (Co-founder & CEO, Vault Platform) & Loydette Bai-Marrow (Director, Fraud Sentinel)
Episode Overview
This episode explores the new “failure to prevent fraud” offense under the UK Economic Crime and Corporate Transparency Act (effective September 1, 2025). Hosts Dottie and Megan, alongside anti-corruption and compliance experts Neta Meidav and Loydette Bai-Marrow, break down what this game-changing legislation means for corporate boards, how it ties into global trends, and why a proactive ethics culture now counts more than ever.
Key Discussion Points & Insights
1. Latest Governance Trends: Director Confidence Index & AI in the Boardroom
[01:30-07:51]
- Director Sentiments:
- Directors overwhelmingly see generative AI as today's top business opportunity (02:06)
- Only 2% of surveyed directors are not planning to use AI for board work—a stark drop from 26% in May 2023 (02:26)
- 46% already use generative AI tools—often consumer-grade ChatGPT—for board work, raising security concerns (03:15)
- Risks & Best Practices:
- Hosts stress the perils of feeding confidential board documents into non-secure AI tools
- "If they're putting that kind of information into the model ... it's now training the model and now it's available for the rest of the world." — Dottie (04:45)
- The right AI tools offer opportunity—like smarter board prep and scenario planning—but require robust governance
- Hosts stress the perils of feeding confidential board documents into non-secure AI tools
2. Introduction of Guests and the New UK Law
[08:52-11:58]
- Expert Backgrounds:
- Loydette: Decade+ as a senior UK government prosecutor (Serious Fraud Office, CPS); now leads Fraud Sentinel and consulting ventures
- Neta: Founded Vault Platform, a tech solution for ethical compliance and digital whistleblowing, now joined Diligent’s ethics/compliance tech team.
- Backdrop to New UK Legislation:
- The “failure to prevent fraud” offense is a direct response to high-profile UK corporate collapses (e.g., Patisserie Valerie, Carillion) (11:58)
- Follows precedence of “failure to prevent bribery” and tax evasion laws; aims to hold companies criminally liable for internal fraud if prevention measures are inadequate
3. What the Offense Means, and Who Is Affected
[11:58-15:51]
- How the Law Works:
- Applies to large companies, including non-UK firms with a “UK nexus” (offices, significant business, or staff in the UK) (13:53)
- Transfers criminal liability if an associated person (employee, agent, supply chain) commits one of nine defined frauds, for the benefit of the company/client (14:44)
- Industry Reach:
- No industry exemptions; financial services are equally affected despite existing regulation (15:13)
- "Simply saying we are already regulated will not be a defence." — Loydette (15:34)
4. Building a Proactive Compliance Program: The New Standard
[15:51-21:05]
- Internal Compliance Implications:
- Companies must review and reinforce compliance programs, ensuring active, not passive systems
- Effective whistleblowing (“speak up”) mechanisms and credible investigation processes are now essential
- "You need to ensure that ... you either have the in-house capability to undertake investigations or that you identify experts..." — Loydette (16:39)
- Cultural Shift Required:
- A reporting line nobody uses is a red flag. Passive “hotline posters” do not demonstrate real compliance or ethical culture (17:45)
- Leverage updated tech for psychological safety, open trust, and employee empowerment
- "It's really about ... creating a system of trust and by ensuring that the tools you put out there are proactive, they create psychological safety..." — Neta (19:40)
5. Anticipated Benefits & Drawbacks for Corporate Governance
[21:05-25:42]
- Benefits:
- Raises internal fraud awareness and accountability top-to-bottom (21:18)
- Embeds anti-fraud culture not just as a compliance box-tick but as a business advantage
- "If organizations are really committed ... we'll see senior leaders leading from the front. This isn't just something for your general counsel ... it's actually something that should be owned by the board." — Loydette (22:38)
- Drawbacks/Risks:
- Added compliance burden may be seen as cost or inconvenience—but becomes a liability if ignored
- Board Guidance:
- Boards should view ethics and compliance as strategic levers for growth, not overhead (23:35)
- The right infrastructure (“rails as well as the train”) is crucial for delivering robust culture and risk management
- “This could potentially be a strategic advantage for our organization." — Loydette (25:30)
6. The Bottom Line: Compliance, Culture, and Competitive Advantage
[25:42-END]
- Proactive ethics and compliance are no longer just risk-mitigation—they shape reputation, attract talent, enable opportunity, and are increasingly measurable (29:14)
- Zero use on the whistleblowing hotline does not mean all is well; it could signal fear or disengagement
- Major corporate failures cost entire ecosystems for years, reinforcing the need for vigilant board oversight (28:31)
- “The companies that aren’t doing the right things are having such pain and having such bad downstream consequences.” — Dottie (27:26)
Notable Quotes & Memorable Moments
-
On Misuse of AI in the Boardroom:
- “I imagine that answer really meant was, hey, ChatGPT, read this board deck for me and tell me what's in it. Which terrifies me…” — Dottie [04:45]
-
On New Compliance Expectations:
- “You need to have in place an effective whistleblowing mechanism, a speak up channel. And you need to ensure that you as an organization ... either have the in house capability to undertake investigations or that you identify experts…” — Loydette [16:39]
-
On Misunderstood Metrics:
- "You've got a speak-up line, nobody uses it, and that must be great, isn't it? ... No, usually what it says is that the company has taken a passive approach to compliance." — Neta [18:02]
-
On Ethics as Strategy:
- "I just think it's a great time for the board to re-engage itself with ethics and to see Ethics as a real driver for better culture, as a real driver for growth and also as a very significant risk factor if it's done wrong..." — Neta [23:35]
-
On Board Ownership:
- "This isn't just something for your general counsel ... it's actually something that should be owned by the board. ... They should be leading from the front." — Loydette [22:38]
Important Segment Timestamps
- [01:44] — Director Confidence Index overview / AI usage statistics
- [07:51] — Introduction of guests and episode theme
- [11:58] — Background on UK “failure to prevent fraud” offense
- [13:53] — Extraterritorial reach of the legislation
- [15:51] — Compliance program requirements and whistleblowing systems
- [21:05] — Benefits/drawbacks for corporate governance
- [23:35] — Board-level guidance: ethics as strategy
- [25:30] — Compliance as strategic advantage
Conclusion: Action Items for Boards
- Treat the new UK offense as both a risk and an opportunity—strengthen internal controls and whistleblowing systems.
- Elevate ethics and compliance from “box-ticking” to boardroom strategic discussion.
- Adopt and monitor effective, secure technological solutions for compliance and reporting.
- Pay attention to internal culture metrics; lack of whistleblowing is not always a good sign.
- Remember: proactive, board-owned compliance is a competitive advantage.
This episode offers practical, urgent advice for directors, from reframing compliance and leveraging AI responsibly, to using new legal requirements as a springboard for improved culture and corporate reputation.