COVID-19 fraud: be on the lookout and act fast

7 September2020: Initial estimates have found coronavirus-related fraud could end up costing the taxpayer £4bn. ICAEW Chief Executive Michael Izza urges members to remain vigilant and exercise professional scepticism during this difficult time.

While it is incumbent on ICAEW members to be vigilant about fraud at all times, the COVID-19 pandemic has resulted in a need to be more alert than ever.

The National Crime Agency has warned repeatedly that criminals are seeking to capitalise on the crisis - most notably with fraudulent claims for the various financial support schemes implemented by the UK Government. While the schemes have been generally welcomed, their scale, complexity and the speed at which they have been introduced means they have also been vulnerable to exploitation.

Initial estimates are that this, together with other COVID-related fraud, could cost taxpayers more than £4bn. This will inevitably include some inadvertent and low-level misuse, but more important are the serious and deliberate efforts to defraud public finances. These include reported cases of businesses and the self-employed making claims under the Coronavirus Job Retention Scheme and the Self-Employed Income Support Scheme to which they are not entitled. 

Recouping the money

HMRC is already undertaking compliance activity to reclaim the money, including in the first instance allowing people to repay overclaimed amounts without incurring penalties.

The deadline for these repayments is 20 October, so businesses must act fast. Where necessary, members should ensure their clients or employers correct the position without delay. If businesses are aware they have received more money than they were entitled to and fail to repay the funds, this will be treated as deliberate and fraudulent action, rather than error.

Bounce Back Loans

While many will likely return funds voluntarily, there will also have been more serious and intentional frauds which will need uncovering.

Experts are particularly concerned about the risk of fraud on the Bounce Back Loan Scheme (BBLS) because claimants were able to self-certify that they met the conditions. One of these conditions was that the loan would not be used for personal purposes but only as an economic benefit for the business. Evidence of where these funds have been misused may now be becoming clearer.

Even more concerning are the actions of criminals who have revived dormant companies or used other people’s bank accounts to make loan applications and receive funds under the BBLS. These could be signs of more organised and coordinated efforts to defraud the banks and the Government. Bounce Back Loans are 100% government-backed, so ultimately we will all pay for these defaults. 

Professional scepticism

I urge all members to remain vigilant and exercise your professional scepticism during this very difficult time. If you spot erroneous or suspicious use of government schemes, take this up with your business. 

Furthermore, if your client does not correct the position and you know or suspect deliberate fraudulent activity, a Suspicious Activity Report must be made to the National Crime Agency – more details of which can be found here.