Fraudulent COVID-19 claims: an ICAEW Chartered Accountant's responsibilities
Various government schemes have been put in place intended to provide financial support for businesses during the Covid-19 pandemic but are unfortunately open to abuse. Professional accountants are well placed to not only identify and report fraud, but in some cases to prevent it happening in the first place.
Code of Ethics
It is therefore important that members continue to adhere to the Code of Ethics and relevant laws and regulations during these difficult times.
Section 220 of the Code (applicable to both members in business and practice) requires that, when preparing or presenting information, a professional accountant shall prepare or present the information in a manner that is intended neither to mislead nor to influence contractual or regulatory outcomes inappropriately. Members in practice additionally have Anti-Money Laundering obligations.
Coronavirus Job Retention Scheme
Turning first to the Coronavirus Job Retention Scheme (CJRS). Some members have been asked to prepare, or been made aware of, claims for employees who have been working, or directors who have been engaged in revenue generating activity, during the period of furlough. A professional accountant should refuse to submit such a claim and explain the reason - it may be that the client has misunderstood the criteria. As there is not yet a crime with proceeds because no claim has been submitted there is no need for a SAR at present. If the client decides to engage a new accountant your response to any professional enquiry letter may make reference to a disagreement over eligibility for a grant. Also if you were to come into receipt of information at a later date suggesting that a fraudulent claim has knowingly been submitted, then you would need to make a Suspicious Activity Report (SAR).
Self-Employment Income Support Scheme
Similar considerations will apply to the Self-Employment Income Support Scheme (SEISS) however the professional accountant is much less likely to have been involved in preparing such claims. Red flags that may lead a member to subsequently suspect the funds have been obtained fraudulently include a lack of evidence of self-employment, rapid cash withdrawal or onward transmission of the funds.
Bounce Back Loan
Turning to the Bounce Back Loan (BBL). This is to be used for business purposes. Lenders may decline applications they believe are for personal purposes.
Whilst the professional accountant has no responsibility to track what the loan was ultimately used for it is highly likely that they will come into receipt of such information in the course of business, and as such will have an obligation to make a SAR if they suspect fraudulent activity.
Other red flags to look out for
Other red flags include accounts showing minimal business activity prior to receipt of the loan, fund transfers to personal accounts or third parties, rapid cash withdrawals, or multiple loan applications using different business names.
Access further information
If you’re an ICAEW member, affiliate or member of staff in an eligible firm with member firm access, you can find further information in our Suspicious Activity Reports helpsheet.
You may also discuss your specific situation confidentially with the Ethics Advisory Service on +44 (0)1908 248 250 or e-mail firstname.lastname@example.org
About the author
David Stevens LLB BFP FCA
Professional Consultant, ICAEW