Fraudulent COVID-19 claims: an ICAEW Chartered Accountant's responsibilities
Updated October 2020: 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
In addition to complying with relevant laws and regulations, ICAEW members (whether in practice or in business) must adhere to the ICAEW Code of Ethics which includes the fundamental principle of integrity. Paragraph R111.2, states:
A professional accountant shall not knowingly be associated with reports, returns, communications or other information where the accountant believes that the information:
(a) Contains a materially false or misleading statement;
(b) Contains statements or information provided recklessly; or
(c) Omits or obscures required information where such omission or obscurity would be misleading.
A professional accountant must not therefore be knowingly associated with false or misleading claims for government support.
Anti-money laundering obligations
Members in practice must also consider their anti-money laundering obligations. Broadly, they are required to submit a Suspicious Activity Report (SAR) where information comes to them in the course of their business in a regulated sector, which gives them suspicion that another person is engaged in money laundering . Making a SAR without a suspicion risks potential breaches of confidentiality – careful consideration should therefore be given to each situation.
Coronavirus Job Retention Scheme (CJRS)
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 were not eligible and/or claims for hours for which there was no entitlement to claim. A professional accountant should refuse to submit such a claim and explain the reason - it may be that the client has misunderstood the criteria. Where a claim has already been made, a professional accountant should discuss the matter with management and encourage an amendment to be made and funds to be returned.
For members in practice, where no claim has been made, there is no crime with proceeds and therefore no need for a SAR to be submitted. Where a claim has been submitted, and proceeds received, there is no need to make a SAR if this was considered to be an innocent error and the client works to amend the claim and return the funds (an innocent error does not result in a money laundering offence in itself); however if there is a suspicion that the claim was fraudulent in nature (e.g. the client knowingly submitted a false claim) the obligation to submit a SAR would arise. If the client decides to engage a new accountant, the response to any professional enquiry letter may make reference to a disagreement over eligibility for a grant.
Self-Employment Income Support Scheme (SEISS)
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 making such claims as agents can’t make claims on behalf of their client.
Red flags that may lead a member to subsequently suspect the funds have been obtained fraudulently include indications that the required declarations are false – for example, indications that the business has not been affected by coronavirus or that there is no intention to continue to trade.
Bounce Back Loan Scheme (BBLS)
Turning to the Bounce Back Loan Scheme (BBLS) 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, depending on the circumstances, may have an obligation to make a SAR.
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.
You may also discuss your specific situation with the Ethics Advisory Service on +44 (0)1908 248 250 – if you are concerned about potential fraudulent activity, please call anonymously.