FRAUD CONCERNS

FRAUD CONCERNS

There are various articles relating to the various types of fraud on our website and there is a huge increase in fraudulent transactions due to the Covid19.

There have been a great number of fraudulent applications for loans under the government bounce back loan schemes and other grants and loans available due to Covid19. The CBILS and BBLS loans.

The statistics reported around June 2020 state that under 32 billion was borrowed by companies and business owners which is approximately 750,000 businesses taking out these loans. Of this amount approximately 4 billion was in the early part of June (within the first 7 to 10 days in June).

These figures will show a significant increase at the end of December 2020.

A few cases have already emerged of fraudulent applications. Both the Department of Working Pensions (DWP) and Her Majesties Revenue and Customs ( HMRC ) .

Similar schemes are also in place in other parts of the world where fraudulent activity is also taking place.

CRIMINAL ACTIONS TO FOLLOW?

The greater concern is that public law enforcement agencies, which even before the pandemic were the subject of significant criticism in that they were failing to adequately investigate and prosecute fraud, will not have sufficient resources to manage the flow of new cases.

The centralised command centre for collating reports of fraud, Action Fraud, was the subject of an undercover investigation by journalists last year, which exposed woeful practices, leading Police Scotland to withdraw from the system altogether.

The Home Office commissioned a review of the service which was published in January 2020. The review found that:

• fraud accounts for one in three of all crimes committed.
• 2000 fraud offences are committed every day in England & Wales, but just one in 50 is prosecuted.
• less than 1% of police officers directly investigate fraud.

Business Recovery Professions (BRPs)are one group that have already reported an emerging awareness of a fraud typology relating to the BBLS scheme but have been unable to access support from law enforcement. BRPs report repeated examples of company directors taking out a BBLS loan, paying the money into a personal account, then placing the company into liquidation. IPs have attempted to make reports to the criminal enforcement division of the Insolvency Service, only to be told that it is overwhelmed, and has no resources to assist. Acting independently in the civil courts would mount up a significant amount in costs and the risk combined with the litigation costs given the value of these loans between 2,000 and 50,000, make this impractical.

PRIVATE PROSECUTIONS AS AN OPTION

BRPs and financial institutions are now looking for a realistic option to address the criminality they uncover, and some are considering pursuing private prosecutions in an effort to mount a credible deterrent to the offending. Some of the benefits cited are:

• private prosecutions offer some cost protection: costs may be recovered from Central Funds, provided certain conditions are met, and there are no fees to issue proceedings, unlike civil claims.
• protection against adverse costs: unlike civil proceedings, private prosecutions do not ordinarily involve applications for costs against the prosecutor, unless misconduct on their part is identified.
• mitigating the risk of future litigation over the government guarantee: if a fraud can be swiftly pursued, and funds recovered using mechanisms in the Proceeds of Crime Act 2002 that are available to private prosecutors, this could protect against future disputes with the government over the enforceability of the guarantee. It will be difficult for the government to claim that lenders had not followed every available counter-fraud control if a full criminal prosecution for a fraudulent loan application is brought.
• act as a deterrent: it is clear from the anecdotal reports from BRPs that these company directors, and other borrowers under the BBLS are not engaging in a sophisticated fraud; rather they are counting on the government guarantee and the large numbers of borrowers, coupled with lack of resources by law enforcement as protection against pursuit. A criminal action by lenders or BRPs through a private prosecution that can be widely publicised is seen as a deterrent to more fraudulent applications, or misappropriation of borrowed funds. This is the financial institution equivalent to posting a sign saying, “thieves will be prosecuted.”

BASIS OF A PRIVATE PROSECUTION

In England and Wales any person, organisation or company is entitled to bring a private prosecution against another party: an entity does not have to be the victim of a crime to pursue a private criminal case. The right to bring a private prosecution is governed by section 6(1) Prosecution of Offences Act 1985. All sanctions that would be available in a public prosecution are available to a private prosecutor, including custodial sentences, financial penalties, and confiscation of the proceeds of crime.

Next Steps

If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email vee@navigatebr.com

This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.