UK government’s coronavirus aid package will be targeted by organised crime
The UK government’s unprecedented business aid package is going to be heavily targeted by organised crime, warns Sam Tate, a regulatory partner and white-collar crime expert at RPC, the City law firm.
Risks will centre around false applications for small business grants of up to £25,000 each – and boiler room fraud operations could see money evaporate as organised crime ‘game’ the system.
Sam Tate says that we should expect organised crime both in the UK and abroad to put in multiple fraudulent applications.
So-called “leakage” in aid systems of 20% and above is not uncommon and the low cost of technology could allow fraudsters to masquerade as legitimate UK businesses, including pretending to be real businesses or self-employed people who do not make claims.
Sam Tate, says this is “no trivial matter given hundreds of millions of pounds are at stake and the money is needed by genuine claimants.”
Says Sam Tate, partner, of RPC: “Every major UK aid programme is targeted by fraudsters and this is the mother of all aid programmes. You can guarantee that organised crime is already looking at how they get their cut of this pie.”
“In practice, the government is faced by a major dilemma – get the money out of the door to genuine claimants as quickly as possible or put in place stringent checks to stop fraudulent applications.”
Sam Tate says, “So far, looking at the grant application process, it is far from clear that effective fraud prevention has been put in place. It is also unclear how the checks that exist have been tested, or even if the government will disclose fraud figures.”
In addition, it is not known how the UK banking network, through which these payments will be made, will target money laundering of stolen funds or if the National Crime Agency will receive additional resources to counter the threat. They have little time to adjust.
Sam Tate says, in terms of testing the system and its operation, “there will be no shortage of financial crime and technology specialists willing to provide their know-how. Prevention is better than cure because when the money is gone – it is gone.”
“Even if the government keeps the level of fraud to just 1% then that is a huge amount of money.”
Fears claims management companies will take too big a cut – FCA will need to police
Outside of the area of fraud , Sam Tate says that the other major area of risk is if claims management companies try to take too big a cut for processing applications on behalf of businesses.
As with PPI, claims management companies are expected to start aggressively offering their services to businesses to apply for the grants and the wage subsidies. However, claims management companies have created problems before by taking too high a fee for doing very little work. That would mean much less of the money getting into the hands of businesses that need the aid.
Adds Sam Tate: “Claims managers are regulated by the FCA so they will need to keep a very close watch on this area. As well as homegrown operators they will need to look for unregulated claims managers operating from boiler rooms in India and also within the UK. We must learn from PPI and prevent people from being taken advantage of.”
Finally, the FCA must work hard to get ahead of these risks, supported by the entire financial crime prevention community.