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Director banned for £150k Bounce Back Loan fraud

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A Rotherham-based director has been banned after setting up three companies with the sole purpose of fraudulently obtaining  £150,000 worth of Bounce Back Loans (BBL). 

17th Nov 2021
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The Insolvency Service has banned Muneef Ihsan for 13 years after an investigation discovered that the 26 year old director opened bank accounts for three companies in June 2020, solely to fleece the Covid support scheme. 

Along with assistance from his friend, Ihsan sunk the companies into voluntary liquidation and the pair spent the fraudulently obtained Covid support loan on a lavish watch and transferred cash to third parties. 

The BBL scheme has long been clouded with stories of fraud, and Ihsan’s ban illustrates the scale of the corruption and fraud risks which the accountancy profession has highlighted since the offset. 

The BBL fraud

Ihsan obtained Covid loans as the director of three companies: Porthart Ltd, Bargain Basement 90 Ltd and Bargains Basement 90 Ltd. These were all registered at the same Rotherham address. 

The director triggered an investigation from the Insolvency Service after putting all three into voluntary liquidation in September 2020, shortly after opening a bank account for each company in June 2020. 

With no evidence that the companies even traded, it’s now clear that Ihsan only opened the bank accounts to get his hands on the £50,000 Covid-19 loans. 

Ihsan then took £24,342 from each of the companies’ bank accounts and transferred the rest to his ‘close friend’ Mahir Towid Ul Haque. 

More BBL fraud

Haque was also complicit in his BBL fraud, after he pulled a similar scheme to Ihsan by placing his supposed online sports retail company Hiitness Ltd into voluntary liquidation in November 2020. 

The company, of which Haque was appointed director in May 2020, only opened a bank account in June 2020 to obtain the £50,000 Covid support loan, and the investigators could not find any evidence that the company traded during his spell as a director.  

Haque transferred £16,050 to his personal account, bought a Rolex watch, withdrew a further £8,410 from the company account and shifted £12,500 to third parties. 

Punishment

Following an investigation from the Insolvency Service, the pair were both disqualified as directors. Ihsan, as the one that scooped up three fraudulent BBLs, received the longer ban of 13 years, while Haque faces a six year ban.  

Under the punishment, neither Ihsan or Haque can now form or manage a company without permission of the court. 

Robert Clarke, chief investigator for the Insolvency Service, said that the punishment sends out a “clear message” that “action will be taken to remove the directors from the corporate arena for a lengthy period of time”. 

AccountingWEB contacted the Insolvency Service and asked whether criminal proceedings would follow. A spokesperson said that they were unable to confirm whether this was the case but added that if there was evidence of criminality, it would be referred to the relevant prosecutory body.

More Covid fraud uncovered

The investigation of Ihsan and Haque is seemingly the tip of the iceberg of BBL fraud as AccountingWEB heard reports from as far back as October last year that the “scale of fraud is enormous”. One anonymous reader told AccountingWEB last year that “criminal gangs have exploited the loophole [as it’s] easy to get money without much effort,” while they claimed banks were not bothered about giving away money as “the government is covering the loan”.  

This case is the latest in a series of Covid fraud that has risen to the surface in the past few weeks. Earlier this month, BBC Radio 4 current affairs documentary File on 4 uncovered a number of businesses that abused the furlough scheme and justified their part in the fraud because “every other business is doing it”.

 

Replies (36)

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By Paul Crowley
17th Nov 2021 15:00

The system was idiotic
No check by the banks that company had traded. Were thuse the rules?
Which banks lent? Let them take the loss.

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Replying to Paul Crowley:
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By gillybean04
17th Nov 2021 16:02

Agreed.

Although I also think the two men should have been banned for much longer. It's not a mistake through ignorance and it's not a mistake of honourable intentions (as wrongful trading can often be). It was a planned and deliberate abuse of TAXPAYER's money (rubs my rug when people say the government pay for things, like they did a kitty whip).

To be frank, I'd have limited it to buisnesses that had been trading more than a year or two. While it may have resulted in new businesses failing, there is always that risk with a new business. Which is exactly why it was a bad idea to include new businesses. How many would have still failed even if not for covid? Except now, taxpayer's get to fund those failures.

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Replying to Paul Crowley:
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By Wanderer
17th Nov 2021 18:53

Paul Crowley wrote:

Which banks lent? Let them take the loss.

Yorkshire Bank x 1
Metro Bank x 3
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Replying to Wanderer:
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By Paul Crowley
19th Nov 2021 11:07

I did not expect it to be the main high street banks
3 from metro is worrying

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By Hugo Fair
17th Nov 2021 16:03

Something really stinks here (beyond the reported fraud):
* Did each of the companies exist prior to May '20 or were they created for sole purpose of BBL?
* Were the new bank accounts the first that each company had ever had?
* Did the banks perform ANY checks prior to agreeing loans (not just evidence of trading, but b&w things like formation date / accounts filed or overdue / credit rating / etc)?
This was organised fraud (hence all the disbursements across a web of colluders) ... the mind boggles!

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By Wanderer
17th Nov 2021 18:06

"A Rotherham-based director has been banned after setting up three companies with the sole purpose of fraudulently obtaining £150,000 worth of Bounce Back Loans (BBL). "

Mr Ihsan should be congratulated for foresight then:-
PORTHART LIMITED - Incorporated on
28 June 2018
BARGAIN BASEMENT 90 LIMITED - Incorporated on
19 December 2019
BARGAINS BASEMENT 90 LIMITED Incorporated on
3 January 2020

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Replying to Wanderer:
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By Hugo Fair
17th Nov 2021 23:01

Well that answers the first of my questions above - for which thanks - but brings another one to the boil:
* How many companies are there that are registered- but-never-traded?
Presumably some are merely due to a change in shareholder plans (and the low cost of registration), but many are 'held' in a kind of deep freeze awaiting criminal opportunities ... like this or the MUCs claiming EAs and various other 'schemes'.

Isn't it time that there was a substantial annual penalty/fee for such not-in-use companies (a bit like the empty housing surcharged council tax)?

And I still don't understand how the Banks failed to address my other earlier questions

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Replying to Hugo Fair:
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By graydjames
19th Nov 2021 09:38

Hugo Fair wrote:

Well that answers the first of my questions above - for which thanks - but brings another one to the boil:
* How many companies are there that are registered- but-never-traded?
Presumably some are merely due to a change in shareholder plans (and the low cost of registration), but many are 'held' in a kind of deep freeze awaiting criminal opportunities ... like this or the MUCs claiming EAs and various other 'schemes'.

Isn't it time that there was a substantial annual penalty/fee for such not-in-use companies (a bit like the empty housing surcharged council tax)?

And I still don't understand how the Banks failed to address my other earlier questions

Crikey that's a sledge hammer to crack a nut if ever I saw one and it misses the point. The fact that a company is on the register but never traded is a common enough situation and to imply that "many" are there for criminal purposes is plainly ridiculous. Some might, but most will be for myriad reasons. I have a very small practice now as I approach retirement, but even I have 11 (ELEVEN) such companies. Registered, most of them many years ago, in most cases as name protectors, but not one of them has ever traded. I regard this as perfectly acceptable and I am perfectly certain that the no doubt thousands of similar companies are held for equally legitimate reasons. The notion that there should be an annual "penalty" is absurd.

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Replying to graydjames:
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By Hugo Fair
19th Nov 2021 12:02

I seem to have hit a raw nerve, but not sure how.

I never said "many are there for criminal purposes" ... I said they were "held in a kind of deep freeze awaiting criminal opportunities" - which is not 'plainly ridiculous', it is fact (see the post just below from Malcolm McFarlin at 19th Nov 2021 10:16).
The words you've put in my mouth are accusatory and aimed at the people holding dormant registrations; whereas I was merely pointing out that a lot of criminal activity relies upon the existence of this pool of poorly reviewed and almost unregulated non-trading companies (even if the owners are entirely unwitting participants in the deeds that follow).

You are quite entitled to regard your behaviour as perfectly acceptable (and I never said it wasn't) ... but your claim that 'the notion that there should be an annual "penalty" is absurd' doesn't hold water.
There are plenty of activities that are entirely legal but are deemed by legislators to not be in the public good - and so that activity is regulated or penalised in some way (even if some regard this as 'social engineering').

I'd be happy with any solution that put some rigour into CH and its (lack of any real) sense of policing of our corporate forest in the UK ... penalties for repeat non-trading just being a flippant thought. But something needs to be done ... as otherwise its tantamount to claiming that it's not the Dr's fault that he/she left the 'dangerous drugs cabinet' unlocked and criminals took advantage.

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Replying to Wanderer:
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By Malcolm McFarlin
19th Nov 2021 10:16

I'm afraid your information is not quite correct. Porthart Ltd was indeed incorporated on 28/06/18 but remained under the control of a different director and was a dormant company until 15/06/20 when Ishan notified Companies House that he was the new director. He managed to backdate his directorship to 01/07/19 which appears to be due to the lack of controls by Companies House since dormant nil accounts were submitted by the previous director on 26/03/20 which to me indicates a clear intention to defraud.
In a previous life I was a VAT fraud investigator and it was vey common for fraudsters to take over dormant companies and submit a hefty VAT repayment claim. At least those who got caught were investigated as a criminal matter although the punishment metered out by the Courts did not always fit the crime until POCA came along. I think POCA or a civil equivalent should be extended to BBL cases.

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By davidbrewster
18th Nov 2021 11:40

My company borrowed £45K BBL but repaid it in 6 weeks but I have now received a letter from them with a Statement that they reclaimed a full year interest from the takpayers.

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By Jim100
18th Nov 2021 13:40

Hold on - so they just got disqualified as a director but they kept the money. They aren't going to be bothered over a disqualification.

Sure this is fraud so should be criminal investigation

There are tens of thousands of such cases. It just stinks big time and heads should roll

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Replying to Jim100:
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By Justin Bryant
18th Nov 2021 14:11

Yes; the clear message from this story is that you are free to steal £150k taxpayers' money and get nothing more than a wrist slap if you're caught (which is unlikely).

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Replying to Jim100:
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By DianeLockhart
19th Nov 2021 09:52

Disqualification is a civil court process and the process and application is about punishment or protecting the public from the scoundrels. One of three things could happen now, 1. the CPS take prosecution proceedings on the back of the disqualification for the fraudulent action and they get a sentence and recover under proceeds of crime and get order for financial recompense. 2. The IP issues proceedings to recover or 3. The Crown's 'task force' who are supposedly being gathered to investigate furlough an BBLS/CBLS et al will act (this has been mentioned in at least 2 budgets now). They could also be made bankrupt over their actions if the financial recovery is not made. I would be surprised if there are no further actions as it is what the IP will see as a 99.9% possibility of wining, it certainly needs a journo to monitor and report as it is an interesting chain of events and is one of the first reported cases. Let the flood gates open on all these cases, it is costing us all a fortune in taxation for the next 20 years.

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By Paul Goody
19th Nov 2021 09:33

I am sorry but is that all? They just got disqualified as directors.

This is fraud and they should be convicted and sent to prison.

If I nicked a Double Decker from Morrison's I would be sitting in the back room waiting for the police to arrive.

I do not get it. Where is the deterrent here?

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Replying to Paul Goody:
By SteveHa
19th Nov 2021 11:55

Paul Goody wrote:

If I nicked a Double Decker from Morrison's I would be sitting in the back room waiting for the police to arrive.

Only if you got caught.

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Replying to SteveHa:
paddle steamer
By DJKL
22nd Nov 2021 15:11

Which you likely would, a single decker would allow a faster getaway.

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By RyanHulme
19th Nov 2021 09:38

They should be up for prison sentences. If they stole £150,000 from anybody else they would be. Disgusting.

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By Maurice Downey
19th Nov 2021 09:44

if there was evidence of criminality? The evidence is overwhelming and the IS will let the public down if it fails to pursue criminal proscecutions

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By Nebs
19th Nov 2021 09:52

The only message this sends out is that they got away with it. If they want to start another company I doubt they will have trouble finding a Patsy to be their director.

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Replying to Nebs:
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By Andrew Mitchell
19th Nov 2021 10:31

Maybe I'm doing something wrong, but it seems to take my clients ages to open up a bank account (or change the signatories on the mandate) yet these chaps managed to open up three accounts in no time at all - must have had very co-operative bank staff?

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By christine johnson
19th Nov 2021 10:23

This is just the tip of the iceberg, the system was a joke and the government did not set out the requirements and parameters to be met before the banks to undertake before issuing the loans. if the government has set out these rules beforehand, and if the banks did not apply them, the bank should be held liable not the taxpayer

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By christine johnson
19th Nov 2021 10:23

This is just the tip of the iceberg, the system was a joke and the government did not set out the requirements and parameters to be met before the banks to undertake before issuing the loans. if the government has set out these rules beforehand, and if the banks did not apply them, the bank should be held liable not the taxpayer

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By christine johnson
19th Nov 2021 10:24

This is just the tip of the iceberg, the system was a joke and the government did not set out the requirements and parameters to be met before the banks to undertake before issuing the loans. if the government has set out these rules beforehand, and if the banks did not apply them, the bank should be held liable not the taxpayer

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Replying to christine johnson:
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By DianeLockhart
19th Nov 2021 10:52

Yes it is the tip of the iceberg, but there needs to be a blanket zero tolerance by CPS, BIS, HMRC investigators, IP's of the lies told when the self certification on the application was made. Because that is where the fraud starts, in their self cert, that they have turnover or anticipated turnover and other points which are supposed to be facts. It is not for the banks to be policemen for the government, they have to satisfy their own criteria and meet the FCA requirements first, which, in this crisis funding, was a pretty low bar for most of the funders. The government made it too easy to get £50k, we are going to see just how many greedy people there are out there. I am an IP, I am pleased to see by this decision and want to see what BIS/CPS will do next, but as a practitioner I will be pursing every wrongful illegal BBL's/CBL's I identify and have evidence of wrongfulness which is recoverable, because that is my obligation, I cannot rely on the HMRC/CPS/BIS to do the right thing by the creditors. However, having has a few cases already there are numerous reasons that will prevent recovery which will appear unfair to creditors. This then holds had with fraudulent furlough claims.... It is going to get technically challenging/interesting.

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Replying to DianeLockhart:
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By Jim100
19th Nov 2021 16:42

Really pleased to hear that you will be pursue these fraudsters. Some unscrupulous IP's will realise these companies will be flush with cash, charge exorbitant fees and cannot be bothered to pursue the matter further as the directors has spent the cash and has no money left or assets. The IP will just close the case.

There are some directors that will try to dissolve the company then realise they can't and just leave the company for ever as is.

There are too many cases of fraud to go after and takes too much time whatever the manpower the government puts into this to claw back some of the tax payers monies. I have had to turn away business as directors have taken too much in bounceback loans or took a loan when the company was dormant to finance the startup of a business which failed but they still took salaries out. I have heard a number of stories from my clients too about their relatives and friends. It was just basically free for all.

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By Ammie
19th Nov 2021 10:40

Tip of the iceberg.

It is this type of behaviour that makes it necessary for financial systems to be tied up in rules and regulations, often appearing onerous. You cannot trust the public to maintain a level of morality and fair and just actions in free and easy circumstances. Its what people do, given the chance.

The banks were also given licence to be relaxed in their lending because the government had underwritten the loans and hence the banks had little exposure.

The whole fast track financial rescue package was a disaster waiting to happen, and it is now happening. Who is going to pay for it? Not the government that's for sure!

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By AndrewV12
19th Nov 2021 10:52

The SEISS grants were reasonable, the Furlough Paye scheme was reasonable, the £50,000 max bounce back loan was ludicrous and was always open to fraud, why some companies clamed it who had no wages or rent / rates costs in their accounts is beyond me, the chances are they did not need it.

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By Emmamay106
19th Nov 2021 11:35

I don't get this...some of my clients struggled to get a loan and had to prove they had been trading etc and provide prior year accounts then these jokers just rock up and get £150k...how?!

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By jamiea4f
19th Nov 2021 12:27

All the bounce back loans that I know of were based on your turnover for the previous years, how exactly did a company formed a few months before applying pass that test? As for his sentence, just a joke. One of my clients claimed (incorrectly) SEISS from HMRC, owned up and is repaying it and was threatened with a fine of 50% of the benefit claimed, yet on the BBL you just get a "ban" for a few years....

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By KIKISROSSIDES
19th Nov 2021 12:32

Banned as directors? How can this be justified? Lock them up I say and throw the keys away. It is clear what they had in mind and in my opinion this is disgusting that in such times there are people like them taking advantage of the system.

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By richards1
19th Nov 2021 12:54

All these people both for this and the other article on furlough fraud have strange sounding names.

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By Arbitrary
19th Nov 2021 12:58

I agree with all who point out that the banks are at least partly complicit in this because they appear to have made little or no effort to verify the trading status of the applicants. The BBL scheme was of course wonderful for the banks because it provided them with risk free loan portfolios and they appear actively to have been promoting those loans, e.g. phoning customers to suggest them, even when the companies were prospering. The point has been made that these banks should perhaps be held liable for their more egregious carelessness. I wonder what the government's agreement with the banks was when the BBL scheme was set up. There must be some written and signed document setting out the terms of the arrangement. Will we be able to get hold of it, I wonder? As to criminal charges I am assuming that, in the cases specified, if the facts as set out are true, these will be made.

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By North East Accountant
19th Nov 2021 13:41

From MP's down no-one is held accountable anymore for their actions....... and the dishonest know this, rip everyone else off and know they can get away with it.

This drives me mad as being an honest guy (just like other A/webbers) it's disheartening that nothing is done about it.

So I have a bit moan on here but nothing will happen....no-one in Government gives a toss....they are unaccountable..... and it being a Friday (13:40) they have probably knocked off for the day anyway.

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By Mature Student
22nd Nov 2021 10:02

I have to say I feel someone needs to stand up for the banks (or should I say their staff).

Yes, they banks have done wrong in the past. But BBL's was the Government's mess, not the banks. When Rishi stood up to announce the first round of Covid aid to businesses, he hadn't let any of the ​banks aware this was on the cards.

New products on this scale normally take months, often a year or more, to go from drawing board to customers being able to apply. Bank staff were like all other office staff; they had been sent home to remain safe from a pandemic yet were trying to work at the same time. The IT systems to support the product had to be designed, built, tested and launched in a ludicrous timescale by staff who had at least one hand tied behind their back. Little to no guidance on eligibility, stretched remote working and broadband capabilities, never mind the cultural change of getting used to a very different way of working & collaborating with colleagues.
​That's if the colleagues were working at all and not off sick with Covid or looking after dependants or didn't have the ability to work remotely.

And this is before the reduced numbers of staff on the front line had to deal with the avalanche of applications and the phone calls asking or often demanding for an update. Given those circumstances is it any wonder fraud happened & mistakes were made? And could have been greatly mitigated with better communication and guidance, but that wasn't a priority with the loans. Not at the time and not since. Yet consider how many guidance changes there have been with CJRS and SEISS between March 2020 and now.

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By Mature Student
22nd Nov 2021 10:09

I have to say I feel someone needs to stand up for the banks (or should I say their staff).

Yes, they banks have done wrong in the past. But BBL's was the Government's mess, not the banks. When Rishi stood up to announce the first round of Covid aid to businesses, he hadn't let any of the ​banks aware this was on the cards.

New products on this scale normally take months, soften a year or more, to go from drawing board to customers being able to apply. Bank staff were like all other office staff; they had been sent home to remain safe from a pandemic yet were trying to work at the same time. The IT systems to support the product had to be designed, built, tested and launched in a ludicrous timescale by staff who had at least one hand tied behind their back. Little to no guidance on eligibility, stretched remote working and broadband capabilities, never mind the cultural change of getting used to a very different way of working & collaborating with colleagues.
​That's if the colleagues were there at all and not off sick with Covid or looking after dependants or unable to work remotely.

And this is before the reduced numbers of staff on the front line, already dealing with higher than normal banking transactions, had to deal with the avalanche of applications and the phone calls asking or often demanding for an update. It's no wonder then that fraud and mistakes happened. This could have been mitigated by, for example, better guidance on eligibility & checks but this wasn't a priority then and never has been since. Just compare it to the changes that have been made since March 2020 to CJRS & SEISS.

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