Save content
Have you found this content useful? Use the button above to save it to your profile.
An image of a crime scene
istock_Crime_Prathaan

Organised crime stole £367m from Covid schemes

by

The Covid support schemes were a “bonanza for organised crime”, with fraudsters zeroing in on the self employed income support scheme.

19th Aug 2022
Save content
Have you found this content useful? Use the button above to save it to your profile.

It’s difficult to talk about the Covid support schemes without mentioning in the next breath the colossal amounts lost through fraud. 

The vulnerabilities of the schemes allowed organised criminals to fraudulently help themselves to £376m, law firm Pinsent Mason reported today. HMRC confirmed that organised crime was responsible for stealing millions from schemes such as furlough and Eat Out to Help Out (EOHO). 

The biggest target for organised crime’s attack on pandemic funding was the self employed income support scheme (SEISS). The law firm said that £258m was pilfered from the self-employed since it was introduced in April 2020.  

SEISS was most vulnerable

Andrew Sackey, partner at Pinsent Masons, explained that organised crime targeted SEISS over the other schemes because the barriers to fraudulent claims were much lower with the self-employed scheme. 

The first round of the SEISS grant only required a tax return to be filed for 2016/17 to 2018/19 and trading in 2018/19 and 2019/20. Later rounds of the grant required the taxpayer to prove that the business was “adversely affected” by Covid.   

Sackey said this restriction was more easily exploited than the furlough scheme, which required fraudsters to create a business and register for PAYE, or the EOHO scheme where a business had to be a registered food seller with a local authority and takeaways were excluded.  

That said, that didn’t stop organised crime from extracting £104m out of the furlough scheme and stealing £5m from EOHO. 

'Bonanza for organised crime'

Sackey acknowledged that the schemes were important in saving jobs and businesses, but also called them a “bonanza for organised crime gangs”. 

Pinsent Masons reported that HMRC is hot on the trail of those who defrauded the Treasury. “It is deploying very substantial resources to investigate and prosecute those fraudsters. Many thousands of investigations into suspected fraudulent SEISS claims have already been opened,” said Sackey. 

“There will be major fines and prison sentences handed down once those investigations are complete.”

The £367m lost to organised crime is a small chunk of the £15bn that the Public Accounts Committee (PAC) estimated that could eventually be lost through Covid fraud and error. 

Schemes rife with fraud 

While SEISS was vulnerable to organised crime, the furlough scheme could have faced the biggest amount of corruption with the group of MPs saying losesses could reach £5.3bn. 

The Bounce Back Loan scheme, though, has attracted the most attention due to the rushed way the scheme was set up to dish out the money to recipients at a speed, which led to almost £5bn being lost to fraud and error. 

The vulnerability of the schemes, and the inefficiency of the Treasury, even led to government minister Lord Agnew to resign from his position over the “Covid school boy errors”.

Agnew would even go on to call the Treasury’s approach to tackling Covid fraud as a “Dad’s Army” operation when he was grilled by the Treasury Committee. 

HMRC has recently beefed up its Taxpayer protection taskforce to combat Covid fraud, after the government invested over £100m into the project

Replies (13)

Please login or register to join the discussion.

avatar
By Justin Bryant
22nd Aug 2022 16:25

If RS deserves to lose (the Tory leadership contest) for any reason, it's this (especially his allowing such easy, industrial scale fraudulent BBLs).

There's no way such gross incompetence would be tolerated in the private sector.

Thanks (0)
avatar
By Roland195
22nd Aug 2022 16:38

I can understand and indeed expected fraud on an industrial scale with CVJRS, EOHO, BBL and other acronyms but struggling to see how this applies to SEISS grants.

Thanks (2)
Replying to Roland195:
avatar
By Justin Bryant
22nd Aug 2022 17:16

Yes; I wondered about that too. Perhaps someone can enlighten us as to how organised criminals did that so easily re SEISS?

We just seem to have PM's word for it. See: https://www.cityam.com/organised-crime-gangs-defrauded-367m-from-covid-s...

Thanks (1)
avatar
By Hugo Fair
22nd Aug 2022 21:30

Sorry, Richard, but this is just a re-write of a puff piece created by Pinsents (i.e. no news content).
And, whoever's 'fault', it's not good for the headline to refer to £367m - and then the 2nd para to refer to the same number as £376m!

But, more importantly, Roland and Justin are right to query the supposed logic behind unquantified assertions such as "organised crime targeted SEISS over the other schemes because the barriers to fraudulent claims were much lower with the self-employed scheme".

Any 'lessons to be learned' need to be based on accurate analysis of the facts (including scheme weaknesses) not just PR soundbites ... we get enough of those from the politicians.

One example ... it *may* turn out that the most egregious failing wasn't the existence of any individual scheme (or the porosity of its 'entitlement/eligibility' rules) but a lack of planning.
And I don't mean planning to create the schemes or to get money quickly to the deserving/needy, I mean recognition on day-one (which it was) that fraud would occur - and developing the measures then (not now) to chase down as much of that fraud as possible.

Of course it's always better to prevent the fraud in the first place, but the next best thing is to have effective plans in place to recoup your losses ... which isn't what has happened!

Thanks (3)
Replying to Hugo Fair:
avatar
By sanjay100
23rd Aug 2022 12:01

Mistakes happen but the most disappointing part is everybody putting their heads in their sands and not doing anything to recover the vast amounts lost.

It wasn't just organised crimes that had a field day. Its even people I thought were honest were just taking the free cash on offer as "everybody else was claiming"

Just a complete shambles. Heads should roll but nothing will happen. Just staggering write offs blaming the unprecedented circumstances.

Thanks (2)
avatar
By JustAnotherUser
23rd Aug 2022 08:12

Track and Trace cost 37 billion over 2 years, the organised crime syndicate known as 'Peaky Tories' led by a suspect known as Boris Shelby, are now on the run.

Thanks (1)
avatar
By Ian McTernan CTA
23rd Aug 2022 12:36

It's all well and good wringing hands now, but at the time a scheme was needed and it obviously worked as the economy came out the other side not too badly affected (but then Russia jumped in...).

Yes, the schemes were rushed but that was necessary at the time. Of course, that causes some fraud, which should be chased, tracked down and prosecuted where possible.

Thanks (0)
Replying to Ian McTernan CTA:
avatar
By Justin Bryant
23rd Aug 2022 13:06

But we are obviously talking gross incompetence here notwithstanding the urgency and it has been stated here many times (see Lord Agnew's evidence) that it would have taken only a day or 2 (if that) to get very simple anti-fraud controls in place for BBLs etc. and the fools in charge who did not do that very simple thing (including RS who must take responsibility for being in charge of this country's money) have thereby cost us all £10bns.

Thanks (1)
Replying to Justin Bryant:
avatar
By Hugo Fair
24th Aug 2022 00:01

Agreed, but my gripe goes beyond the incompetence or even laziness.

The 1st opportunity was obviously to have imposed tighter controls as part of the claims process ... but there's been a long period of time since then (*after* it was known & admitted that fraud was commonplace) during which effective recovery plans could have been prepared and rolled out.

However there's no real desire (to recover or to prosecute), so we are now missing the 3rd opportunity to do something about it. THAT is unforgiveable.

Thanks (2)
Replying to Ian McTernan CTA:
avatar
By sanjay100
23rd Aug 2022 14:18

The most basic check would have been to check at companies house how long the company has in existence.

There are other checks that could have been done like proof of turnover etc.

Thanks (1)
Replying to Ian McTernan CTA:
avatar
By Ammie
24th Aug 2022 10:46

Sorry, not good enough.

Let's see how slack and frivolous HM Government are with funding support for the energy crisis. I expect they will be much more careful and release funding in a much more controlled manner. At the time of the pandemic they had no issue rushing through less important protective legislation and staging parties and should have been better prioritised, given the billions being paid out to support the economy and the public, the up shot of which is where we are now which isn't quite a bed of roses, and it's not just about the war either.

It would have taken a little more control to minimise the "free for all", but it was dealt with in a frenzy and panic.

Thanks (0)
avatar
By meadowsaw227
24th Aug 2022 11:19

It must be the case that all the fraud was committed by people who do not use accountants as presumably as soon as any accountants discovered the fraud they reported it OR made the miscreants pay it back.

Thanks (0)
Replying to meadowsaw227:
avatar
By Roland195
25th Aug 2022 09:46

What's your preferred method? The old arm twisted up the back is a classic but your institute may recommend thumb-screws (make sure to keep notes of when you use them otherwise HMRC may decide there is personal use of them though).

Thanks (0)