COVID-19 loans, lack of publicity and risk of fraud

Neil williams Financial crime expert Rahman Ravelli is concerned about the risk of fraud involving coronavirus loan programs.

To say that the government has left the taxpayer vulnerable to the theft of millions of pounds is a heavy accusation to make. But this is the charge that has been leveled against the government by prominent anti-fraud organizations.

They believe the theft is made possible because there is no publication of lists of those who have received money under the coronavirus loan programs. With the government having guaranteed loans totaling almost £ 35 billion to help more than 800,000 small businesses survive the COVID-19 crisis, critics fear the lack of in-depth checks on businesses and people asking for money is practically an invitation to those looking to make fraudulent gains .

The prospect of criminals using bogus businesses to make these gains prompted Spotlight on corruption, the Fraud Advisory Board and Transparency International will write to Chancellor Rishi Sunak in an attempt to persuade the Treasury to release the names of all those who receive viral loans. Their argument is that removing the anonymity of loan recipients will make it easier for authorities to identify – with the help of the public – those who are using the system for criminal gain, and will deter many who are tempted to do so. do it.

While the past few months have been odd times for politicians, the business community and the rest of us, the argument made by anti-corruption bodies is hard to ignore. It seems odd that the government has not approached the lending program with at least one eye on those who would view these loans as an opportunity to make an illegal race for money. While loans can be touted as an innovative response to unique circumstances, there is nothing unique about a large fund of money attracting those looking to get their hands on it illegally. The government’s own national anti-fraud initiative has proven successful in matching electronic data within and between public and private sector organizations to prevent and detect fraud related to grants and benefits. Failure to provide it with the tools to do the same with tens of billions of pounds in government loans seems to represent either a huge oversight, a sign of government naivety, or a hopelessly optimistic belief that those seeking to commit fraud simply would not risk. no false requests. .

Identifying fraud is data-driven. If details of all loans were released, all kinds of cross-referencing could be done to identify suspicious activity before, during or after loan applications. Without these details, the task of spotting – and recognizing the importance of – the business that is suddenly no longer dormant or the arrival of new directors is infinitely more difficult. Fraud feeds on weaknesses in systems. Those who seek to commit it are adept at recognizing these weaknesses and the best ways to exploit them – subprime mortgage abuse and all kinds of long-standing frauds are just two obvious examples of this.

It must be recognized, of course, that there will be people without criminal intent who will appreciate the fact that the loan they have requested and received is not known to others. They may think that making it public would give their competitors an advantage, as these competitors may see an opportunity in a rival’s adversity. But on the other hand, it is not out of the question that, without publicly available loan information, innocent businesses have no idea that claims have been made on their behalf, with funds being authorized and paid to third parties who hacked identities. and embezzled funds. The possibility of verifying a central register of candidates may well discourage this.

Fraud feeds on weaknesses in systems.

Protecting the identity of legitimate businesses seeking help is one thing. But trusting existing regulatory and compliance frameworks and procedures that are strong enough to ensure that opportunities for fraud are limited is another. The danger is that these frameworks are simply not up to the task. Loan programs can prove to be a fertile hunting ground for opportunists looking to get their hands on the rich harvests available.

The government has made it clear that loans must be repaid and that banks will take precautions against loan fraud, such as customer checks and monitoring. He even said he expects those who apply for loans to act responsibly. This seems to be more of an unfounded hope than a realistic expectation. Those looking to commit fraud will always be happy to go with the ad-free option. That is exactly what the government gave them.

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