Corona Loans confiscated cash while smuggling across British border

An investigation by the Times on Friday, April 29 (April 29), revealed that bags full of cash from “Covid-19” loans backed by taxpayers were confiscated at the border, during a attempt to smuggle it out of the country. .

A source in the UK Home Office said border officials at airports across the country had stopped people “suspected of taking out bad credit because of the Corona virus which carried large sums of money”.

Other recipients of financial support during the pandemic used the aid to finance gambling activities and to buy houses, cars and watches, as revealed in the investigations. Among them are dozens of corporate executives who were fired after abusing a loan program set up to support businesses during the pandemic.

In many cases, individuals took out loans before immediately transferring money to personal bank accounts and spending the money on themselves rather than their companies.

It is estimated that up to £ 17 billion ($ 21.4 billion) of the £ 47 billion ($ 59.2 billion) spent by the government on corporate loans will not be repaid, and about £ 4.9 billion ($ 6 billion). 1 billion) is presumably lost. due to fraud.

One fraud expert said he feared the results were just the “tip of the iceberg”, with most of those responsible likely not to face any significant punishment due to the “large scale” of the offenses.

David Clarke, former head of the City of London police’s fraud division and former head of the Anti-Fraud Advisory Committee, said the information released was “appalling”, adding that it “proved that there is no effective protection”. for funds sent as corporate aid. “.

Investigations

A gambler used a loan of £ 50,000 ($ 62.9 thousand) to finance poker games. One businessman broke the rules of the system by securing more than a dozen loans against the pandemic for companies in the same group of companies.

Investigations have revealed that the owner of a sandwich shop received a £ 35,000 ($ 44,000) loan from his business before using it within six months to repair his garden, gambling losses and the bankruptcy of a new business. to finance. The owner of the property paid £ 30,000 ($ 37.7,000) himself after claiming a business loan for a “consultation fee”.

He revealed that the owner of a soft drink company had inflated his company’s sales volume by 100 times in his application for a loan of a maximum of £ 50,000 ($ 62.9 thousand).

A restaurant owner managed to get a loan after he was evicted from his home because he did not pay rent.

Home Office sources said that people who were stopped at British airports in an attempt to smuggle large sums of cash came out of loans. The funds were confiscated under the Crime Revenue Act and investigations are ongoing.

Lord Agnew, the counter-fraud minister who resigned over alleged failures in the scheme, expressed concern to MPs about the repayment of money smuggled out of the country. He wrote letters of resignation to Border Force personnel who were able to stop the money from leaving the country.

And in recent months, state insolvency service records, which could ban directors who violate company rules or who are bankrupt responsible for their debts to operating companies, have revealed the extent of abuse of the system.

Exclusion of corporate governance

The loan repayment program is the largest business loan scheme associated with “Covid-19”, as it targeted the smallest companies and granted them loans of up to £ 50,000 ($ 62.9 thousand) or 25 percent of annual turnover.

In many cases, managers took out the loans before transferring the full amount to their personal bank accounts. According to the rules, loans can only be used to support businesses.

Exclusions prevent people from running companies for up to 15 years. Disqualification is a civil order used when a manager is suspected of fraudulent conduct of a business, misuse of company funds, or failure to pay taxes, to protect the public.

The cases identified by the newspaper are among the first to emerge from the insolvency cycle, and there are expected to be many more, while a parliamentary question from the Labor Party revealed that from February the government will liquidate at least 63,968 companies opposed. still owes money under the pandemic plan.

By preventing the closure of those businesses, the government could seek to recover some of the money through insolvency proceedings or take civil or criminal action against the directors.

Recovery plan and the theft of billions

The UK government unveiled the recovery plan on 4 May 2020 during the first wave of the epidemic to support thousands of small businesses at risk of collapsing. It initially required managers to answer seven questions online.

Under the scheme, companies can apply for loans of up to £ 50,000 ($ 62,900) depending on their self-declared turnover. The debt is repaid over six years at a fixed rate of 2.5 percent.

The government covered the interest for the first year. Borrowers can request an additional grace period of six months. The taxpayer secures credit by allowing the banks to claim refunds from the taxpayer in many non-payment circumstances.

Under the scheme’s requirements, companies had to declare to banks what their “self-certified annual turnover” was, fill out a form and declare the validity of this information to determine the size of the loan for which they were eligible. In most cases, it appears that there were no attempts by banks to verify these allegations, even when “red flags” against fraud were within reach.

The “Times” identified 124 cases between October 2021 and March 2022 in which drivers were excluded, or were subject to bankruptcy pledges due to abuse. In at least seven of these cases, unqualified managers or bankruptcy players used the loans to continue playing the gambling games.

In 18 other cases, managers took cash in cash from loans and other forms of COVID-19 support for unclear purposes, and could not prove that they used the money for their business. Other examples identified include the use of drivers to buy cars or renovate their homes.

More than one in three of the 230 disqualifications listed on the insolvency service website at the end of March involved some form of abuse.

shocking result

One insolvency practitioner said that in many cases, drivers of fraud not related to pandemic schemes committed abuse.

Clarke said he feared the cases had so far been preceded by “an avalanche of setbacks that made their way through the system”.

“The failures in prudential investigations are staggering, proving that there is in fact no protection for the money being sent,” he added. He continued, “It would have taken a junior researcher just 15 minutes to do the kind of basic due diligence that would prevent these cases, which could cost as little as £ 20 ($ 25.1) per loan, from happening.”

Shadow Chancellor Rachel Reeves said: “These stories are the shocking result of Finance Minister Rishi Sunak’s repeated disregard for warnings about the lack of anti-fraud measures in his support schemes. It is especially painful when the government imposes new taxes on workers and businesses. “

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“Our (Covid) support schemes have been implemented at unprecedented speeds and have managed to protect millions of jobs and businesses at the height of the pandemic,” a Treasury spokesman said.

“Last year, we stopped about 2.2 billion pounds ($ 2.7 billion) of potential fraud through the lending scheme, and 743 million pounds ($ 934.8 million) more than required for leave grants,” he added. The new Taxpayer Protection Task Force, which has about 1,300 employees, is expected to recover an additional £ 1 billion ($ 1.2 billion) in taxpayers’ money.

The spokesman said there were active criminal investigations and that the National Investigation Agency had arrested 49 people in such cases.

The British Business Bank, a state-owned development bank set up to increase lending to small and medium-sized enterprises, has been given the task of managing the recovery scheme, including Treasury pandemic support programs.

“Since the scheme was launched, UK Business Bank has worked with lenders and across the government to prevent, detect and combat fraud and put in place additional measures as soon as possible to reduce fraud risk, including use of data from work-at-home businesses, ”the bank said.

Concerns about transparency

Ministers spend tens of thousands of pounds of taxpayers’ money to fight to prevent the public from knowing where billions of coronavirus loans have ended up.

The British Business Bank, which handled the government’s schemes, has refused to publish its records of who received the money for more than a year, and is fighting transparency advocates in the courts, the newspaper said.

Specialists say releasing information could help tackle fraud. However, the government says it could lead to “activity” against suspected fraudsters.

The Anti-fraud Advisory Committee, an independent charity made up of the anti-fraud community, wrote to Rishi Sunak in June 2020, explaining that the “lack of transparency” about who benefited from the schemes provided an “opportunity” to deceive the UK “.

The letter, signed by David Clark, head of the organization and head of fraud at the City of London Police, and Rosalind Wright, former director of the Serious Fraud Office, said transparency was required because of “serious vulnerabilities affecting fraudsters and corrupt insiders”. make possible. to exploit the Recovery Scheme and the Coronavirus County Loan Scheme (CBIL). ) “.

They told Sunak that “the publication of the information will help deter and detect crime by enabling the public and businesses to check the creditworthiness of customers and suppliers.”

“Law enforcers and credit agencies will also be able to conduct research and fit data to identify crime using established methods,” the letter reads.

Transparency activists had to refer the bank to the information court in an attempt to force him to publish the information.

Full disclosure is subject to a fraction of the tens of billions of pounds of public money spent to support businesses through the pandemic. This includes much of the £ 80 billion ($ 100.5 billion) in pandemic money borrowed, and £ 70 billion ($ 88 billion) in lease payments.

It did not provide details about the identities of the 1.6 million companies that borrowed a total of £ 47.4 billion ($ 59.5 billion) through the lending scheme, unless it appeared in court or bankruptcy cases.

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