Covid-19 Financial Support Schemes – Reporting Misconduct

Since the onset of the COVID-19 pandemic, the UK government has provided enormous and unprecedented financial support to companies and individuals via a number of financial support schemes. However, the Insolvency Service has already received reports of abuse in corporate insolvencies.

These support schemes include the following:-

• Bounce Back Loans
• Coronavirus Job Retention Scheme (support for employees on furlough)
• Small Business Grant Fund
• Retail, Hospitality, and Leisure Grant Fund
• Local Authority Discretionary Grants Fund

There are other support schemes available.

Financial Abuse Associated With COVID-19 Support Schemes

Some of the abuse that has already been reported in relation to COVID-19 support schemes include the following: –

1. Where Bounce Back Loans have been obtained and the proceeds of these loans have been removed by the directors for their personal benefit in close proximity to the company entering into insolvency proceedings.

2. The use of the Coronavirus Job Retention scheme for purposes other than paying employees who are on furlough, or claiming support for employees who continue to work contrary to the terms and conditions of the scheme.

3. Providing false information in connection with any applications for COVID-19 support schemes.

The Director Conduct Reporting Service does not have any specific questions relating to COVID-19 or the abuse of the aforementioned schemes and apparently IT constraints have prevented these from being added.

The Insolvency Service has asked office holders, if they identify any possible abuse of the COVID-19 support schemes, to report the abuse by answering yes to the question in section 12 of the conduct report entitled, “Have you identified any potential criminal matters; statutory or regulatory breaches that are not currently being investigated by other regulators or the police?”.

Following this, officeholders will be contacted for further information.

Further Action

Officeholders have been informed that if they are dealing with any cases where the conduct report has already been submitted and they become aware of any abuse of the COVID-19 support schemes which have not previously been identified on the Directors Conduct Report, the insolvency practitioners should report this as new information via the “Contact Us” link.

Insolvency practitioners have also been informed that they should report any suspected fraud in relation to HMRC- administered Coronavirus relief schemes (such as the Job Retention Scheme) directly to HMRC. Once this is done HMRC will then consider criminality or personal liability.

Furthermore, to comply with anti-money laundering requirements, where office holders are aware or have any suspicions of any criminal activity resulting in the entity being in possession of the proceeds of crime, they should also submit a Suspicious Activity Report (SAR). In the event that officeholders intend to deal with the assets of, or make any payments from, an entity which they know or suspect includes proceeds of crime, they should also consider whether a Defence Against Money Laundering SAR should be submitted to the National Crime Agency, to obtain consent or proceed with the transaction.

The Government has had to make billions of pounds available to businesses and individuals at breakneck speed to prevent damage to the economy, this has unfortunately led to the possibility of abuse by unscrupulous individuals. Hopefully, the measures set out above will assist in redressing some of the abuse and misuse of much-needed funds by many genuine businesses throughout the country.

For More Information About COVID-19 Financial Support Schemes

If you would like any further information in relation to this article please contact DBT & Partners as follows:

Shahid Miah – [email protected].

Tajinder Barring – [email protected].

0207 416 6745