Blog Post

Why Are Pandemic Fraudsters Going Unpunished?

GUEST BLOGGER

Martin Kenney

Although well-intentioned, the U.K.’s fiscal response to the COVID pandemic has been seriously flawed, creating huge opportunities for fraudsters to exploit multiple shortcomings of the various schemes offered by the government to help support businesses.

Now Whitehall officials have admitted that only 2% of the cash from a GBP 22 billion program funding businesses during the pandemic has been returned to the Treasury in the last three years.

The admission comes after the Department for Business and Trade was criticized by MPs for the slow progress made to recover an estimated GBP 1.1 billion in fraud lost to fake claims and mistakes under the ministry’s business COVID support program administered by local councils.

This is GBP 21 billion of taxpayers’ money gone. This is a staggering sum, and particularly galling coming off the back of an energy crisis, a cost-of-living crisis and recession warnings threatening the U.K. economy.

The admission of lax controls and hasty decisions during the pandemic led Dame Meg Hillier, chair of the Commons’ Public Accounts Committee, to comment in a report published earlier this month

“A door was left wide open in these schemes to fraudsters who took shameful financial advantage of schemes that were designed with national solidarity in mind. It is simply not good enough to give up on recovering this money simply because it is difficult to do so. Public trust is harmed if the government shrugs its shoulders at criminals lining their pockets with state support.”

Whitehall mandarins have made the observation that it is “incredibly hard and expensive” to recover the money stolen in fraudulent and fake claims. This statement not only highlights the obvious but should also be highly embarrassing for those within the Department for Business and Trade who issued it.

The U.K. is not alone in this mess. The U.S. Department of Justice has opened multiple cases, going back to 2021, with hundreds of billions of dollars estimated to have been looted.

The signs were there for the U.K. back in 2020, when I pointed out that the COVID-19 PPE (personal protection equipment) supply chains were ripe for fraud. I predicted the NHS would be a soft target when a GBP 45 million deal for medical masks collapsed amid fraud accusations.

Asset recovery firms, like our own, have previously voiced concerns about the situation in the U.K., which we described as “a ticking time bomb” that would adversely affect the public purse for years to come.

Many others identified the same issues, both in the U.K and across the globe.

Indeed, the situation in the U.K. was so grim that I implored my fellow Canadians to learn from the U.K.’s mistakes and to instead devote resources to investigating not only COVID fraud, but all types of fraud which continue to proliferate.

The pandemic devastated the global economy and governments found themselves bidding against one another to secure vaccines and medical and protective equipment supplies. Likewise, they needed to act fast and put together schemes that would save jobs and their national economies. They were forced to react, and the necessity for expediting schemes left them vulnerable to fraudsters.

There appears to be a reluctance and lack of political will to right wrongs. Those who stole public money during the pandemic should be seen repaying their ill-gotten gains. Otherwise, public confidence in national governments will be undermined. This is a matter of the highest public interest and demands action.

Forty percent of local U.K. councils failed to complete a questionnaire circulated by the Department for Business and Trade about the scale of the Covid business support scheme losses (which councils administered). This is unacceptable. It is now incumbent on the U.K. government and its global counterparts to think outside of the box in formulating solutions to these dreadful losses – and to think creatively about how to get some of the money back.

In my view, there needs to be a joint public/private sector partnership approach to redress such huge fraud losses to the public purse. The private sector has a deep bench of well trained and experienced asset recovery professionals (in fraud recovery lawyers, forensic accountants and fraud investigators). They are in place in all of the jurisdictions used by fraudsters to hide illicitly obtained assets (e.g., the Cayman Islands, Jersey, Switzerland, Singapore and Dubai). The public sector has tools which are very powerful in aid of asset recovery if used correctly (like MLAT Requests and Egmont Group financial intelligence requests). The combined strength of the public and private sectors in asset recovery would have a profoundly positive effect on the rate, value and frequency of recoveries.

Once the wheels of justice start spinning, and people see fraudsters’ assets stripped away from them, some public trust will start to return. In turn, there will be a queue of businesspeople who “didn’t realize that they had inadvertently made a false claim” doing their best to pay back what they have taken, rather than face prosecution, imprisonment and their assets frozen and seized.

Martin Kenney is Managing Partner of Martin Kenney & Co., Solicitors (MKS), a specialist investigative and asset recovery practice based in the BVI, focused on multi-jurisdictional fraud and grand corruption cases. In 2014, he was the recipient of the ACFE’s highest honor: the Cressey Award for lifetime achievement in the detection and deterrence of fraud. He has been chosen as a global elite “Thought Leader” by Who’s Who Legal from 2017–present and is also a visiting professor at the University of Central Lancashire’s School of Justice in the U.K. 

SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners

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