COVID 19 – a golden opportunity?

Anyone who studies the theory of why people commit fraud knows of a 1998 work by Marcus Felson and Ronald Clarke called 'Opportunity Makes the Thief'. In that work Felson and Clarke argue that much crime is as a result of opportunities with which the thief is presented and that crime patterns shift as new opportunities present themselves or existing possibilities are shut down.

Thus the growth of online crime parallels the expansion of the internet, online shopping and banking, the drop in bank robberies is as a result of better security, CCTV and the fact that it's easier to rob people by sitting behind a computer.

So the COVID 19 pandemic presented a golden opportunity for criminal and not so criminal individuals to get their hands on someone else's money. Creatively criminals have responded to lockdowns by developing, for example

• fake holiday scams – for those who can get away
• ticket frauds for festivals and events – for after 'Freedom Day'
• test and trace visits by fake staff - just on the off chance

in short almost any way of persuading people to part with their bank details or send money to criminals for something they are never going to receive.

The COVID 19 support – Bounce Back Loan scheme and the Coronavirus Job Retention Scheme (Furlough) payments - have been abused by individuals to the extent, HMRC estimate of some £3.5bn.

Employers have tried to game the system by claiming for staff and having them work normally or asking staff to take a 20% pay cut and claiming the remaining 80%. Fraudsters have set up fake companies and claimed for non-existent staff and have got away with it so far because , in the earlier panic stricken days of lockdowns, rules and regulations were rushed through and the evidence required for a claim was flimsy at best.

Clearly, as time goes on, many of these cases will be investigated, the fraud uncovered and individuals prosecuted but this will take time and effort. An underfunded and understaffed HMRC and its legal departments may well simply write off a lot of the losses in the most difficult cases.

The criminal has an advantage akin to Novak Djokovic playing Justin Bieber for the Wimbledon championship. They have first go advantage, until a crime is committed, there is nothing to investigate, they can be very creative and forward thinking and they know that public services and the police and fraud squads will struggle to accumulate evidence enough to meet the burden of proof ('beyond reasonable doubt') to secure a conviction.

The question is - how far has this gone? Is it just a question of previously honest or presently desperate employers submitting false claims or is it the fact that professional criminals have piled in and made a killing? Undoubtedly a bit of both.

Suppose a small business has to shut down because of the lockdown. It still has expenses to pay, it wants to keep its staff. The government will pay 80% of the wage bill – but what about the other 20%? Who will pay the rent or the interest on the overdraft? So what if I class a couple of temps as full time and claim for them or massage the numbers a little bit – it might save my business and the jobs. It's not really fraud – it's survival.

There may be more sympathy for them than for individuals such as company director Raashid Khan who claimed £50,000 for his company from the Bounce Back Loan Scheme and managed to transfer it all to himself (plus £20,000) shortly before the company went into administration or the individuals behind a furniture retailer in Manchester, and two Glasgow-based companies, for which no legitimate business activity has been identified since at least January 2020.

Two of those companies secured Bounce Back Loans, at least one of which was procured on the basis of false information. One of the Glasgow-based companies also secured two Coronavirus Business Interruption Loans totalling £240,000 on the basis of false information.

Ignoring the professional criminal, who is always with us, the question for the previously honest business owner is this - is there an ethical position i.e. would it be right to commit an unethical act (making a false claim) for what they see as a higher cause (saving the business and jobs)? Are such people criminals? Well in the eyes of the law the answer is yes – of course they are but the morality of what they are doing is the question.

Taking a hard line ethical position one might argue that an unethical act can never be justified because it is, of itself, unethical. However another school of thought argues that the end justifies the means and if that involves getting a little extra from the government to save a family business and preserve the jobs of its workers could it be an ethical act. Is saving a business a higher purpose?

The owners of businesses forced into lockdowns might claim that the level of support that they need isn't being met as the government support, welcome as it is, isn't sufficient – loans do, after all, have to be repaid. Their need is to save the business and jobs and help all the other stakeholders that are involved such as suppliers and the corner sandwich shop which feeds the workers at lunchtime.

So the temptation is there and the opportunity is there.

One view is that the government is fair game, public money, a victimless crime – except that it isn't. The public money comes from taxes or loans that have to be repaid and the money that criminals stole to enable them to buy another Rolex or box of expensive trainers or which business owners falsely claimed to preserve their businesses could, maybe, have gone to more deserving causes.

All the proceeds of their crime have to be funded by someone else – and it’s not Google or Amazon – it's you and me.

John Taylor is an author for accountingcpd. To see his courses, click here.