Friday 23 October 2020 11:59 am

Criminal gangs steal £2bn through furlough fraud

Criminal gangs have scooped up almost £2bn of government cash intended for furloughed workers, according to official tax estimates.

HM Revenue & Customs (HMRC) said that between 5 and 10 per cent of the £39bn sum handed out by chancellor Rishi Sunak to support workers during the pandemic had been claimed fraudulently. 

A report published today by the National Audit Office (NAO) said there was evidence of “significant levels of furlough fraud” from both organised gangs “hijacking” claims and employers taking money collected on behalf of staff.

Tax officials told the NAO they were “almost certain” more than half of fraudulent claims had been pocketed by organised criminals posing as legitimate businesses.

The NAO said details of agents who worked on behalf of employees were likely stolen, meaning fraudsters may have been able to make claims for large numbers. Furlough agents accounted for around half of claims under the jobs retention scheme.

HMRC said it only started alerting businesses that claims had been made in their name in August. 

“This meant businesses may not have been aware that their details had been hijacked and used to make a claim during the first months of the scheme,” the NAO said.

HMRC has so far made three arrests on suspicion of furlough fraud, while it expects to follow up on more than 27,000 “high-risk” claims.

“HMRC has paid out billions of pounds to fraudsters. Most of this is likely to be gone for good,” said Meg Hillier, chair of the public accounts committee. 

“HMRC managed to stop tens of thousands of fraudulent claims against the self-employment scheme. But… [it] missed chances to find out which companies were pocketing cash meant for their staff or forcing them to work while furloughed.”

Nicola Finnerty, criminal litigation partner at Kingsley Napley law firm, told City A.M: “The most immediate concern is likely to be with the taxman and the reputational damage that may follow.  However, the knottiest problem may well be how to manage potentially criminal funds which have entered, and possibly exited, a company’s accounts amounting to a criminal offence.  

“The coronavirus crisis continues to put a significant strain on public resources and there is likely to be little, and reducing, sympathy for companies that have incorrectly claimed funds and have not put in place steps to undo that error.”

It comes after Sunak yesterday announced a basket of further financial support measures for staff and businesses unable to operate during local lockdowns around the country. 

The fresh bailout is estimated to be in the region of £11bn, taking the total furlough figure to more than £50bn. 

The chancellor’s job support schemes have been largely successful in protecting jobs up to October, when the furlough scheme is due to wind down, the NAO found.

However, as many as 2.9m people were told they were not eligible for the scheme due to a combination of policy decision and tax restraints.