Fraud – What Has Changed Since The Arrival Of Coronavirus?

There has been much coverage of ‘Covid-related’ fraudulent scams since the emergence of the virus, however; until statistics are available to allow a historical comparative analysis, it is too early to say whether or not this is very much business as usual for fraudsters, or whether there has been a genuine increase in general fraud and identity fraud activity.

It is probable that many of the scams committed have been perpetrated by the same individuals who were responsible for ‘pre-Covid’ fraud and the differing modus operandi simply illustrates their ability to rapidly switch tactics to adapt to and exploit a changing environment. Specifically, reacting to the fact that people were forced to stay at home and were driven online for everyday activities from dating to shopping. Overnight, the number of people who suddenly became ‘targets’ for online fraudsters increased significantly.

A recent article in the Times claimed that almost all crime rates fell in 2020 because of the pandemic, however; fraud is now the most common offence in England and Wales, with fraud overall up to 4 percent and online fraud up by 70 percent.

An article in the Telegraph claims that online scams rose to record levels last year and that £479 million was stolen from people in ‘push-payment’ schemes; in which people are tricked into transferring money. This represents a 5 percent increase on 2019 and the largest loss ever recorded, with almost 150,000 people being impacted. The largest single type of scam involved investment fraud, with sites promoting fake investment opportunities such as cryptocurrency.

Other scams included impersonation fraud, with criminals posing as broadband or TV streaming providers, or in some cases, even as a bank’s fraud investigation team and romance scams, with lonely and sometimes vulnerable individuals being targeted.

What is perhaps more interesting though, is whether or not people who would never previously have considered it, have since committed fraud as a direct result of the pressures induced by the virus.

The general hypothesis as to why previously trusted people commit fraud originates from Donald Cressey’s work. In simple terms, it suggests that previously law-abiding people commit fraud when they have a problem which they can alleviate through fraudulent behaviour and which they can rationalise to themselves. This is commonly referred to as the ‘fraud triangle’:

If we consider the environment created by Covid and superimpose the above, it is easy to see why many ordinary people may have committed fraud.

Pressure – The first component is pressure, which provides the motivation for the crime.

Whereas the government stepped in quickly to offer financial support to many individuals and businesses, the help was insufficient to meet everyone’s needs and a minority of people slipped through the cracks altogether and received almost no help.

This created pressure for many, including company directors who inevitably worried about how they were going to stay afloat and meet their financial obligations; not to mention the moral obligations many felt towards employees.

Opportunity – The second component is opportunity. An individual must identify a means of abusing their position to solve their financial problem and crucially, also believe they have a reasonable chance of not being caught.

The government can only be applauded for rushing out financial help, however; schemes such as Bounce Back Loans (BBLs) were launched with haste, with little requirement for due diligence involved and they were easy to abuse. The scale of the rollout was also such that individuals may have felt that their crime would go unnoticed amongst the many others that were being committed.

Rationalisation – The final component is rationalisation. It is not hard to conceive that some individuals will have felt that the impact upon the economy was unjust and that they should not have had to suffer as a result of something which was completely beyond their control. They were simply honest people caught in a bad set of circumstances.

The two most obvious areas which are likely to have been abused in the last year BBLs and commercial lending.

Bounce Back Loan Fraud

The BBL scheme promised to help small and medium-sized businesses remain trading by providing them with guaranteed loans of up to £50,000, interest free for 12 months.

Although companies that applied for the scheme were subject to KYC checks, banks struggled to cope with the sheer volume of applications and the checks were no more that cursory. HM Treasury now fears that there were numerous successful fraudulent applications.

People have also already been arrested for creating fake companies and supplying faked/forged documentation to secure loans. There is also evidence to suggest that some individuals took loans in the knowledge that they could never pay them back as their business was simply not viable (pre-covid), or, that they took loans and then liquidated their company, with the intention of ‘phoenixing’ their company and trading under a new name post-covid.

An example of BBL fraud cited in the Financial Times, noted a worker in Essex who was arrested for fraudulently stealing £240,000 worth of loans provided by the BBL scheme from his employer.

Covid Recovery Loan Scheme

This scheme was established to help businesses of any size access loans and other types of finance so that they could continue to trade throughout the pandemic and recover afterwards. Up to £10 million was available per business, with the government guaranteeing up to 80% of the finance to the lender and the finance predominantly being provided by British banks.

Again, this channel was vulnerable to fraud, and individuals and companies intentionally falsified information, such as the value of their assets, or performance of their business to secure loans; a criminal offence under Section 17 of the Theft Act 1968.

Combined, the Public Account Committee, believe that fraudulent BBL and recovery loan scheme losses could amount to £26bn.

It will take time before the statistics are released to enable us to state with authority whether or not fraud has significantly increased during the Coronavirus pandemic, or, whether it has simply increased in line with the increasing trend. What is beyond doubt, is that it is a significant problem and it is here to stay.

Fraud is now the most likely crime that the British public will become a victim of and the Office for National Statistics believes that it now accounts for one third of all crimes reported in the UK.

Just one percent of police resources are dedicated to dealing with fraud and fewer than three percent of the cases they investigate end in someone being charged or prosecuted.

What to do if you find yourself a victim of Identity Fraud

If you suspect you may have been a victim of fraud, Matrix Intelligence can assist you by investigating the crime, identifying the individuals responsible and tracing any assets that may be recoverable. For free advice and a no obligation proposal, please contact us on 0203 873 1089 or email: info@matrix-intelligence.com.