AUTHOR: David Clarke
DATE: March 20, 2020
Protecting SMEs during COVID-19
1. Urgently get COVID-19 aid cash to SMEs
2. Stop fraudsters stealing cash from SMEs
99% of all companies in the UK are smaller, privately owned companies. Many are sole traders like plumbers. These businesses are the ‘community’ and are crucial for prosperity; they are not large corporations and must take priority for receipt of COVID-19 aid money.
I am a Director of one such privately held company that is directly impacted by the virus with a global workforce now operating remotely and colleagues in Spain, Italy and China subject to lockdowns unlike anything seen since the Second World War. As such, I am one of those shouting from my isolation balcony to get Government aid money out to those in need – and before the virus peaks!
There must be no delay. It is vital that the British government’s £350 billion COVID-19 aid package reaches these smaller companies quickly to avert a much wider shock to society. But here’s my ‘Katrina’ dilemma:
What is the best way for the Government to quickly get aid money to smaller companies who want to keep people in jobs while preventing crooks from stealing it for themselves?
It feels odd to be thinking of crime when patients and brave medical staff are losing their lives to a virus that is painful, tragic and invisible to the eye. But recent history teaches us that in times like this, much needed aid will not reach those in need because fraudsters will steal it.
Standard fraud controls can be circumvented in times of emergency and criminals know this. The despicable actions of those who tricked the generous public into giving money to them after the Grenfell Tower fire and Westminster Bridge terror attack illustrate the problem. Stealing donations from charities is appalling but it’s eclipsed by the eye-watering sums that criminals can steal from the public purse. A report published today by the National Audit Office highlights how up to 100,000 claims related to universal credit may be fraudulent, collectively worth up to £148 million. Meanwhile, Whitehall is planning a review into how business grants are awarded, to combat instances of grant fraud, which some estimate to be worth in excess of £2bn.
This is a global crime problem and can be seen in the scale and simplicity of the frauds that were perpetrated following the devastating loss of life and property caused by Hurricane Katrina, which hit Louisiana in the USA in 2005. Billions of dollars in Federal aid was quickly made available to support people and companies after Katrina. A decade later, the FBI and prosecutors across the USA have investigated thousands of companies and corrupt individuals who embezzled millions of dollars meant to help those in need.
I am one of those shouting from my isolation balcony to get Government aid money out to those in need – and before the virus peaks!
We can learn from the past and there are some basic things that the British and other Governments (and businesses) can do to ensure that COVID-19 aid money quickly gets to the small companies that need urgent assistance. Here are my three suggestions:
- Fraudsters steal company identities and use fake documents in applications. Introduce robust due diligence procedures to ensure the recipient of aid money is who they say they are and publish information about recipients of aid funds.
- Corrupt officials inside organisations that allocate grants collude with fraudsters in order to make some money for themselves. Current laws make it easy to prosecute small companies that commit fraud but it is near impossible to prosecute a large corporation. It is time to introduce a new offence of Failing to Prevent Economic Crime that makes a large corporation criminally liable. This will act as a deterrent as it makes the corporation responsible.
- Provide smaller businesses with information and technological tools to help them to spot fraud and not fall victim. This should take the form of a national public information campaign and requirement for banks to implement the Confirmation of Payee system (deferred for too long) to prevent small businesses being tricked into sending money to fraudsters.
Government cannot do this alone; every business must now be extra vigilant to avoid fraud such as CEO impersonation fraud and invoice scams. Information about the latest fraud threats can be found on the City of London Police Action Fraud website, and for free resources on fighting fraud, visit the Fraud Advisory Panel charity.
Stay safe, and I wish you, your loved ones, and our medical professionals good health and success in the months ahead.