The furlough scheme has seen over 9.3 million employees furloughed at a cost of £25.5bn. A large percentage of the payment will be genuine, with the remainder consisting of genuinely erroneous or deliberately fraudulent submissions.
The furlough scheme will continue to attract fraudulent submissions until it ends. Examples provided in the media of furlough fraud schemes include employees made to work whilst furloughed and claims made for employees without their knowledge.
Businesses in order to survive have had to adapt significantly since March 2020, this will not change for the foreseeable future. Fraudsters, whether external to a business, or working within it, will exploit any perceived weakness.
Typically, a business has systems and controls to reduce their fraud risk. A business significantly increases its fraud risk where ‘trust’ of an individual is deemed as an adequate control.
Paradoxically many businesses find themselves in a unique position where ‘trust’ in employees has increased, and systems and controls has more than likely reduced. Therefore, the fraud risk across many businesses will have increased. The furlough submissions by unscrupulous individuals within a business, particularly those involved in payroll, may be an area that has been exploited.
The Directors, Executive Team, Management Board, Shareholders etc should seek independent review that their furlough submissions were accurate. Any discrepancies may identify unwittingly committed errors, or in some cases, fraud. Fraud identified in the furlough submissions by an employee may potentially indicate wider payroll or other related fraud schemes.
Where a business has received furlough monies they are not entitled, most will take measures to repay the Treasury. What civil or criminal action HMRC will take against those they identify that knew their business submitted erroneous or fraudulent claims and did not self-disclose remains to be seen.
Fraud risk evolves and a business has to evolve and understand fraud across their businesses to protect their finances and reputation.
Remember, trust is not a control.
Head of Risk and Compliance
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