Whistleblowers Aid HMRC’s Fight Against Furlough Fraudsters

HMRC stated that in devising the scheme they took a risk-based approach to the furlough scheme which included prepayment checks of known suspect organisations and devices against claims. HMRC claim that their approach struck the right balance between making the scheme as accessible as possible while protecting public money against error and fraud.

However, whilst the scheme provided a life support for many businesses and families, from the beginning it was clear the scheme could be targeted for fraud, particularly considering the huge volume of furlough claims to be assessed at the peak of the pandemic and compounded by the need to make the furlough payments immediately. These requirements made it difficult to quickly identify fraudulent or accidental claims.  

It would have come as no surprise that the scheme would be targeted by fraudsters. HMRC have been inundated with tip–offs from employees about fraud against the government furlough scheme perpetrated by their employers.  As a result of a recent freedom of information request HMRC advised that an astonishing 13,775 allegations of furlough fraud had been recorded by the beginning of May this year.

The impact of these tip-offs has yet to be fully realised. However, according to a recent study undertaken by Pinsent Masons it was found that 268 directors, some of whom have committed furlough fraud, have been banned from running companies by the Insolvency Service since 31 March 2021. HMRC are enforcing sanctions and pursuing disqualifications including recovery of misappropriated public funds. 

“Whistleblowers have played a major role in helping HMRC catch those who defrauded the furlough scheme or were otherwise not entitled to the benefits claims,” said Andrew Sackey, partner at Pinsent Masons. “Significant numbers of employees who found themselves unwittingly playing a part in a breach of the rules or even fraud will have reported them in response.”

This begs the question as to why so many whistleblowers have come forward?  

Clearly the opportunity to commit fraud by the nature of the scheme resulted in a huge volume of fraud claims. External factors such as the increased price of living, the energy crisis and the post Brexit uncertainty may have had some influence. The level of tip-offs certainly reflects the depth of feeling towards those who broke the rules at a time of national crisis and financial squeeze on household budgets.     

Another factor may also include the fact that HMRC provided the means for employees to speak up and report matters. To encourage whistleblowers to come forward, HMRC published information about employers’ furlough claims online. Employees have subsequently been accessing this information to raise reports through the HMRC’s digital reporting service.

With HMRC likely to continue with enforcement action, organisations who claimed under the furlough scheme should preserve records of decisions they made so that they can validate their furlough claims and respond to queries HMRC may wish to raise. Any businesses that find they have mistakenly claimed furlough incorrectly should seek independent advice.  

AAB People delivers whistleblowing solutions to companies globally. For more information, don’t hesitate to contact us.