Credit, collections & insolvency news
New research from Mazars has shown that prosecutions of company directors for fraud tripled over the past year amid a crackdown on coronavirus loan scams, with 122 company directors convicted of crimes during the year to the end of September — a rise from 40 during the previous 12 months. The total points to a high conviction rate, with 127 company directors prosecuted.
Mazars said the rise is likely to relate to the government-backed Covid support schemes, including the bounce back loan scheme (BBLS) and coronavirus business interruption loan scheme (CBILS).
The firm said the trend is set to continue as the Insolvency Service takes an increasingly tough stance on fraud during the pandemic.
The Institute of Chartered Accountants in England and Wales and the Insolvency Practitioners’ Association have urged their members to report any suspected cases of malpractice relating to Covid support schemes directly to the Secretary of State.
Mazars said that this guidance has helped increase the number of directors being investigated and prosecuted as a result of action undertaken by the Insolvency Service.
Michael Pallott, a partner at Mazars, said “The Insolvency Service is sending a clear message that directors will now face serious penalties, including prison sentences, in cases of gross misconduct.”
“Covid fraud is just one example of this. The challenges of the pandemic meant that the government’s resources were considerably stretched.”
“However, the Insolvency Service has committed itself to cracking down on Covid related fraud and is taking a much more hard-line approach; it is not afraid to pursue criminal prosecutions where necessary.”
“Normally such sanctions for directors would be limited to disqualification. Given the state of public finances, it is in everyone’s interests to have an effective enforcement scheme to make an example out of dishonest business owners. Directors who have committed Covid related fraud need to take serious notice of these trends.”