UK police struggle to track down billions in Covid loan fraud

Last month, five members of a Manchester crime gang were jailed for a total of 46 years for their role in an international ‘chop shop’ ring which used government-backed Covid-19 loans to export cars luxury goods stolen in Dubai.

During his sentencing, Judge Anthony Cross QC asked the government for an explanation of how a defendant with multiple criminal convictions, including a four-year prison sentence for drug-related offences, was able to obtain a loan guaranteed by the state without the “most basic control”.

He told defendant Asif Hussain, 44, from Stockport: ‘You have a total of 48 prior offenses for dishonesty and other offences. That a man like you was able to get a Covid loan defies belief.

The case is part of a series of criminal lawsuits in courts across England and Wales that highlight how the government‘s rebound loan scheme for small businesses battling the coronavirus crisis has been infiltrated by criminals who saw it as a source of easy money.

According to the National Investigation Service, a law enforcement agency, fraud investigations involving 205 suspects and 16 organized crime gangs have been opened, involving what was a flagship business loan scheme.

Natis, who was tasked with prosecuting these gangs after targeting government Covid-19 support programs, said 47 arrests had been made in relation to the bounce-back loan scheme. He added that he was looking at 1,397 other businesses or business associates in connection with the illegal use of bounce loans.

Launched by Chancellor Rishi Sunak in May 2020 and run by state-owned British Business Bank, the Rebound Lending Scheme has provided 1.1 million small businesses with loans worth over £47 billion in total. sterling. But the program has been criticized for having limited verification of borrowers and no credit checks.

In December, the National Audit Office, Parliament’s spending watchdog, reported that a lack of due diligence had made the bounce-back loan scheme “vulnerable to fraud and loss”, estimating that up to 5 billions of pounds could be lost to fraudsters.

Susan Hawley, executive director of Spotlight on Corruption, a campaign group, said that while it was positive that investigations had been opened by law enforcement, the scale of the fraud involved meant that the probes were smelled “like a drop in the ocean”.

“The British public will repay the fruits of this extreme negligence and failure to put in place basic fraud protection for years to come,” she added.

Last month Lord Theodore Agnew resigned as Whitehall’s efficiency minister after sharply criticizing the government’s ‘dismal record’ in tackling fraud around the bounce-back loan scheme.

Agnew claimed the government, which had agreed to fully guarantee loans under the scheme, had so far reimbursed banks almost £1bn for defaulted loans.

He added that more than a quarter of this sum was linked to fraudulent loans.

In the ‘chop shop’ case, Manchester Crown Court heard how vehicles including Range Rovers and Porsches were stolen in a series of ‘horrific’ nighttime burglaries.

Police inspect cars cut up by the ‘chop shop’ network in the North West of England © GMP

The gang dismantled the cars for parts in “chop shops” set up in former cotton mills in the North West of England or shipped them to sell in containers in the Middle East.

Prosecutors have explained how two members of the gang used £145,000 they got in bounce-back loans. One member, Hussain, who was a director of Wigan-based German Automotive 365 Ltd, received a £50,000 repayment loan for his fake company within seven days of applying.

In a separate case in November, Judge Cross jailed six men from a drug trafficking gang at Manchester Crown Court for a total of 133 years.

The men were part of a conspiracy to supply cocaine and were convicted of a conspiracy to kidnap and rob an 82-year-old wealthy businessman.

A defendant had secured a £25,000 repayment loan for a south Manchester plastics business which the gang had used as a front for their crime, the court heard.

In a third case in December, two international crime ring bosses responsible for laundering £70m, including £10m from repayment loans, were jailed for a total of 33 years at London Crown Court. Kingston.

Deivis Grochiatskij and Artem Terzyan

Deivis Grochiatskij, left, and Artem Terzyan, were convicted of money laundering after exploiting the loan scheme © NCA

Artem Terzyan, 38, from Russia, and Deivis Grochiatskij, 44, from Lithuania, were convicted of two counts of money laundering after exploiting the loan scheme, with £3.2million received from a single bank, according to the National Crime Agency.

In his remarks on the sentencing, Judge Rajeev Shetty said British taxpayers would be “stunned and upset if part of their hard-earned tax contributions were going into the pockets of criminals”.

Mike Levi, professor of criminology at Cardiff University, said he was not surprised at the level of fraud on the bounce-back loan scheme given the lack of credit checks in the early stages of the pandemic.

“There was a lot of money and the attitude of individuals or fraudster networks was to think it was just a giveaway,” he added.

The Department for Business, Energy and Industrial Strategy, which oversaw the rebound loan scheme, said government support had provided ‘a lifeline to millions of businesses’ and protected millions jobs.

He added: “We continue to crack down on Covid-19 fraud and will not tolerate those who seek to defraud the UK taxpayer”, and that he was working closely with lenders and enforcement authorities to ” ensure that those who commit fraud suffer the consequences”. ”.

Natis has so far recovered £4.8million lost in illegal rebound loans, but lawyers have said the chances of recovering larger sums are slim.

Unknown associate (Pixelized by NCA) kisses stacks of cash in Deivis Grochiatskij's apartment
An unknown associate (pixelated by the National Crime Agency) clutches stacks of cash in Deivis Grochiatskij’s apartment © Richard Gardner/Shutterstock

Peter Binning, partner at law firm Corker Binning, said: ‘It’s pretty clear that the government intended to get money out to the public as quickly as possible and they took no adjacent action to put put in place anti-fraud measures.

“Once the money comes out. . . the chances of recovering it are low.

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