News |Investigations

16th November 2021

Insolvency Service steps up “crack down” on fraudsters

Prosecutions of rogue directors increased in the year to 30th September.

News of a 13-year ban for a Rotherham-based director is the latest indication of a push by the Insolvency Service to pursue and punish those who have abused Covid-19 financial relief schemes.

Muneef Ihsan fraudulently claimed £150,000 in Bounce Back Loans through three companies, which he then placed into voluntary liquidation in September 2020, prompting an Insolvency Service investigation. Ihsan opened bank accounts for each of his companies in June 2020 and obtained 3 £50,000 Bounce Back Loans, despite there being no evidence that the companies had ever traded.

Ihsan withdrew £24,342 in cash after obtaining the loans and started to transfer the remaining funds to companies owned by “a close friend”, Mahir Twoid Ul Haque, who has also been disqualified from holding directorships for six years.

Ul Haque, who claimed a £50,000 Bounce Back Loan through his own company, was found to have used the loan funds to buy a Rolex watch. He withdrew £8,410 in cash, moved £16,050 to his personal bank account and “transferred £12,500 to other third parties.”

Recently released figures show that there was a 205% year-on-year increase in the number of convictions following Insolvency Service action in the year to 30th September 2021, with 122 directors convicted of criminal activity.

Last month, an Insolvency Service press release detailed another example of a nine-year ban for the director of a cleaning company which entered liquidation in June 2020. The sole director, Rafael Henrique Scher, was found to have misused a Bounce Back Loan of £30,000 by using it to pay a single creditor, despite the company being in administration and owing “sizable debts” to other creditors with “tax liabilities which amounted to over £94,000.”

The same communication included three more examples of Bounce Back Loan-related restrictions – all eight years of bankruptcy restrictions – triggered by Insolvency Service investigations.

These efforts are still only a drop in the ocean. As I wrote about in October, more than 1.5 million businesses made use of the Bounce Back Loan Scheme and it’s estimated that around half of the £46.5bn borrowed will not be repaid.

Where loans were fraudulently acquired, company directors can be held personally liable for any wrongdoing, with fraudulent activity fitting into five categories:

  1. When borrowers exaggerate otherwise legitimate claims, for instance by exaggerating their turnover to receive a larger loan.
  2. The impersonation of a legitimate business to receive a loan.
  3. Using ‘money mules’ to take out loans and then file for bankruptcy.
  4. Making multiple applications via various lenders.
  5. Filing under a false company to receive the loan.

Fraud investigations by ESA Risk

If you suspect that a fraud has occurred within your business and need advice or support on the next steps, we’re here to help.

Contact Mike Wright, Risk Management & Investigations Consultant, at mike.wright@esarisk.com, on +44 (0)843 515 8686 or via our contact form, to find out more.

contact us online or by phone

Fraud investigations

If you suspect that a fraud has occurred within your business, we’re here to help.

What are you looking for?

Get the advice you need

Deep dive for the answers you need
Or contact us on +44 (0)843 515 8686 or at advice@esarisk.com.

Deep dive for the
answers you need

Lawyers, accountants, advisors, investors, senior
management. You name it, we help them find the answers
they need. Ready to discover how we can help you?