As the NAO reveals up to £30bn from coronavirus schemes has been lost to fraud and organised crime, just how will UK law enforcement respond?

On 23 October we learned that organised crime gangs have stolen up to £2bn of furlough cash, with official estimates from HMRC putting a figure of £4bn on the overall sum lost to organised crime, fraud and error.

This comes just a fortnight after the National Audit Office’s (NAO) previous announcement of £26bn lost in the very same circumstances under the Government’s Bounce Back Loan Scheme.

The immense task of investigating these crimes and trying to recover the money is almost impossible to comprehend. At the forefront of the Government’s response will of course be HMRC, although the NCA also made a commitment back on 2 October to investigate the more challenging cases linked to organised crime groups.

Whilst HMRC have created a legislative ‘weapon of choice’ to tackle a vast number of cases by way of Schedule 16 of The Finance Act 2020, it is the finite investigative resources available to Government that may well provide the biggest challenge going forward.

In the Telegraph, crime correspondents Tony Diver and Martin Evans referenced the Government’s dedicated tax enforcement teams, saying that ‘officials believe it would take 500 staff members to track down £275 million from 10,000 of the most high risk furlough grants’.

Of course, HMRC’s dedicated compliance teams have never had to cover these areas of investigation before and so its organisation will inevitably require a degree of restructuring and reprioritising of resources to tackle these never-before-seen frauds. Perhaps the last time HMRC were called upon to deal with an unprecedented level of fraud was MTIC (missing trader fraud) but never on this scale and accumulating in such a short space of time. Wikipedia quotes the UK as losing 12.6 billion euros at the peak of that problem in 2005-6. A sum approximately a third of what has been amassed in just a matter of months in 2020.

Whilst recent years have seen HMRC take an alternative approach to debt recovery through outsourcing to the private sector, it has remained far more precious with its in-house compliance resources. If what the Telegraph reported on 23 October is a representative yardstick of HMRC resources to coronavirus fraud debt recovery, HMRC would need 54,500 staff to claw the coronavirus losses back. Broadly speaking, the entire UK workforce – that is clearly not possible and whilst resources are redirected towards coronavirus fraud, what will happen to investigations into mainstream fraud? If the expected tax rises come to fruition, tax fraud across the board will almost certainly increase – that cannot be allowed to continue unchecked.

HMRC also need to be realistic about the prospect of recovery of monies from coronavirus fraud. The bounce back loans will have been spent and the borrowers may not have easily identifiable personal assets, may have used the loan to repay personal debt or transferred funds offshore. Unless criminal proceedings are instigated, redirecting staff from mainstream compliance work may not yield any benefit to the treasury.

Perhaps now is the time when new public and private sector partnerships in tax compliance could really make a difference.