The COVID-19 pandemic has been a major crisis for businesses and employees around the world. To make matters worse, some unscrupulous employers in the UK have abused the Coronavirus Job Retention Scheme by engaging in furlough fraud. They do this by accepting taxpayer money designed to help them pay salaries for furloughed workers, who are essentially “deactivated” to due to loss of business and quarantine – yet they pressure them to work (or they accept furlough benefits without the employees’ knowledge).
The system is designed to keep companies from laying off employees during such a time of crisis. Unfortunately, a crisis can also present the opportunity to commit fraud. In this case, pressuring employees to work despite being furloughed is an abuse of the system and a violation of the law. Employers who do this are gaming the system and taking advantage of employee labour, with taxpayers footing up to 80 percent of the bill (their salary).
How big is the problem? According to a recent study, more than one in three employees on furlough in the UK are currently under pressure to continue working while on furlough (Express UK, 2020). This shocking statistic has demonstrated that the issue of abuse in the furlough system is not an isolated affair, but appears to be widespread. So much so that HM Revenues and Customs is actually offering a 30-day amnesty period for employers to “admit to deliberate non-compliance of furloughing rules” (Yahoo UK, 2020). More than 1,900 calls have been logged to the furlough fraud hotline, and companies face penalties with new legislation on the way to punish violations.
What does furlough fraud look like? Here are some of the ways that employers are abusing the system.
1. Furloughed employees are pressured to work
A survey showed that 27 percent of furloughed employees were asked to send and respond to emails, and 17 percent were asked to make phone calls. Furlough workers by law are not expected to be actively engaging in any work for the employer while furloughed.
2. They are asked to come to the workplace
Rather than being asked to work from home (which is still against the rules), 12 percent of furloughed employees report being pressured to physically attend their workplace.
3. Employees are encouraged to “volunteer”
A reported 11 percent of furloughed employees are being pressured to continuing working for their employer as a “volunteer,” which is against the law.
4. Some employee don’t even know they are furloughed
In certain cases, employers have claimed furlough on their employees’ behalf, without their knowledge, while they continue working.
In their efforts to eradicate corruption, Parliament is pushing through new draft legislation that is expected to become law in July as part of the Finance Bill 2020. Dawn Register, partner in tax dispute resolution at BDO, told Personnel Today: “It is clear that HMRC is now gearing up to tackle incorrect and fraudulent claims for Covid-19 support payments. Latest government statistics show the eye-watering numbers paid out and why HMRC resources will focus on this potential new area of fraud” (Personnel Today, 2020).
The problem of furlough fraud illustrates the danger at companies that don’t adhere to a strict ethical code of conduct. By contrast, a proper tone at the top that helps discourage fraud and corruption would make it just as difficult and unacceptable to flout furlough laws as it would be to, say, engage in bribery, or cook its books. Unfortunately, many entities in the UK will likely learn the hard way when investigations and penalties bring them into compliance at a high cost. Legislators have signalled that both criminal and civil penalties will be on the table for those companies found to be abusing the system.
At CRI® Group, our experts are focused on anti-corruption methods and help implement proper anti-fraud processes that prevent problems like furlough fraud. Our due diligence processes can also detect when such fraudulent acts are being undertaken without the knowledge of ownership or directors. Let us show you ways to detect and prevent fraud at every level, and build a corporate culture that’s based on compliance and ethics.
Based in London, CRI® Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening, Business Intelligence, Due Diligence, Compliance Solutions and other professional Investigative Research solutions provider. We have the largest proprietary network of background screening analysts and investigators across the Middle East and Asia. Our global presence ensures that no matter how international your operations are, we have the network needed to provide you with all you need, wherever you happen to be. CRI® Group also holds BS102000:2013 and BS7858:2019 Certifications is an HRO certified provider and partner with Oracle.
In 2016, CRI® Group launched the Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence – an independent certification body established for ISO 37001:2016 Anti-Bribery Management Systems, ISO 37301 Compliance Management Systems and ISO 31000:2018 Risk Management, providing training and certification. ABAC® operates through its global network of certified ethics and compliance professionals, qualified auditors and other certified professionals. As a result, CRI® Group’s global team of certified fraud examiners work as a discreet white-labelled supplier to some of the world’s largest organizations. Contact ABAC® for more on ISO Certification and training.
MEET THE CEO
Zafar I. Anjum is Group Chief Executive Officer of CRI® Group (www.crigroup.com), a global supplier of investigative, forensic accounting, business due to diligence and employee background screening services for some of the world’s leading business organisations. Headquartered in London (with a significant presence throughout the region) and licensed by the Dubai International Financial Centre-DIFC, the Qatar Financial Center – QFC, and the Abu Dhabi Global Market-ADGM, CRI® Group safeguard businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI® Group maintains offices in UAE, Pakistan, Qatar, Singapore, Malaysia, Brazil, China, the USA, and the United Kingdom.
Contact CRI® Group to learn more about its 3PRM-Certified™ third-party risk management strategy program and discover an effective and proactive approach to mitigating the risks associated with corruption, bribery, financial crimes and other dangerous risks posed by third-party partnerships.
Zafar Anjum, MSc, MS, CFE, CII, MICA, Int. Dip. (Fin. Crime) | CRI® Group Chief Executive Officer
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