Illegal arms sales, smuggling, and organised crime such as drug trafficking, people trafficking and prostitution rings, can generate huge amounts of money, as can ‘white collar crimes’ including, insider trading, bribery and computer fraud schemes.
As the Government made vital funds available to support businesses through the deepest recession for 300 years, a lack of due diligence and robust ID verification left the door wide open to organized crime gangs to exploit the opportunity.
John Dobson, CEO at SmartSearch says these frauds were made possible due to a lack of joined up systems, despite all the information being available to raise flags when bogus applications were being made. And without moving to more secure methods of verification, regulated firms in the property sector face the same threat.
In one example more than £40bn has been loaned to struggling firms through the Bounce Back loan scheme. But the Government’s own estimates suggest that nearly two thirds of loans may never be repaid, due to mistakes in the process and fraudulent claims.
Dobson says: “The Bounce Back loan scheme is one of a number of funds made available since the start of the coronavirus pandemic which have been targeted by fraudsters, and they have probably found it surprisingly easy to work the system.
“This should serve as a stark reminder to all regulated businesses that when it comes to fraud we should be working at a heightened state of alert because as long as you’re using manual methods of ID verification, you’re going to be vulnerable.”
Dobson says one of the key lessons to be learnt from the past 12 months of living and working in a Covid-world is that increasing use of technology is the most effective way to protect your business from falling victim to fraud.
RegTech providers have also responded to the crisis and developed processes and systems to adapt to the new ways of working.
He adds: “The whole essence of an electronic verification solution is that all the information is there in one place, and easily accessible so that anybody in the business can use it, it’s not technically complicated in that sense.
“If the government departments responsible for handing out the Bounce Back loans had been using an electronic verification system to vet applicants, they could have found out almost instantly whether they were genuine.
“There are a number of ways to check whether a business is bonafide; verify the company exists at Companies House, identify trading accounts, look at payment histories, identify the auditor, identify the ultimate beneficial owners, persons of significant control. Verifying the bank account where loan funds are due to be paid to see if it matches with the address given on the application, and in some instances the owner’s address, is also key. All this information and more is available in a smartsearch so there is no excuse for ‘skimping’ on due diligence.
“Within two minutes you can confirm a business and its directors/shareholders are genuine and it exists. It’s simply not possible to replicate that level of search and due diligence by relying on people emailing scans of passports and driving licences, which are so easily forged and have no relevance in proving a business exists
“With the property market remaining such a high priority target for criminals, it’s vital not to repeat the mistakes made by the Government in allowing billions to be lost.”