The failure of the UK’s Covid loan fraud task force was entirely predictable
Tony McClements leads his own inquiry into the failure of the UK’s Covid loan fraud task force.
Recent revelations that a UK government-backed unit, tasked with investigating widespread abuse of a Covid bounce-back loan scheme, recovered only a fraction of suspected fraud should come as no surprise.
Earlier this month, The Times revealed that only £7.2m ($9.6m) of more than £1 billion ($1.33 billion) of suspected fraud on taxpayer-backed pandemic business loans had been recovered. The National Investigation Service (Natis) received £38.5m ($51.3m) from taxpayers to investigate widespread abuse of the bounce-back loan scheme, and had previously claimed that it recovered £23m ($30.6m).
An investigation by state auditors, however, was only able to verify £7.2m ($9.6m) of recoveries “directly attributed to active investigations by Natis.”
As a former detective with 33 years of front-line investigative experience, I believe we need a proper postmortem investigation into this whole debacle: an inquiry into the inquiry if you will.
My view is blunt. This project was doomed from the start, because it lacked the requisite core ingredient for all serious investigations. Namely, suitably-qualified investigators such as current or former police detectives.
Il-fated by design
This was an project that was ill-fated by design.
The numbers are a clear red flag: a recovery/conviction rate so low is not the result of plain misfortune, but of structural and operational flaws. No matter how much money you throw at a fraud problem, if you don’t staff it with genuine investigators and maintain disciplined governance, you will fail.
Back in 2023 I wrote an article in which I outlined my concerns about the investigation into Covid-related frauds, as the picture became apparent:
“The police have a saying that ‘cuts have consequences.’ Sustained cuts inflicted on the number of rank and file officers in the UK mean that there are few with the skills and experience to investigate what can be complex fraud investigations linked to this type of wrongdoing.
“In an ideal world, the police would join forces with His Majesty’s Revenue and Customs (HMRC), the Department for Work and Pensions (DWP), and other government agencies with the knowledge to bring the perpetrators of such huge fraud to justice. Instead, a specialist squad of this nature is unlikely to see the light of day.”
Instead, we got Natis, a local council-run counter-fraud unit dressed up (literally, as it transpires, in “police-style” uniforms) as a law-enforcement body, without the powers, experience, or safeguards necessary for such a role.
I tried to make the point that a lack of experienced criminal investigators, especially those with a fraud investigation background, would be the Achilles heel of any investigation. Likewise, I tried to point out that draconian cuts to police fraud squads (in effect, their total demise), left the country vulnerable to a fraud of this type – both now and in the future.
The lack of deterrent becomes an incentive to fraudsters.
Why now and in the future? Because the lack of deterrent becomes an incentive to fraudsters. They know – and this latest debacle cements that belief – that they can act with impunity. They know because experts have been banging this drum for years. This Natis failure was predictable and sends the wrong message.
If there was any other threat as great as fraud to UK PLC, then we would have specialist teams of highly-trained investigators working on the problem.
The losses from Covid-related fraud are immense by any standards. To recover just over £7m ($9.3m) of a reported £1.9 billion lost ($2.5 billion) is as scandalous as the crime perpetrated. And the figure was reported to be as high as £7 billion ($9.3 billion) by Chancellor Rachel Reeve immediately prior to the 2024 UK general election.
Let’s be honest
Let’s be honest: vast swathes of this fraud were committed by people who may never have committed another crime in their lives. The opportunity and temptation presented by the unique pandemic situation was simply too great to resist. Putting aside the organized criminals who also filled their boots, the majority of culprits would tremble in abject panic at the sight of police officers turning up at their doors to question them about the loans they secured. It would be like shooting fish in a barrel for experienced investigators.
Am I saying that we should focus solely on the low-hanging fruit? No. I am making a wider point: it would surely have been easy to increase the rate of recovery here by pointing out to the (normally honest) business owners that paying back what they stole may be a good idea, otherwise they could find themselves being criminally prosecuted. How many would make an effort to repay the money? I suspect a significant number.
This is not another Post Office scandal, where there was little or no criminality. These fraudulent bounce-back loans can be shown to be demonstrably dishonest acts, and as a result, the taxpayer has lost billions of pounds. Recouping at least some of the public purse in this instance should be straightforward, certainly more than £7.2m ($9.6m) after two years of effort.
The real targets should be the organized criminals. They will be easy to identify, albeit challenging to investigate and prosecute. Could law enforcement civil powers be used effectively? If we don’t try, we’ll never know. Losses such as these demand a meaningful response, or the deterrent is lost along with the war.
Insolvency Service powers
Shifting the responsibility to the Insolvency Service is a step in the right direction. I worked with them whilst in the Fraud Squad and they are effective investigators, with significant powers. However, I would implore the government to supplement them with experienced police investigators (and thereby their police powers) and perhaps consider adding to these some retired cops.
The point being that a team of his type would surely be more effective than simply the insolvency practitioners. If we add to this HMRC and the Department of Work & Pensions staff, we would have a team worthy of the task.
The Natis debacle has proven what I have said repeatedly in a number of articles and interviews, that these are not skills you acquire in six months. They come from years of police detective work, working major fraud, building a judgment of when a line is worth pursuing or when you’ve hit a blind alley.
Natis was largely staffed with local authority counter-fraud officers and non-sworn local authority staff. The recent review noted that only three of 108 investigators had been properly seconded or authorized – meaning most staff lacked proper authority to collect evidence under the Proceeds of Crime Act (POCA), or to handle certain criminal powers.
You cannot build serious criminal cases with staff lacking those core tools. The fact that large swathes of their work were vulnerable to legal challenge or exclusion from court should alarm any investigator. Worse, by late 2021, Natis had more than 2,100 intelligence reports but capacity to only pursue a maximum of 50 cases per year.
That kind of triage is not failure: it is planning for failure. In a fraud environment where complexity is high, building high-quality cases – not just volume – is essential. The fact that many cases were never engaged, or under-investigated, has guaranteed low recoveries.
In a fraud environment where complexity is high, building high-quality cases – not just volume – is essential.
From the outset, political and press pressure demanded strong recovery narratives. Natis, whether by design or by miscalculation, leaned into that expectation: “raids”, “arrests” and high public recoveries were projected. But when the reality fell far short, the reputational credibility of the entire enterprise collapsed.
Serious fraud investigations rarely exist in isolation. They require liaison with national specialized agencies (for example, the National Crime Agency), regional police forces, crime labs, financial intelligence units, prosecutors, and courts. I have (in my earlier career) often been embedded in cross-agency task forces for major money-laundering or corruption cases.
In conclusion, don’t attempt complex fraud cases without real investigators. If your internal team lacks detective capability, outsource or co-investigate with qualified external bodies. Segment your cases by risk and capability. Don’t overload a weak central team with all fraud cases, and triage rigorously. And “investment” is key: invest in real detectives and investigators.
