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Insolvency fraud

There has been a rise in scams during the COVID crisis, mainly due to the growth in corporate insolvencies. Such firms try to do business while insolvent or apply for credit or trade when suspended or termed “ineligible” to get such benefits. They claim to be into reforms only to avoid paying the creditors.  

It represents premeditated crimes driven by opportunism. It happens when counterfeit firms file for liquidation and abuse the government’s COVID-19 support schemes. They forge documents to convince the banks that their winding-up order has been revoked, allowing them to transfer a huge amount from their accounts. 

How Does It Happen?

The organisation goes bankrupt, and a new company is formed with the same directors set up to appear different from the failed one, but they are operating in the same manner with the same team. The creditors get just a percentage of the money they lend before it declares insolvency

The assets of the previous company are transferred to the new, and not much is left for the creditors to reclaim, so they face a loss against supplied goods or services. 

Bogus organisations sometimes pretend to be selling medical care products to secure funding offered during the pandemic by the government. 

They use fake representations to secure grants and bounce back loans. In some cases, they claimed they were operating through a reputable address that provided a bogus lease but was unoccupied. 

How To Protect Yourself?

If a firm claims to be insolvent during the epidemic (or due to a natural disaster), and if they have your money, do your research to find out who the directors are to spot if they have formed any bogus organisation. If you have claims against them, do not give up on them, even when they are not liable to pay.

How To Spot It?

It is a criminal offence to contravene a disqualification, bankruptcy order, restriction, or undertaking where a disqualified person or institution tries to gain benefits through illegal trade. 

For example, if you have funds from an insolvent organisation and the representatives are not responding to your messages regarding unpaid dues or loans.

If you have offered trade credits to a new business that declines. 
If you have suffered any such fraud, report it to the authorities and raise concerns regarding the loss. If you suspect anyone, report it to the insolvency service.

Date Published: Sep 11, 2023

Types of fraud

A-Z of fraud

To help understand which fraud you've been affected by, we've categorised them into an alphabetical list.

What is fraud and cyber crime?

Cybercrimes can be of two types. First, it can be cyber dependent, where the fraudsters use online devices to convince the victim to accept their offers.

Advance fee fraud

If you are trying to get a loan for a house or a car, they ask to meet the provider to get the financing arrangement and pay the finder's fee in advance.

Corporate fraud

Corporate frauds can be complicated, committed either by the firm or an individual. Nevertheless, it mostly involves cheating where the employee or the firm.

Individual fraud

There are many types of individual frauds related to advance fees, investments, insurance brokers, bogus tradespeople, Ponzi schemes, pension liberation.

Online fraud

Hence the number of cases of online fraud is increasing each year, and most such cases include – account takeover, direct frauds, or scams related domain names.

Identity fraud and identity theft

The criminal uses the stolen identity of another person living or deceased to conduct unlawful activities like obtaining goods or services in another's name.

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