In the past two months, the Financial Intelligence Unit (FIU), governmental reporting center for unusual financial transactions, has forwarded 46 files to investigation services such as FIOD and the Inspectorate of Social Affairs and Employment (SZW), which are related to the corona crisis. FIU reports this NRC and Reporter Radio. It concerns an amount of at least several tens of millions of euros. The files contain reports of money laundering and fraud involving, for example, trade in mouth masks, as well as fraud with support measures.
In the latter category, FIU received reports in particular about abuse of the Entrepreneurial Affected Sectors (TOGS) Allowance – the EUR 4,000 that the cabinet made available for entrepreneurs directly affected by the crisis. Suspicious transactions were also identified when the Temporary Bridging Scheme for Independent Entrepreneurs (TOZO), the income supplement for independent entrepreneurs, was granted.
“What we see is that companies that have a good turnover, because they do business in a sector that is not affected by the corona crisis, are still requesting compensation,” says Hennie Verbeek-Kusters, head of FIU. Reporter Radio. “The money is then transferred abroad immediately after it is deposited by the government, and is used for matters such as a casino visit,” continues Verbeek-Kusters.
The Cabinet knows that “things will go wrong”
This concerns a total of 18 files in which 34 reports of abuse of the TOGS and TOZO occur. One file can contain multiple reports of “suspicious” transactions.
The reports came in via, for example, accountants and banks, who have a duty to report unusual transactions. They must always report it to FIU. The service investigates these reports and brings them back to the attention of investigative authorities. FIOD and the Inspectorate SZW have now also been engaged in investigating fraud involving support measures. If the UWV benefits agency or the FIU sees something crazy, the Inspectorate SZW can, for example, institute an investigation under the authority of the Public Prosecution Service.
For the time being, the aid measures are not piles of files, and therefore not huge amounts. The “biggest” report was about a company that committed fraud with both the TOGS and the TOZO, and was around 10,000 euros. In comparison, a total of about 3.8 billion is available for the TOZO alone.
The cabinet did announce on Wednesday that the TOGS scheme, which previously stood at a maximum of 4,000 euros, will go up to a maximum of 20,000 euros from 1 June – depending on the size of the company. The government is allocating another billion euros for this. The amounts of fraud are likely to increase due to the higher compensation. Moreover, FIU only has insight into the matters that have been reported. “And we can never assume that that is all,” said Verbeek-Kusters.
Greater risk of fraud
Companies that have ‘the guts’ in this ’emergency’ to abuse aid schemes will get the government behind them, Minister Wopke Hoekstra (Finance, CDA) said in the House of Representatives at the end of March. However, he warned at the same time, “things will go wrong”.
Because the Cabinet also knows: because many companies are in acute need, advances are already being distributed and final subsidies are only determined afterwards. And that increases the risk of fraud.
Reports of fraud with the Emergency Measure Bridging Employment (NOW) have not yet been forwarded by FIU to investigative services. While that is precisely the regulation that, for example, accountants express concerns about. They see: that NOW scheme offers room to shift with turnover and employees.
To qualify for continued payment of labor costs, companies must report their revenue decline over a three-month period. The amount of the allowance depends on the loss of turnover and the number of employees. For example, companies can now transfer income that they normally book in May to July, in order to keep turnover artificially low and to claim more wage subsidy. Now, in their current accounts, unlike in previous years, companies are trading purely to get support – that’s fraudulent.
In addition, if a company has several BVs, one of which suffers a loss, it could put all employees on the payroll of the loss-making BV. That is also accounting fraud, and accountants warn against this too.
The Ministry of Social Affairs and Employment established on Wednesday that companies that receive a NOW advance of 100,000 euros or more are obliged to submit an audit report to the UWV. According to Marcel Pheijffer, professor of accountancy at Nyenrode Business University, the ‘shift risk’ still exists. He does expect that the number of fraud reports from accountants will increase in this way. “That way the gaps will be closed somewhat.”
The broadcast of Reporter Radio with Hennie Verbeek-Kusters will be broadcast on NPO Radio 1 on Sunday
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from May 22, 2020