Article 4
Fraud
Fraud in the IF/ABL world
We have seen and are aware of an increase in fraud throughout the IF and ABL world, with there being more this year compared to the 4 previous years which include:
Recycling and re-aging of invoices
Fresh air invoices
Withholding rebates accruals
Posting receipts against the oldest invoices first
Manipulation of overdues
Direct banking
This has occurred across several sectors, including:
Haulage
Storage
Recruitment
Plant and machinery hire
Manufacturing
Identification is often difficult, though through predominantly reviewing the sales day books and nominal ledgers we identify most issues. Furthermore, risk factor “hindsight reviews” usually pinpoint the timing.
We believe this increase in fraud in IF/ABL is largely down to several things including:
The retrenching of bank led funding
Business payday loan type funders taking a less commercial view on funding.
Government support through CBILS, (Coronavirus business interruption loan scheme) and RLS, (Recovery loan scheme) type loans are diminishing and with the introduction of Growth Guarantee Scheme we have understandably seen an increase in qualifying criteria.
Business overheads such as staff, supply and fuel costs
Transient HMRC
Historically, easy access to cash has simply drawn out the process when in a lot of cases an early restructuring business review would have been far more appropriate and valuable.
We have seen this put pressure on IF/ABL facilities and subsequent frauds to support cash requirements.
Although there isn’t an easy solution constant reviews of data, statistics and trends as well as an early intervention is key to minimising risks.
The outlook for businesses is continued cost burden as we all face additional cash pressures with recent and imminent Tax/NI rises.
Over the last few years HMRC have been largely indifferent, lacking direction especially through the government transition. However, we feel they will improve their efforts heading into 2025 especially given the fiscal pressures within.
