A BBC investigation has uncovered a scam where fraudsters target struggling families and persuade them to claim Universal Credit, in order to obtain an upfront advance payment.
The fraudsters offer to complete the paperwork, often giving assurances as to the legality of the scheme, in exchange for a cut of the money the claimant receives. However, not only are these people operating illegitimately, the claimant often doesn’t realise that the ‘advance payment’ is actually a form of loan, which has to be paid back in full to the DWP within a year.
How the scam works
- The fraudster contacts the claimants and offers to organise a grant or loan for them, which will result in quick access to cash (normally around £500)
- They will often give assurances that the scheme is legal
- The claimant provides their details to the fraudster, who then submits an application for universal credit on their behalf – this often involves making false claims about the claimant’s personal circumstances
- The Department of Work and Pensions (DWP) approves the claim and transfers an advance loan to the claimant’s bank account
- The fraudster will demand a set-up fee and the claimant will be forced to hand over most of the money (normally around two-thirds of the payment)
- The fraudster disappears and, because the money is actually a loan, the claimant will be left owing the entire amount to the government
The way that the scam works means that the claimant is potentially liable for benefit fraud. The DWP has set up a dedicated unit to investigate an estimated 85,000 cases where they suspect a criminal offence has been committed.
Recent guidance in relation to benefit fraud investigations means that the DWP and local authorities will now routinely exercise their statutory powers to obtain the bank records of those under investigation, which they receive directly from the banks.
It is not known how many of the cases currently being investigated involve claimants who have genuinely been taken in by the organised criminals behind the scheme but it is thought to be a significant number.
In some cases, victims of the fraud not only become suspected of criminal activity but also lose out on other benefits they are entitled to. This is because Universal Credit acts as a combined payment of other means-tested welfare benefits, which get stopped immediately when fraud is suspected. Universal Credit combines six “legacy benefits” into one monthly means-tested payment. The legacy benefits are working tax credits, child tax credit, jobseeker’s allowance, income support, employment support allowance, and housing benefit
The DWP report that they have already secured their first conviction in relation to this scam and there are thousands of ongoing investigations.
If you or a family member has received a letter from the DWP requesting that you attend an interview under caution, please contact a member of our Crime and Regulatory Team. Our team are fraud experts who can guide you through the process and help ensure that you avoid prosecution wherever possible.
Our lawyers represent clients in interviews under caution and have specialist expertise in DWP fraud investigations. For more information, contact a member of the team here.