Is the Insolvency Service Fit for Purpose in a Fast-Moving World of Fraud?
When companies fail, it’s not always just bad luck or market forces to blame. Insolvency can sometimes be the final chapter in a deeper story, one that begins with fraud, deceit, and deliberate misconduct.
And in the rare cases where fraud, deceit and deliberate misconduct are to blame, that misconduct is moving faster and hitting harder than ever before.
Thanks to technology, today’s fraudsters operate at lightning speed. Money is transferred globally in seconds. Shell companies are formed in minutes. Victims are deceived via sophisticated scams, and by the time they realise what’s happened, it’s too late.
But while fraud has become faster, more agile, and more destructive, the response from our enforcement bodies has not.
The System Is Fragmented, Underpowered, and Too Slow
The Insolvency Service is just one of several organisations tasked with tackling corporate wrongdoing. Others include:
- HMRC
- Action Fraud
- The police
- The Serious Fraud Office
- The Financial Conduct Authority
- The National Crime Agency (NCA)
Each has its own remit, priorities, targets and constraints. But between them, cases are passed around, referrals are delayed, and victims are left waiting for months or years with no updates and no meaningful action. Often information is not shared properly, in the detail that’s really needed.
This lack of coordination has real consequences, and I’ve seen it again firsthand recently.
A Real, Ongoing Fraud — And a System That Isn’t Responding
Recently, I’ve been supporting individuals affected by an ongoing fraud – a scheme being run across multiple companies, by a group of individuals (some now offshore), who hide behind nominee directors and puppet employees, and who constantly shift their corporate vehicles.
They use big boy intimidation, threats, and legal bluster to keep their victims scared, silent and alone. Victims are suffering ongoing harm financially and emotionally. Some are mentally broken by the experience.
And what’s most shocking is this: they have absolutely no confidence in the system to protect them.
They’ve reported the matter to every organisation they can, filling a different form out every time, providing the same evidence. They’ve raised concerns with liquidators, the Insolvency Service, the police, HMRC, Action Fraud. But nothing appears to be coordinated. And nothing appears to be stopping those behind it. Meanwhile, the Fraudsters Stay Ahead, sipping cocktails on the beach abroad.
This isn’t an isolated case. It’s part of a wider pattern, one that many insolvency practitioners, creditors, and stakeholders are encountering more regularly.
We see it in bounce back loan frauds. In phoenix trading. In schemes involving fake directors and asset stripping. By the time action is taken – if indeed it is taken – the damage is done, the funds are often gone, shifted abroad, and the wrongdoers have moved on.
Even when directors are disqualified, it’s usually years later. And while the government introduced compensation orders in 2015, they are still rarely used, even in the most blatant cases. Instead the Insolvency Service concentrate on getting a meaningless disqualification – the perpetrators just get another puppet to do their bidding – they’re not hit where it hurts, their pocket.
A System Not Keeping Up
The Insolvency Service has many capable and committed professionals. But it cannot meet today’s challenges without fundamental reform. That includes:
- Closer coordination between agencies – especially in complex, multi-entity frauds
- Faster use of intervention powers to freeze activity and prevent further harm
- Greater use of compensation orders, asset recovery powers, and criminal referrals
- Access to digital forensic tools to trace fraud across jurisdictions
- Clearer communication with victims, so they aren’t left in the dark
Right now, victims are not just being hurt by fraud. They’re being hurt again by a system that doesn’t respond – or responds too slowly to matter.
Conclusion: A Call for Urgency and Reform
Insolvency professionals are often the ones who first see the signs of fraud. But we cannot fight it alone. And we certainly can’t deliver justice when those responsible have already vanished into the shadows.
If regulators and enforcement bodies are to have credibility, they must be equipped to act quickly, decisively, and together.
Because in the real world, fraud doesn’t wait. And neither should justice.