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Thanks. I know you said not to ignore or hide BUT what would happen if I do. Will they end up convicting the vehicle keeper/owner who is my cousin or they will somehow link it to me. At the moment the letter is addressed to my cousin and I have not been mentioned at all as to their knowledge I have reported the badge lost.
If your cousin names you then you will be interviewed and as said, chances are it will end there.
If your cousin doesn't name you, he will likely end up being interviewed.
Refusal to answer can lead to court proceedings and a fine.
If he persisted in it wasn't me but I am not saying who it was, potentially it could see a charge arising from misuse of the BB against him. Bear in mind you lost the BB, reported it and it has now been found being used in cousin's car...there may be no solid evidence but many if not most BB frauds are family members so they would be making the assumption and trying to make charges stick.
If either of you were to lie and blame AN Other, this would be lying under oath and a charge of Perverting the Course of Justice could arise.
Basically, tell the truth and all should be well, evade or lie and get really into the smelly stuff.