Bounce Back Loan Fraud Could Cost UK Billions
Up to 60% of emergency pandemic loans made under the Bounce Back Loan Scheme are unlikely to ever be paid back, according to recent findings from the government's spending watchdog.
The Bounce Back Loan Scheme was launched in May 2020 in response to the COVID-19 pandemic and allows small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available to businesses is £50,000. The government guarantees 100% of the loan and there are no fees or interest to pay for the first 12 months. Following this initial period, the interest rate is 2.5% per-year.
Unfortunately, concerns have been raised regarding how secure the scheme is. It has been found that the lending scheme has been carrying out light checks, which means fraudsters have been able to exploit the system. A BBC investigation learned that fraudsters are setting up fake businesses on an industrial scale and are able to successfully apply for the government backed loan in other people's names.
Many of those who have been affected by the fraudulent activity will have no idea that their names have been used until they start receiving repayment letters. The National Audit Office (NAO) are now reporting that, as a result of the widespread fraud, taxpayers could lose as much as £26bn.
The sub-standard security checks are thought to be a result of how quickly the scheme was launched in May. The circumstances caused by the COVID-19 pandemic meant that the government was forced to lend money to small businesses as soon as possible to prevent them from collapsing.
Prior to the scheme's launch, the Chief Executive of the British Business Bank wrote to the government warning of the "very significant fraud and credit risks", adding that it was "vulnerable to abuse by individuals and organised crime".
Meg Hillier, chair of the Public Accounts Committee, outlined the issue, saying:
"The government estimates that up to 60% of the loans could turn bad - this would be a truly eye-watering loss of public money.
"The bounce back loan scheme got money into the hands of small businesses quickly, and will have stopped some from going under. But the scheme's hasty launch means criminals may have helped themselves to billions of pounds at the taxpayer's expense.
"Sadly, many firms won't be able to repay their loans and the banks will be quick to wash their hands of the problem."
A government spokesperson has also commented on the situation, stating: "We targeted this support to help those who need it most as quickly as possible and we won't apologise for this.
"We've looked to minimise fraud - with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls. Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both."
What should you do if you are being investigated for Bounce Back Loan fraud?
If you find yourself accused of Bounce Back Loan fraud, or you are concerned about a potential investigation, contact our specialist Serious Fraud and Business Crime solicitors today.
We have a team of specialist fraud defence solicitors who have substantial experience handling a wide range of complex and high value fraud matters. We are able to advise individuals at every stage of the criminal justice process, from initial investigation to court proceedings.
If you or someone you know requires post-prosecution advice, we also have a team of highly skilled criminal appeal lawyers.
Amongst our talented team, we have Partner, Alan Burcombe, who has handled many high profile and multi-million pound frauds. Partner, Ravinder Khumra, also specialises in all types of complex business and white-collar crime, including Financial Conduct Authority matters.
Contact our serious fraud and business crime solicitors for advice about Bounce Back Loan fraud
If you are being investigated for Bounce Back Loan fraud, get in touch with our expert serious fraud and business crime lawyers for advice and legal representation.