Concerns have been raised in several quarters about potentially fraudulent use of the Bounce Back Loan Scheme (BBLS), which was designed to provide financial support to UK businesses adversely hit by the coronavirus outbreak.
The BBC recently reported that the government-owned British Business Bank (BBB), which supervises the scheme, twice aired such concerns.
The corporation has claimed that criminals have been setting up bogus companies to obtain loans worth tens of thousands of pounds.
Recognition of “risks” from an early stage
Just two days before the scheme’s launch in early May, BBB chief executive Keith Morgan wrote in a letter to Business Secretary Alok Sharma of the “very significant fraud and credit risks” the initiative posed, explaining that it was “vulnerable to abuse by individuals and organised crime”.
Mr Morgan told the minister that the bank was unable to guarantee “robust controls”. He said he was also concerned about an “extensive reliance on customer self-certification” and “potential for market distortion”. He added that the BBB had commissioned accountants PwC to undertake a review of the scheme, with this resulting in its fraud risk being classified as “very high”.
The letter was dated 2 May, and followed an email warning the previous day. Mr Morgan also sought to draw attention in his letter to the “huge operational challenges” created by the scheme’s rapid introduction.
However, Mr Sharma said the scheme should proceed despite the risks, due to what he described as the “unprecedented situation facing the country”.
Shocking revelations of fraud
Bounce Back Loans are loans of as much as £50,000, entirely backed by the government. Borrowers have six years to pay off the loans, which are interest-free for the first 12 months.
Recent figures from the Treasury indicate that some 1.55 million applications have been made to the scheme, with 1.26 million of these being approved and more than £38 billion being paid out.
However, the BBC’s Angus Crawford recently revealed how fraudsters were exploiting the loan scheme. One victim, Mark Telling, had his personal details stolen to create a bogus company, Tellings Home Made Furniture, which “borrowed” £50,000 via the system.
The news of such abuse comes after National Audit Office comptroller and auditor general Gareth Davies cited Bounce Back Loans as “probably the riskiest” of the government’s COVID-19 bailout measures.
“A lifeline to thousands of businesses across the UK”
A government spokesman defended the scheme to the BBC, stating: “Our loan schemes have provided a lifeline to thousands of businesses across the UK – helping them survive the outbreak and protecting millions of jobs.
“Our support has been targeted to ensure we help those who need it most as quickly as possible and we won’t apologise for this.”
He added that the government worked alongside agencies to reduce 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”.
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