Covid loan fraud cases reported to Action Fraud

Covid loan fraud cases reported to Action Fraud

Authorities have started investigating fraudsters who are suspected of exploiting the government’s coronavirus emergency loan schemes, after 11 cases were reported to Action Fraud.

Of the fraud reports filed with Action Fraud, nine related to suspected fraud targeting the Bounce-Back Loan Scheme (BBLS), while two concerned the Coronavirus Business Interruption Loan Scheme (CBILS).

It is believed that fraudsters may have claimed bounce back loans on behalf of bogus companies, whereas others have channelled funds into cryptocurrencies. 

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According to law firm RPC, these loans were vulnerable to exploitation as lenders have only been carrying out “light checks” due to pressure to get money to struggling businesses as quickly as possible.

RPC said BBLS has been targeted the most by fraudsters due to “its reliance on businesses self-certification to determine eligibility”. 

Under the BBLS, the government provided lenders with a 100 per cent guarantee for the loan and paid any fees and interest for the first 12 months.

Businesses could borrow between £2,000 and £50,000, or a maximum of 25 per cent of annual turnover.

However, RPC warned many BBLS frauds will remain “undetected” due to the relatively low value of the loans.

RPC stated: “This gives rise to questions about the potential abuse of larger bounce back schemes, some of which offered support of up to £1bn to big business and were not subject to any controls regarding the transfer of funds to overseas entities.”

The National Audit Office has previously estimated that UK taxpayers will lose out on £15bn to £26bn through BBLS due to fraud and businesses defaulting on loans. 

This accounts for almost two thirds of the total amount of money paid out through the scheme.  

Earlier this month (October 7), Gareth Davis, head of the NAO said: “With concerns that many small businesses might run out of money as a result of the Covid-19 pandemic, government acted decisively to get cash into their hands as quickly as possible.

“Unfortunately, the cost to the taxpayer has the potential to be very high, if the estimated losses turn out to be correct. 

“Government will need to ensure that robust debt collection and fraud investigation arrangements are in place to minimise the impact of these potential losses to the public purse. 

“It should also take this opportunity to consider now the controls it would put in place to protect against the abuse of any future such schemes.”

Sam Tate, partner at RPC said: “The Serious Fraud Office and HMRC will be determined to crack down on large-scale fraud involving millions of pounds, but many cases of BBLS fraud will likely slip through the net.

“Even with the value of each loan capped at £50,000, the widespread abuse of bounce-back loans means the losses will be substantial. 

“This will come at the taxpayers’ expense and larger loans are even more worrying.”

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