Govt’s COVID-19 loan schemes targeted by fraudsters

Taxpayers face losing up to £26bn due to fraudulent applications to the government’s coronavirus loan schemes, as well as an inability to pay the money back.

Despite a package of loans supporting businesses throughout the pandemic, cloud-based credit management platform, Know-it, suggested the figure serves as a timely reminder of the controls required to tackle fraud, financial crime and non-payment.

The Coronavirus Bounce Back Loan (BBLS) and Coronavirus Business Interruption Loan (CBILS) schemes have been at the core of the government’s efforts to help businesses keep their heads above water since March. Under the BBLS, the government provided lenders with a 100% 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, Action Fraud has recently reported 11 cases of fraudsters suspected of exploiting the BBLS and CBILS emergency loan schemes. According to law firm, RPC, these loans were vulnerable to exploitation as lenders have only been carrying out “light checks”, due to the pressure of getting money to stressed businesses as quickly as possible.

Know-it founder and CEO, Lynne Darcey, commented: “Fraud and financial crime – problems that have been brought into the spotlight recently – have arguably been the most pressing issue facing businesses for many years now.

“Back in 2017, even before the recent COVID-19 outbreak, fraud and financial crime cost UK businesses £190bn every year, with the private sector hit hardest losing around £140bn. SMEs usually come off worst, as they typically operate on a much lower turnover and are at risk of more serious consequences should they suffer from a major fraudulent incident.

“On the one hand, the next step for the government needs to be flexing its muscle and putting in place vigorous debt recovery procedures and fraud investigation arrangements, principally to lessen the impact of any immediate losses to the UK taxpayer.

“On the other, the exploitation of the BBLS and CBILS loans should remind everyone, no matter if you are a government or a business, there is always a need for basic credit checks to establish the validity of a company, its financial status and its directors. If these basic checks are not completed, then any system will always be open to fraud and default on payments and, in this instance, it is the UK taxpayer that will suffer.”

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