According to recent official figures, more than £1 billion of taxpayer-funded loans made under the Government’s Bounce Back Loan Scheme (BBLS), have been identified as potentially fraudulent.
A statement from the Department for Business, Energy & Industrial Strategy (BEIS) has revealed that, as of July 31, 2022, businesses have drawn a total of £46.6 billion through BBLS, with only light checks on eligibility at the time in a bid to encourage banks to lend quickly.
However, it is feared that almost £5 billion of this support could have been lost to fraudsters.
Ministers are blaming lenders for not making more stringent checks before lending the money and then not pursuing businesses more recently to recover the cash, but bank executives reject these accusations, saying they were simply following Treasury rules.
Of the £3.8 billion to cover loan defaults, £1.2 billion has already been paid to the banks by the Treasury, with around £236 million of this covering suspected fraudulent loans. Lloyds and Barclays have flagged the largest amount of suspected fraud, at £304 million and £259 million respectively.
However, a spokesperson for Barclays has said that the bank continues proactively to tackle BBLS fraud and is “committed to the identification, escalation and recovery of fraud within the schemes, compliant with the requirements of the Government Lending Schemes”.
Collectively, lenders reported that they had prevented more than £2.2 billion worth of fraudulent applications as a result of required “know your customer” and anti-money laundering checks.
The first successful criminal prosecution of a Bounce Back Loan fraudster for the Insolvency Service was of Abdulrazag Zagroba, the sole Director of a pizza takeaway business in Manchester, who was jailed for two years in June.
Roger Isaacs, Forensic Partner at Milsted Langdon, said: “The level of fraud perpetrated through the Covid support measures provided by the Government has been significant, particularly in relation to the Government-backed loan schemes.
“Action is now being taken against some criminals who have committed offences, with prosecutors engaging forensic accountants to help present financial evidence to the courts.
“Accountancy evidence tends to play a pivotal role in these time of claim in which financial analysis is required both in relation to the use to which the borrowed funds were put and the solvency of the business at the time the loans were drawn down.”