Investigations into suspected fraud targeting the Government’s coronavirus emergency loan schemes have begun, with 11 reports of fraud to the City of London Police via Action Fraud, according to law firm RPC.
Of the fraud reports filed with Action Fraud, the UK’s national reporting centre for fraud, nine cases relate to suspected fraud targeting the Bounce-back Loan Scheme (BBLS), whilst two relate to the Coronavirus Business Interruption Loan Scheme (CBILS).
Under BBLS, small business owners can apply for 100% Government-backed loans of up to £50,000.
The law firm said due to “pressure” to get money to struggling businesses as quickly as possible, lenders, who were also experiencing pressure to keep their clients afloat, were “instructed and perhaps even incentivised to carry out only light checks on borrowers”.
RPC added that banks should be “mindful” of potential questions of corporate liability that may arise from their facilitation of stolen funds by companies who were forced to take loans to sure up their balance sheets.
It is believed that organised crime gangs may have claimed Bounce Back Loans on behalf of bogus companies, whereas other individuals have channelled funds into cryptocurrencies. BBLS is believed to have been targeted the most by fraudsters due to its reliance on businesses self-certification to determine eligibility.
Authorities have already been active in pursuing suspected fraudsters. Two men in North London were arrested in July for fraudulent applications made under BBLS. The police have also obtained 10 Account Freezing Orders to prevent suspects from accessing accounts that have funds in excess of £550,000.
Emily Pica, associate at RPC said: “Due to the extraordinary circumstances of the pandemic, Bounce Back Loans, in particular, have been wide open to fraud. Opportunistic fraudsters have apparently found it fairly easy to abuse the scheme.”
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.”