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Banks have prevented more than £ 1 billion of fraudulent business loans from being paid for by one of the government’s emergency Covid programs.
In a letter to the Public Accounts Committee, the British Business Bank – which administers the government-backed lending program – said 20 lenders blocked a total of 26,933 fraudulent claims for the rebound loan scheme (BBLS) between May and October.
Those fraudulent applications could have cost the taxpayer £ 1.1 billion, as the scheme uses public funds to repay any losses that creditors cannot recover.
So far the program has distributed 1.3 billion in loans worth £ 40.2 billion, but last month the National Audit Office warned that taxpayers would lose billions of pounds to BBLS fraud. The National Crime Agency (NCA) and the British Business Bank also warned against fraud related to the program, which was designed to distribute low-cost loans of up to £ 50,000 to small businesses.
The government has been criticized for failing to heed those warnings and has since launched a £ 100,000 Covid Fraud Hotline to try and catch scammers. The hotline, operated by Crimestoppers, allows people to leave anonymous tips on suspected fraud, including any unusual purchases by companies or individuals or cold callers requesting bank details that could lead to identity theft.
A National Audit Office report released in October said the extent of BBLS fraud would not be clear for months. However, the Cabinet government’s anti-fraud function estimates that losses will be significantly higher than the usual levels of fraud associated with public sector programs, which usually range between 0.5% and 5%.
Three people were arrested for alleged BBLS fraud in Birmingham last week after obtaining £ 145,000 in government-guaranteed loans. All three suspects have been questioned and have since been released under investigation, according to the ANC. It marked the first arrests linked to the regime.
Most accredited lenders have restricted applications to their customers, in part to prevent fraud. However, the move also blocked up to 250,000 small businesses from accessing emergency finance, as they do not carry out banking transactions with any of the accredited lenders, according to the All-Party Parliamentary Group on Fair Trade.
BBLS will run until January 31, after an extension announced earlier this week. Companies will also be able to request top-ups if they have not requested the maximum amount available in their initial application.
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