Watchdog slams Bounce Back Loan fraud checks as “inadequate”
The government was too slow to put effective measures in place to stop fraudsters from stealing billions of pounds through its Bounce Back Loan (BBL) scheme, a report by the National Audit Office (NAO) has warned.
The BBL scheme was introduced on 4 May 2020, offering loans of up to £50,000 or a maximum of 25 per cent of annual turnover, to support businesses through the pandemic. However, at the time there was limited verification and no credit checks carried out on borrowers, leaving the scheme vulnerable to fraud and losses, the watchdog concluded.
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The NAO, which scrutinises public spending for parliament, said the 13 measures which were eventually introduced between June and September of last year came too late. For example, the duplicate application check was only implemented after 61 per cent of the loans had been made. It concluded that the government’s efforts to limit taxpayers’ exposure to fraudulent loans was “inadequate”.
In total, 1.5 million BBLs were issued, worth £47bn. Of this, more than 90 per cent went to micro-businesses with a turnover below £632,000.
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Back in March of this year, the Department for Business estimated that 11 per cent of BBLs, equating to £4.9bn were fraudulent. Combined with borrowers which are likely to default, the Department for Business expects 37 per cent of loans, worth £17bn, will not be repaid.
Due to the scale of possible fraud and limited resources, the Department for Business said it will prioritise the pursuit of organised crime rather than focusing its investigative resource on borrowers who overstated turnover by less than a certain percentage.
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The Department for Business uses the National Investigation Service (NATIS) for fraud worth more than £100,000 with evidence of organised crime. Although NATIS had received more than 2,100 intelligence reports by October 2021, it only has capacity to pursue a maximum of 50 cases per year.
The Department for Business has set NATIS a target of recovering at least £6m of fraudulent loans over three years; up to October 2021, the agency’s work had resulted in 43 arrests across 33 investigations and over £3m of recoveries.
The NAO recommends the Department for Business produces a formal strategy for managing Bounce Back Loan fraud by April 2022, and monitors the performance of each counter-fraud measure.
