Covid-19 bank loan fraud up a third to £1.65bn

Covid-19 bank loan fraud up a third to £1.65bn

UK taxpayers have been forced to cover a larger bill for Covid-19 loan schemes after the number of pandemic business loans flagged for fraud jumped by 43%

Over £1.65bn worth of loans have been flagged as open to potential fraud at the end of June, revealed Department for Business and Trade (DBT) figures.

This marked a 43% rise from the £1.1bn flagged three months earlier, meaning the public is left facing a greater bill than expected.

In total, around £77bn was distributed under Covid-19 loan schemes, inclusive of the bounce back loan scheme, coronavirus business interruption loan scheme (CBILS) and the coronavirus large business interruption loan scheme (CLBILS).

The bulk of funds were made up of bounce back scheme, which accounted for a total of £46.63bn.

Unlike the others, the bounce back scheme received a 100% guarantee from the government, meaning that losses would be covered by the taxpayer. It saw banks pay out zero-interest loans of up to £50,000 to small and medium-sized businesses.

However, the scheme allowed commercial banks to run fewer checks to make sure money was distributed quickly. This meant it was more susceptible to fraudsters.

As a result, £1.65bn worth of bounce back loans were flagged for fraud. The government has so far paid out £1.3bn of that total to banks to cover the lenders’ losses. The DBT said: ‘Since fraudulent loans are likely to be among the first to default, it is assumed that the proportion of guarantee claims linked to loans with a suspected fraud flag should decline as the scheme matures, although this will only become apparent over time.

‘Lenders are continually adapting their processes for identifying and combating fraud to counter new methods employed by bad actors. As such, figures for suspected fraud will vary from quarter to quarter, both for individual lenders and the overall schemes.’

Businesses drew a total of £25.86bn from the coronavirus business interruption loan scheme (CBILS), with around 92.65% either fully repaid or on schedule. Lenders flagged £400m of the borrowed amount as suspected fraud.

For CLBILS, businesses took out a total of £4.45bn, with around 97.92?ing either fully repaid or on schedule. There are no fraudulent CLBILS loans identified by the banks.

The government has so far paid out £7.39bn to lenders under the guarantees, while £17bn has been fully repaid by borrowers.

On top this, around £31bn worth of loans remain outstanding from borrowers still making payments on time.

Barclays is owed £4.5bn of bounce back loans, followed by NatWest Group at £4.1bn, HSBC UK at £3.3bn and Lloyds Bank with a scheduled outstanding balance of £3.5bn.

MS Taxes says – The government had an impossible task of keeping the country and saving as many businesses as they could. However they pumped money into businesses and the economy a better method would be apparent with hindsight. There is always things that could be done better and you learn by your mistakes. Personally, I think they did a good job, some schemes could have been handled better but the country was in unprecedented times an whatever they did would have been criticised. Let me know your thoughts?

#MakesSenseAccountants #BBLFraud #YouKnowItMakesSense