Bounce Back Loan Scheme: U.K. COVID Loan Fraud Clocked in at 4% – Fraud Friday

June 26, 2024

Delaney Sexton
Contributing Editor

Bounce Back Loan Scheme: U.K. COVID Loan Fraud Clocked in at 4% – Fraud Friday

Across the pond, Britain’s small businesses also needed a lifeline during the global economic crisis brought on by the COVID-19 pandemic. This came in the form of the Bounce Back Loan scheme. The scheme provided small to medium-sized businesses with small, low-interest loans that have to be repaid in full. These loans had a fixed interest rate of 2.5%, a maximum 10-year maturity, and no payments due in the first year of the loan. Commercial lenders executed the loan scheme, and the government would provide a 100% guarantee for the loans including capital and interest.

Just as we have seen the Paycheck Protection Program and COVID Economic Injury Disaster Loan program have their fair share of fraud, the Bounce Back Loan Scheme was no different. In April of this year, it was reported that during 2023-24, 831 directors were banned for taking advantage of the program. From 2022-23, 459 directors were disqualified. Their disqualification prevents them from acting as the director of or playing any role in a business’s management throughout the disqualification period. Taking advantage of the Bounce Back Loan Scheme results in an average disqualification length of 9.5 years.

Business owners are not the only party facing consequences for fraud. British banks and lenders lost around 1 billion pounds ($1.28 billion) in guarantees on 11,813 loans. It is estimated that out of the 77 billion pounds lent, 1.8 billion pounds was fraudulent.

Tales of Bounce Back Loan Scheme fraud sound familiar when thinking of cases of PPP and EIDL fraud. Instead of spending the proceeds on business expenses, some business owners purchased cars? Check. Jewelry? Check. Gambling? Check. Crypto investments? Check. The list of ineligible uses of proceeds goes on and parallels what was seen in our own programs.

One government official’s frustration with the way COVID fraud was being handled made headlines at the start of 2022. The Conservative Treasury minister and Cabinet Office minister Lord Agnew stepped down as a result of COVID business loan fraud. He resigned not due to any fault of his own, but because he had seen enough of the lack of fraud controls.

Small business loan fraud was not unique to just the U.K. or U.S. during the pandemic. Many countries had some form of small business assistance during that time, and many were met with fraud. It was the price that was paid to keep small businesses alive.

Sources:
Reuters Article
Yahoo Finance Article
The Guardian Article