December 17, 2021

Delaney Sexton
Contributing Editor

Fraud Friday – The UK and Germany Also Facing Widespread COVID Small Business Loan Fraud

With most of SBA’s COVID-19 relief programs reaching their end, there are billions of dollars in potential losses due to the programs being afflicted with fraud. Many fraudsters have taken advantage of SBA’s financing, but countries around the world are being confronted with the same issues in their small business COVID aid efforts.

The United Kingdom’s National Audit Office released an end-of-the-year report that “branded the government’s measures inadequate” when it came to preventing fraud in their Bounce Back Loan Scheme. Showing similarities to the SBA’s efforts, the Bounce Back Loan Scheme attempted to provide money to businesses in need as quickly and efficiently as possible during the pandemic. The focus on efficiency in both country’s programs did not allow the proper controls to be in place for fraud prevention.

While the UK’s National Crime Agency and National Investigation Service worked to combat fraud, their anti-fraud controls were placed too late in the program. There are well over 2,000 fraud reports as of this month, and the crime prevention agencies are understaffed for the considerable number of fraud reports. It is believed that it will take many years to work through the number of cases. The SBA Office of Inspector General shared the same sentiment in previous reports.

Germany’s attempts to support small business owners and the self-employed were also racked with fraud. The small business loan fraud spans every state in Germany. Towards the beginning of 2021, it was found that there were around 25,400 suspected cases of fraud worth hundreds of millions of euros, but authorities say this number could be much larger.

Near the beginning of March 2021, Germany temporarily suspended their financial assistance because of the potential fraud and launched investigations. “There are suspicions that in a few cases corona-related state aid was obtained unlawfully through fraud,” a German economy ministry spokeswoman writes in an emailed statement.

Around the world, government agencies are left with the task of identifying and investigating the fraud in aid programs meant to support small businesses through a time of economic crisis. These investigations will continue for years as they attempt to recover millions and billions in lost COVID aid.

Sources:
Lawyer Monthly – Bounce Back Loan Scheme Fraud (UK)
DW – Fraud in COVID-19 Aid (Germany)
Reuters – COVID-19 Aid Suspension (Germany)