January 28, 2022
Fraud Friday – Trouble over the Pond with COVID Bounce Back Loan Scheme (BBLS)
“I am beyond words. People were working every hour god sent to find solutions,” says one senior UK bank executive. UK banks are fearing that they will face backlash over the rampant fraud within the UK’s Bounce Back Loan scheme.
“Hopefully common sense will prevail, but if it doesn’t I have literally told the Treasury and Financial Conduct Authority in meetings: ‘I hope nobody has a short memory around here folks, I have every meeting minuted’, recording everything the government said like ‘get these done, get these out, cut corners’, to protect myself,” continues the banker.
The resignation of a Conservative minister in the House of Lords sparked this controversy. Lord Agnew states that the treasury has “little interest in the consequences of fraud to our society.” He further accused officials of making “schoolboy errors” by giving out loans to fraudulent borrowers.
The nail in the coffin came after he criticized UK banks for taking around £1 billion to cover the defaulted loans under the fully guaranteed Bounce Back Loan scheme. According to Agnew, the banks could claim finances from the state loan guarantees, but there was not enough clarity on what the lenders have been doing to address the fraud.
Banks are facing the heat for issues that were already embedded in the program. The Treasury was under pressure to get money to small businesses as quickly as possible, but the National Audit Office reported that the fraud prevention fell short and was under-resourced.
A permanent secretary at Her Majesty’s Treasury, Charles Roxburgh, says that officials understood “this would be an expensive scheme by its very design…we were aware of the fraud risk. Ministers were advised of that.”
Overall, the Bounce Back Loan scheme funded loans up to £50,000. In total, there were about £47 billion in loans to small businesses, and around a quarter of all UK companies applied for a loan within the program. In the aftermath, about 2% of the loans have been defaulted on by borrowers, and the taxpayer could see losses of up to £17 billion from defaults, fraud, and errors.