Police loan fraud investigations increased 50% in February

City of London police investigated 50% more fraud probes in connection with the Government’s Bounce Back Loan scheme (BBLs) in February than the month before according to new research by RPC.

The international law firm found that Bounce Back Loan fraud investigations increased from 17 in January 2021 to 26 and 28 in February and March 2021 respectively.

BBLs were those offered to small and medium-sized businesses in the UK that were impacted by the Coronavirus pandemic. More than 1.5 million businesses took out a loan before the scheme closed on 31st March 2021.

Due to increased risk of credit and fraud risk related to the scheme, it has been estimated that between 35 and 60% of lenders could default on the losses.

These were 100% state-backed and worth up to £50,000 interest-free in the first 12 months. Due to low levels of controls, designed to enable lenders to fast-track payments to help struggling businesses, there are concerns that abuse of the scheme was widespread.

It has been reported that fraudsters falsified documents to claim loans for non-existent companies, whilst some company directors used money claimed through the scheme to pay for personal items such as luxury cars.

RPC says abuse of the BBLs scheme can carry a heavy prison sentence if defendants are found guilty by a jury. However, with a huge backlog of criminal cases (compounded further by COVID-19), trials for even serious offenders caught today are unlikely to take place until 2023/2024.

Sam Tate, Partner and Head of White Collar Crime at RPC said “The authorities will want to accelerate the pace of investigations. Otherwise, there is a high risk these assets will leave the country.”

“BBLs have been particularly attractive to fraudsters. Despite lenders blocking tens of thousands of applications believed to be fraudulent, many will have slipped through holes in the net, with the cost to the taxpayer estimated to be in the billions of pounds.”

“Yet, trials even for serious BBL fraudsters caught today are unlikely to take place until 2023/2024, which is less of a deterrent for on-going fraud.”