UK COVID loan program could lose £ 26bn to fraud and defaults
LONDON (Reuters) – Criminals may have made billions of pounds operating a government loan scheme to help UK businesses hit by the coronavirus, while large losses are expected from businesses unable to repay, said Wednesday the oversight body for the country’s expenditure.
The Bounce Back loan program, launched in early May, allows banks to quickly lend businesses up to £ 50,000 with a 100% government guarantee.
The National Audit Office (NAO) said if the program provided rapid support to small businesses, it could lead to between £ 15 billion and £ 26 billion in potential losses due to fraud and default, although estimates are “very uncertain. “.
“Unfortunately, the cost to the taxpayer can be very high,” said Gareth Davies, the head of the NAO.
According to the Government Affairs Department (BEIS) and the British Business Bank, the program is expected to lend 38-48 billion pounds by Nov. 4, well in excess of the 18-26 billion originally planned, the NAO said.
By early September, more than 1.2 million loans worth nearly £ 37 billion had been made, mostly to small businesses. To speed up the process, the program relied on self-certification and no credit checks for existing customers.
The watchdog cited BEIS and the British Business Bank estimate that 35% to 60% of borrowers could default on their loans, with a third-party review pointing to a high risk of fraud through multiple apps and criminals taking money. money they had no intention of repaying.
The extent of the losses will not be known until next May, when the loans start to be repaid, but Meg Hillier, who chairs Parliament’s public accounts committee, said it could be a “loss mind-boggling public money “.
“The hasty launch of the program means criminals may have used billions of pounds at taxpayer expense,” she said.
The government said the loans provided a lifeline for thousands of businesses and protected millions of jobs.
“We have targeted this support to help those who need it most as quickly as possible and we will not apologize for it,” a spokesperson said, adding that the government had sought to minimize fraud as rates of default had to be lower.
The British Business Bank also said lenders have introduced additional controls to mitigate fraud.
UK Finance, the trade body representing banks and lenders in Britain, said those checks included a cross-sector initiative to eliminate duplicate claims.
“Requests from customers without an existing business account are subject to additional checks, including customer fraud, anti-money laundering (AML) and Know Your Customer (KYC) assessments before any loan,” said a spokesperson.
Earlier this week, the National Crime Agency said it would investigate serious and organized crime related to the scheme and help banks spot fraudulent claims.
Sinead Cruise Additional Reports; Editing by Stephen Addison and Tomasz Janowski