Bounce-back loan fraud in 2022

26th May 2022 | Lawtons News|
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Nick Titchener

Managing Partner

Bounce-back loan fraud in 2022 

A Home Office source recently said that people have been stopped, at numerous UK airports, ‘carrying large amounts of money suspected [to be] from coronavirus bounce-back loans’. Such funds have been confiscated under the Proceeds of Crime Act.

Ever since the bounce-back loan scheme started, it has been subject to fraud, with company directors transferring funds to their personal bank accounts and misusing them. It is estimated that nearly £5 billion of the £47 billion supplied by the government has been claimed fraudulently. 

Instead of channelling the funds into their businesses, some directors have used it for home improvements, buying cars and gambling sprees. There has even been one case of a former pub landlord sending bounce-back funds to ISIS.
As a result of bounce-back loan frauds, dozens of company directors have been disqualified, preventing them from managing companies for up to 15 years. A disqualification is a civil order designed to protect the public from further fraudulent activity.

What is the bounce-back loan scheme?

Intended to help the smallest businesses recover from Covid-19-associated losses, the scheme was the largest pandemic-related business loan scheme. More than 1.6 million bank loans were underwritten by the government, offering businesses loans of up to £50,000, or 25% of their annual turnover. 

Taking advantage of this, one company owner inflated his firm’s turnover by 100 times to claim the maximum amount. Another businessman broke the rules by claiming more than 10 loans for companies in the same group.

One business owner, who received a £50,000 loan from Barclays, claimed his company’s turnover was £200,000 in 2019. In actual fact, the company had been largely inactive since April 2019 and had assets of just £1,500. The business owner spent some of the money on gambling, while transferring over £32,000 of it to Romania.

In response to questions surrounding the case, Barclays said: “To ensure speed of response and issuing of funds, the government scheme was designed such that lenders were not asked to verify any self-attested details of borrowers.”

Lawtons Director Stephen Halloran highlighted the difficulties involved with the scheme: “Since applicants could self-certify financial information, the scheme was always liable to be vulnerable to fraud. For some, the temptation proved too much.

“The government believes that over 10% of the bounce-back loans issued were subject to fraudulent claims, so I’m sure we’ll be seeing a steady flow of fraud cases relating to the scheme over the coming months and years.”

The scale of bounce-back loan fraud

The government believes that around £17 billion of the £47 billion provided will not be paid back, including the almost £5 billion claimed fraudulently. More than 60,000 businesses who still owe money on loans have required government intervention to avoid being wound up. With tough economic times ongoing and a recession looking ever more likely, it is likely that more companies owning bounce-back loans will need a helping hand. 

By keeping these companies in existence, the government can attempt to reclaim some of the loan funds through insolvency procedures. They can also take civil or criminal action against directors.

If you need legal guidance as a result of bounce-back loan fraud, contact us now to secure the best legal outcome possible.

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