Criminal gangs have been found to be exploiting loopholes in the £35bn business bounce back scheme, which could result in a huge hit for taxpayers, according to an investigation by The Mail on Sunday
Although around 1.15m SMEs have borrowed up to £50,000 each under the scheme to keep their businesses afloat, the loans are being exploited by greedy owners, rogue landlords and criminal gangs. Tactics include fraudsters using classified adverts to find people willing to obtain bounce back loans illegally and a man who tried to use the loan to buy a supercar.
Banks have started asking those applying for buy-to-let mortgages whether they have taken out bounce back loans, so concerned are they about the abuse of the scheme.
Amid worries that the taxpayer is being left to carry the can for loans to crooks that will never be repaid, the spending watchdog, the National Audit Office (NAO), has launched an investigation into the scheme’s value for money. The Cabinet Office is understood to be rushing to formulate a strategy to cut down on the abuse.
The office’s managers have been warned that the handing out of funds by the banks with only the bare minimum of checks enables conmen to apply using the names of dormant or fake businesses. Worse still, the full extent of the problem may not become apparent until April of next year when the loans are due to be repaid.
Fraudsters apply for multiple loans from different banks
Chancellor Sunak’s loan scheme came into force in May following criticism of the banks for being too slow to help businesses at the height of the pandemic. The plan involved handing out loans of up to £50,000 without delay while the Government promised to repay 100pc of any losses suffered by the banks.
However, it appears from intelligence shared with officials in the Cabinet Office that fraudsters are using dormant companies to access funds illegally. Criminals are said to evade detection by recruiting a ‘clean’ director for a company applying for a loan and backdating the person’s appointment to avoid suspicion.
To maximise their payouts, the firms apply for loans from multiple banks and the funds can then be laundered through a number of accounts to make them untraceable.
Michael Levi, Professor of Criminology at Cardiff University, said that the proof of the pudding will be next year when the loans are due to be repaid. It won’t be until April that the true scale of the problem will be realised. It’s possible that crooks are only getting away with a small proportion of the total, but a small percentage could prove to be a huge amount of money.
‘Mules’ help launder illegally obtained loans
Experts said advertisers are busy recruiting ‘mules’ to store the proceeds of bounce back fraud in exchange for a share of the proceeds. The adverts usually run along the lines of: “I need someone to help me open an account so I can apply for a bounce back loan.
I am eligible for the entire £50,000 and will give a small percentage to whoever can help me obtain the loan.”
David Clarke, chairman of the Fraud Advisory Panel charity, said it is vital that all banks apply proper checks to prevent conmen from receiving multiple bounce back loans from different lenders that will never be repaid, adding that it’s not too late to recoup the money.
Banking trade body UK Finance stated that lenders have a robust system in place for ‘detecting and preventing fraudulent activity’ which checks for multiple duplicate applications.
The organisation added that businesses applying for a bounce back loan must self-certify that they are using the loan for business purposes, in compliance with the rules of the scheme set by government.
The Treasury is said to be confident that the banks’ precautionary measures are sufficient.