According to the spending watchdog, the U.K. did not put in place effective measures to protect taxpayers from fraudulent pandemic loans to businesses of up to 4.9 billion pounds ($6.5B).
In a Friday report, the National Audit Office stated that the Bounce Back Loan program was launched in May 2020. It was intended to quickly lend money with no credit checks and minimal verification. This made it vulnerable to fraud. It said that 13 additional counterfraud measures were later introduced, but “most were too late to prevent fraud and were instead focused on detection.”
Continue reading: millions in U.K. covid loans went to inactive or brand-new firms
Boris Johnson’s government estimates that 17 billion pounds out of 47 billion pounds of loans made under the program might never be repaid. This includes 4.9 billion dollars of fraudulent loans. This program was created to assist small businesses in surviving successive lockdowns during the pandemic.
However, the NAO stated that these projections were “highly uncertain” and asked the government for a formal strategy to manage fraud by April.
Gareth Davies, chief of NAO, stated that fraud will be more apparent over time. “But, it is evident that the government must improve its identification, quantification, and recovery of fraudulent loans in the scheme.”
The British Business Bank, which accredited lenders under the program’s terms, showed that approximately 2 billion pounds worth of loans were repaid and that 1.3 billion pounds had defaulted.
The study also revealed that approximately 100,000 loans (or 7%) are at least one month behind on their payments. The loans were provided by commercial lenders. However, the government offered a 100% guarantee.
The U.K. Business Department, which oversees the bank’s overseas operations, stated in a statement that they are continuing to fight Covid-19 fraud. “We work closely with enforcement authorities and lenders to reduce fraud and ensure that those who have committed fraud are punished.”
