British Business Bank Launches Fraud Investigation

The Telegraph reports that leaders at the Business British Bank are launching a £1,000,000 investigation to get to the bottom of fears that widespread fraud occurred on the Bounce Back Loan Program.

Similar to the US Paycheck Protection Program (PPP), The Bounce Back Loan Scheme (BBLS) provides financial support to businesses across the UK that are losing revenue and seeing their cash flow disrupted, as a result of the COVID-19 outbreak and that can benefit from £50,000 or less in finance.

The organization hired consultant PwC on a £1m contract to analyze transactions for six months and is also bringing in other compliance and risk experts to identify where fraud might have occurred.

Massive Losses Feared by Experts

So far, the government has loaned over £43 billion in the program to over 50,000 businesses but experts believe the program was fraught with fraud.

Experts believe that approximately £1 billion in funds were given to fraudsters, however, some believe that the number could be far higher. The total estimated loss rates on the program could be 65% of the total amount loaned. That means that losses could be $22 billion or more by the time all is said and done.

Some of the schemes that investigators have uncovered so far include:

  • Fraudsters are stealing identities of legitimate businesses and using that information to apply for and receive bounce back loans.
  • Fraudsters are setting up fake businesses and successfully applying for bounce back loans with no intention of paying the money back.
  • Fraudsters are applying for, and receiving multiple different bounce back loans from different banks in quick succession in a fraud that is referred to as loan-stacking.
  • Fraudsters were caught advertising to solicit mules that would engage in fraud and take out bounce back loans using false and misleading information.
  • A fraudster was caught by a car dealer, trying to buy a luxury Porsche using proceeds gained through a fraudulent bounce back loan.
  • Fraudsters are recruiting money mules to hold funds in their bank accounts that have been gained through fraudulent bounce back loans.

Self Certification Doomed the Program

The warning bells on the program have been ringing for a while. Keith Morgan, chief executive of the British Business Bank, wrote a letter back in May warning of the very real fraud risk.

He believed that the self certification aspect of the loans was flawed and that there would massive losses.

He was right! We’ll see where the investigation leads.

I am Frank McKenna, a fraud expert from San Diego. The views and opinions expressed here are entirely my own and do not reflect those of Point Predictive.