The UK government has been urged to implement vigorous debt recovery procedures and fraud investigation arrangements, to lessen the impact of immediate losses from its emergency loan schemes.
Cloud-based credit management platform Know-it cited last month’s prediction from the National Audit Office that taxpayers face losing up to £26bn from initiatives such as the bounce back loan scheme (BBLS) and coronavirus business interruption loan scheme (CBILS), due to fraudulent applications or an inability to pay the money back.
Know-it said that this serves as a timely reminder of the controls required to tackle fraud, financial crime and non-payment.
It also cited Action Fraud which found 11 cases of fraudsters suspected of exploiting BBLS and CBILS.
According to law firm RPC, these loans were vulnerable to exploitation as lenders have only been carrying out ‘light checks’ because of the pressure to get money to stressed businesses as quickly as possible.
“Fraud and financial crime – problems that have been brought into the spotlight recently – have arguably been the most pressing issues facing businesses for many years now,” said Lynne Darcey, founder and chief executive of Know-it.
“Back in 2017, even before the recent Covid-19 outbreak, fraud and financial crime cost UK businesses £190bn every year, with the private sector hit hardest losing around £140bn.
“Small- and medium-sized enterprises usually come off worst, as they typically operate on a much lower turnover and are at risk of more serious consequences should they suffer from a major fraudulent incident.
“On the one hand, the next step for the government needs to be flexing its muscle and putting in place vigorous debt recovery procedures and fraud investigation arrangements, principally to lessen the impact of any immediate losses to the UK taxpayer.
“On the other, the exploitation of the BBLS and CBILS loans should remind everyone, no matter if you are a government or a business, there is always a need for basic credit checks to establish the validity of a company, its financial status and its directors.
“If these basic checks are not completed, then any system will always be open to fraud and default on payments and, in this instance, it is the UK taxpayer that will suffer.”
Darcey said that even after Covid-19, the problem of fraud will remain, so lenders need to utilise technology when checking the credit status of their borrowers.
“We understand that many do not have the resources readily available to continuously check the credit status of their customers and conduct due diligence,” said Darcey.
“This is where technology plays a critical role.
“For example, by using technology to automate the credit control process, this can help businesses streamline this process so they can credit check and monitor and conduct due diligence, all from one place.
“Automating this process, firms can collate the information and identify areas of concern, without expending huge amounts of time and precious resources, ultimately helping them to limit risk and reduce fraud.”