The British Business Bank (BBB) has launched an investigation into Covid-19 emergency loan schemes, amid concerns that thousands of firms have fraudulently obtained finance.
The state development bank has appointed accountancy giant PwC on a £1m contract to analyse transactions for six months.
The Telegraph first reported news of the appointment, which was subsequently confirmed to Peer2Peer Finance News by the BBB.
The bounce back loan scheme (BBLS) – which offers 100 per cent government-backed loans of up to £50,000 to micro businesses – is thought to be the most susceptible to fraud out of the government schemes. Lenders do not have to take on any of the risk with bounce back loans and have been encouraged to get the loans out to small businesses as quickly as possible.
Prior to the launch of BBLS, the bank set up a Fraud Prevention Collaboration Working Group which meets weekly and is co-hosted by the bank, trade body UK Finance and fraud prevention service Cifas.
The working group provides a forum for BBLS-accredited lenders to share their experiences, discuss their fraud levels, highlight best practices and discuss scheme-wide solutions.
As a result of the group’s findings, the BBB has implemented a multiple application system meaning a lender can see if a potential borrower already has a bounce back loan to prevent people receiving more than one.
It has also introduced a new rule whereby businesses applying for a bounce back loan that have undergone a change in director are identified as a possible pointer of fraud.
In May, Keith Morgan, then-chief executive of the BBB, wrote to business secretary Alok Sharma to highlight concerns around bounce back loan fraud and value of money.
In response, Sharma said that lenders delivering funds under the scheme conduct fraud checks but deploying funds quickly was a priority.
“We take the issue of fraud very seriously, and have worked alongside the government fraud prevention services, fraud bureaux and the banking and alternative finance sectors to put in place additional measures to further mitigate fraud and credit risks,” said a spokesperson from the BBB.
“These include checks for duplicate applications, additional flags for fraudulent activity, and establishing a Fraud Prevention Collaboration Working Group to share best practice and explore, design and implement further solutions.
“We have recently appointed consultants to provide further insight into where fraud is being committed or attempted, helping to identify where further resources are required as well as enabling additional fraud-prevention measures to be put in place.”
In November, the Office for Budget Responsibility forecasted taxpayers could be left with a £29.5bn bill from bad debts caused by defaults in the government’s emergency lending schemes.
During the same month, the Treasury announced that it is the responsibility of lenders, not government, to recover debts under the support schemes.