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Uncovering Potential Bounce Back Loan Fraud

Government Launches Pilot Program for Bounce Back Loan Scheme.

In a bid to tackle potential fraudulent applications under the Bounce Back Loan Scheme (BBLS), the Department for Business (DBT), the Cabinet Office, and HM Revenue & Customs (HMRC) have joined forces to launch a groundbreaking pilot program. This initiative focuses on identifying sole traders who may have applied for loans during periods of inactivity or misrepresented their turnover.

How will it work?

It’s a two phase process:

  1. Data Detective: Initially, the Cabinet Office and DBT will collaborate with HMRC to share data on sole trader borrowings. HMRC will then cross-reference this information with its records, flagging high-risk cases for further investigation by DBT.
  2. Red Flag Alert: In the second phase, accredited BBLS lenders will be brought into the fold, receiving information on identified risk cases to aid in their own investigations. Lenders are also encouraged to report suspected fraud directly to DBT.

This targeted approach stems from the success of a prior pilot program that focused on limited companies participating in the loan scheme. Recognising the potential for fraudulent activities among sole traders, the Government has now directed its efforts toward this demographic.

Before the closure of the Bounce Back Loan Scheme in March 2021, a substantial £9.6 billion had been lent to sole traders. Individual loan amounts ranged from £2,000 to £50,000, with the Government acting as the guarantor. Notably, recipients were obligated to utilise the funds for the benefit of their businesses and were prohibited from using them for personal purposes.

The Government’s proactive stance on fraud prevention comes in the wake of criticism from the Public Accounts Committee regarding DBT’s handling of COVID-19 support schemes. A 2023 report by the same committee highlighted slow progress in DBT’s counter-fraud activities, emphasising the need for more robust measures. DBT has also acknowledged discrepancies in the use of grant payments made to businesses through local councils as part of COVID-19 support schemes.

HMRC estimates the total amount of error and fraud across all COVID-19 support schemes to be £5 billion, underlining the urgency of the government’s efforts to secure these financial lifelines against misuse.

As the pilot program unfolds, it represents a pivotal step in safeguarding the integrity of the Bounce Back Loan Scheme and maintaining public trust in Government-backed initiatives. The collaboration between DBT, the Cabinet Office and HMRC showcases a commitment to transparency, accountability and the responsible stewardship of public funds.

CLICK HERE for more information on the Government’s website.

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