UK watchdog criticizes lack of fraud checks on COVID loans


General view of deserted New Bond Street with its stores closed, following the coronavirus disease (COVID-19) outbreak, London, Great Britain, May 7, 2020. REUTERS / Simon Dawson // File Photo

Register now for FREE and unlimited access to reuters.com

Register

LONDON, Dec. 3 (Reuters) – The UK government has failed to properly guard against fraud in its £ 47bn ($ 63bn) COVID emergency loan program for small businesses, s’ opening up to billions of pounds in losses, a watchdog warned Friday.

The Bounce Back loan program launched in May 2020 and has failed to perform credit checks or fully verify the identity of small businesses applying for loans, said the National Audit Office, which monitors public sector spending.

“The government has prioritized providing early rebound loans to small businesses, but has failed to put in place adequate fraud prevention measures,” said Gareth Davies, Comptroller and Auditor General of the NAO.

Register now for FREE and unlimited access to reuters.com

Register

“One of the impacts of these decisions is evident in the high levels of estimated fraud.”

The government launched the program to stop the collapse of small businesses that had to go out of business due to strict lockdown restrictions at the start of the COVID-19 pandemic.

Businesses could borrow up to £ 50,000 each through banks at a fixed interest rate of 2.5%, repayable over 10 years. Initially, lenders had to make a loan decision within 24 to 48 hours.

In March, the UK Department of Business, which ran the program through British Business Bank, a state lender, estimated that 37% of loans would go unpaid and 11% came from fraudulent claims.

A subsequent survey by PwC accountants in October revised the fraud rate to 7.5%, although the NAO said it had not had time to verify that estimate itself.

Other countries are also investigating the misuse of emergency loans issued during the pandemic.

The US Special Inspector General for Pandemic Recovery said in June that Washington’s loan program had been plagued by “unprecedented levels of fraud.” Read more

Meg Hillier, chair of a multi-party public accounts committee in the UK Parliament, said the government had done too little to reduce “the colossal risks of fraud and error”.

“He is now focused on collecting money from organized crime, but many small-scale fraudsters will have eluded him,” she added.

A spokesperson for the Ministry of Business said the loans and other aid had helped millions of businesses avoid laying off staff.

“We are working closely with lenders and law enforcement authorities to minimize fraud and ensure that those who commit fraud suffer the consequences,” the spokesperson added.

($ 1 = 0.7519 pounds)

Register now for FREE and unlimited access to reuters.com

Register

Reporting by David Milliken Editing by William Schomberg

Our Standards: Thomson Reuters Trust Principles.


Comments are closed.