Bounce Back Loan Scheme (BBLS) Fraud - What To Do If You Have A Problem

More than 12 months ago, we warned that the completion of a simple 2-page self-certification form online would result in a plethora of fraudulent claims. Our worst fears have been confirmed. Bounce Back Loan fraud is being forecast at more than half the £43bn lent and unfortunately the government has 100% liability for these loans, which means the UK taxpayer does.

How has this happened?

• Very little proof of business health: to qualify, a business only had to have been established before 1 March 2020.
• Impersonation of legitimate businesses: no controls to restrict a business to one application. Fraudsters put mail redirection on businesses.
• Use of willing 'money mules’ who took out loans only to file for bankruptcy.
• Filing of multiple applications across banks.
• Using stolen UK identities to make applications.
• Use of dummy or fake companies to make applications.
• False representations made by those using the scheme, such as to the value of property against which loans are secured.
• Organised criminal gangs infiltrated or intimidated businesses to obtain loans and steal the money for themselves. It is perhaps most likely that someone within the legitimate business may have assisted, aided and/or abetted a fraudulent application in this scenario.
• Non-residents applying for loans.

How was the fraud committed? What needs to happen now?

• Purchase of expensive personal assets e.g. luxury cars
• Directors routinely using the company bank account as an extension of their personal bank account
• Applying for a BBL when the business was ‘technically’ insolvent
• Money laundering: the business accountant or bookkeeper have a legal obligation to report any suspicion of fraud
• Bounce Back Loans used to pay back loans to the business from business owners or used to lend money to business owners. Any amounts borrowed must be repaid.
• Dividends must be repaid if, by making the dividend payment, the company became insolvent.

The risk of inaction

Companies and individuals to be investigated and prosecuted face significant reputational damage, in addition to criminal penalties.

Legislation contains a number of offences that may be relevant in relation to fraudulent applications for Bounce Back Loans, including an offence of carrying on a fraudulent business.

The offences are punishable with a maximum of 10 years imprisonment. Following a conviction, authorities can seek the seizure and return of funds under the Proceeds of Crime Act 2002.

Police are likely to use existing powers available, such as applying for account freezing orders in order to prevent funds from being dissipated whilst investigations are on-going.

What action should be taken now?

Mistakes, of course, can happen. Businesses need to ensure that they can show evidence of the information that has been submitted as part of any loan application. At Davidsons, we are able to undertake internal business checks to uncover any potential issues. Internal investigations are a crucial tool in working out what went wrong. If you have taken out a Bounce Back Loan Scheme for your business, believe you may have made an error when making a claim or you are facing investigation for Bounce Back Loan fraud, get in touch. Our expert team are here to help you with any enquiry you have on the BBLS.