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UK watchdog criticises lack of fraud checks on COVID loans

Fri, 03rd Dec 2021 00:01

By David Milliken

LONDON, Dec 3 (Reuters) - Britain's government failed to
guard properly against fraud in its 47 billion-pound ($63
billion) COVID emergency lending programme for small businesses,
opening itself up to billions of pounds of losses, a watchdog
warned on Friday.

The Bounce Back Loan Scheme launched in May 2020 and did not
conduct credit checks or fully verify the identity of small
businesses applying for loans, the National Audit Office, which
scrutinises public-sector spending, said.

"Government prioritised getting Bounce Back Loans to small
businesses quickly but failed to put adequate fraud prevention
measures in place," said Gareth Davies, the NAO's comptroller
and auditor general.

"One impact of these decisions is apparent in the high
levels of estimated fraud."

The government launched the scheme to stop the collapse of
small businesses which had to cease trading due to tight
lockdown restrictions at the start of the COVID-19 pandemic.

Firms could borrow up to 50,000 pounds each via banks at a
fixed interest rate of 2.5%, repayable over 10 years. Initially,
lenders had to give a loan decision within 24 to 48 hours.

In March, Britain's business ministry, which ran the
programme via the British Business Bank, a state lender,
estimated that 37% of the loans would not be repaid, and that
11% came from fraudulent applications.

A subsequent investigation by accountants PwC in October
revised the fraud rate down to 7.5%, although the NAO said it
had not had time to check this estimate itself.

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

The U.S. Special Inspector General for Pandemic Recovery
said in June that Washington's loans programme had been plagued
by "unprecedented levels of fraud".

Meg Hillier, the chair of a cross-party Public Accounts
Committee in Britain's parliament, said the government had done
too little to reduce "colossal risks of fraud and error".

"It's now focusing on recovering money from organised crime,
yet many of the smaller-scale fraudsters will have slipped
through its fingers," she added.

A business ministry spokesperson said loans and other
support had helped millions of firms avoid laying off staff.

"We are working closely with lenders and enforcement
authorities to minimise fraud and ensure those that have
committed fraud face consequences," the spokesperson added.
($1 = 0.7519 pounds)
(Reporting by David Milliken
Editing by William Schomberg)

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