You might have heard in the press in recent months that there are more and more stories emerging of company directors who are being pursued for committing fraud in respect of the Covid-19 Bounce Back Loan Scheme. The National Audit Office is reporting that approximately 11% of approved loans, or £4.9billion in monetary terms, was obtained fraudulently.
It is likely that more and more investigations are going to take place and companies and their directors will want to ensure that they are well advised if they face an allegation of Bounce Back Loan fraud.
The Bounce Back Loan Scheme
The Bounce Back Loan Scheme was launched in response to the Covid-19 pandemic. It was introduced on 04 May 2020 by the Government to assist businesses who were suffering solely as a result of the various closure measures imposed by the Government. Affected businesses could apply for loans of up to £50,000.00, depending on their turnover figures. The loans were backed by Government guarantees. They were offered for no fees and low interest rates of 2.5% and were repayable over 10 years with the first repayment not due until 1 year after the loan was taken out.
The Loans were relatively easy to obtain and, due to the importance of companies securing funds and the government’s guarantee, the Banks and commercial lenders administering the Loan schemes applied relatively lax scrutiny measures when considering loan applications, which exposed the Loan schemes to a significant risk of fraud.
What is Bounce Back Loan Scheme Fraud?
There are a number of ways in which directors of companies committed fraud when obtaining Bounce Back Loans. Typically, they included situations where applications were submitted for Loans where the business was not, in fact, eligible for a Loan. This occurred by businesses artificially inflating the turnover of their businesses in order to secure greater payments. Other cases involved fake businesses being incorporated solely so that they could apply for a Loan. Once obtained, the funds were misappropriated and the vehicle through which they were obtained were closed down.
There have been cases of impersonation, whereby fraudsters took on the disguise of legitimate businesses and obtained funds illegitimately. Other instances involve applications to many lenders where in fact each business was only entitled to one loan. Of course, there have been many cases reported in the press where funds obtained through Bounce Back Loans were used for unauthorised purposes.
If you are facing an allegation of Bounce Back Loan fraud, there may well be a legitimate defence to those allegations. For example, it might have been the case that errors were made when applying for Loans which were not caught by the Bank’s security checks. Other businesses might have also relied on professional advice when making an application for a Loan which, depending upon the wider circumstances, could give rise to a defence to allegations of dishonesty.
Potential Penalties for Bounce Back Loan Scheme Fraud
The Courts have the power to impose a wide range of penalties for Loan fraud, these include, but might not necessarily be limited to:
• Disqualification as a Director;
• Proceeds of Crime recovery proceedings;
• Penalties or fines; or
• Settlement by way of a damages payment.
What Should You do if You are Accused of Bounce Back Loan Fraud?
The worst thing any person can do when facing an allegation of this nature is bury their head in the sand. Good, early legal advice is always critical. We at Baines Wilson will be able to investigate your case to examine whether or not your business has a legitimate defence to any allegations of commercial fraud.