Taxpayers could be hit by a huge fraud time-bomb from Rishi Sunak’s £35billion bounce back loans, an investigation by The Mail on Sunday has found.
More than 1.15million businesses have borrowed up to £50,000 each under the flagship scheme to get back on their feet.
But The Mail on Sunday can reveal that the loans are being exploited by greedy business owners, rogue landlords and criminal gangs.
Exploitation: Taxpayers could be hit by a huge fraud time-bomb from Rishi Sunak’s £35billion bounce back loans
Our investigation found:
- Fraudsters are using classified advertisements to solicit people to help get hold of bounce back loans illegally;
- A supercar dealer caught a fraudster trying to use a taxpayer-backed loan to buy a Porsche Cayman worth £41,000;
- Banks are so concerned about abuse of the scheme that they have started asking those applying for buy-to-let mortgages whether they have taken out bounce back loans;
- The spending watchdog, the National Audit Office, has launched a probe into the scheme’s ‘value for money’ amid concerns that the taxpayer is being left on the hook for loans to crooks that will never be repaid.
The Cabinet Office is understood to be scrambling to devise a strategy to clamp down on the abuse.
Its officials have been warned that banks are handing out funds with only ‘minimal’ checks. That is allowing crooks to apply using the names of fake or dormant businesses.
The full scale of the problem may not become clear until the loans are due to be repaid from next April.
Sunak’s loan scheme was launched in May after banks came under fire for taking too long to help businesses at the height of the pandemic.
The idea was to distribute loans of up to £50,000 extremely rapidly with the Government promising to cover 100 per cent of any losses suffered by the banks.
But sources said intelligence shared with officials in the Cabinet Office shows fraudsters are using dormant companies to gain funds from the scheme illegally.
They said criminals evade detection by recruiting a ‘clean’ director for a company to apply for a loan. They backdate the individual’s appointment to avoid suspicion. The firms apply for loans at multiple banks to maximise their payouts.
The stolen funds can then be shifted through a number of bank accounts to make them untraceable.
Michael Levi, professor of criminology at Cardiff University, said: ‘It is when you try to get it back you see the problems. It is only in April that we will be able to tell the scale of the missing money.
‘It may be that fraudsters are only getting away with a small proportion of the total, but a small percentage of this will be a huge amount.’
Experts said advertisers are recruiting so-called mules to stash the proceeds of bounce back loan fraud in exchange for a share of the proceeds.
One post said: ‘I basically need someone to help me open an account so I can apply for a bounce back loan.
‘I am eligible for the entire £50,000 and will split a small percentage with someone who can help me get the loan.’
Stephen Brogan, a car dealer near Glasgow, found that a crook used his firm’s details to apply for a £40,000 loan.
He said someone rang him to buy a Porsche and asked for his bank account details to send the payment. The fraudster applied for a bounce back loan and pretended the borrowed money was the payment for the car when it landed in Brogan’s account.
He only discovered a loan had been applied for in his firm’s name after checking with Bank of Scotland.
Brogan said: ‘The bank didn’t do any due diligence on the loan. They completely let us down. It took three days for their fraud division to get back to us. They said their department has never been busier.’
David Clarke, chairman of the Fraud Advisory Panel charity, said: ‘It is vital that all banks apply proper checks to stop fraudsters receiving multiple bounce back loans from different lenders that will never be repaid. It’s not too late to claw back money.’
Banking trade body UK Finance said lenders had a system to ‘detect and prevent fraudulent activity’ which checks for duplicate applications.
It added: ‘Under the rules of the scheme set by government, businesses applying for a bounce back loan have to self-certify that they are using the loan for business purposes.’
The Treasury is understood to be confident that the banks’ precautions are sufficient.