Organised crime syndicates are targeting Covid loans, says NCA

ORGANISED criminals are exploiting the Government’s emergency coronavirus pandemic loan scheme for small businesses, crime investigators have warned.

The National Crime Agency said yesterday it had received intelligence that criminals are targeting the Bounce Back Loan Scheme under which banks have approved about £38bn of lending to 1.3m businesses since it was introduced at the start of May.

The agency said i t had shared “red-flag indicators” with respective banks lending under the scheme to help them tackle fraudulent applications for loans.

Under the scheme, small businesses can borrow up to £50,000 from commercial lenders at an annual interest rate of 2.5pc.

The Government guarantees 100pc of any losses banks suffer if borrowers fail to repay their bounce back loans.

The crime agency’s statement comes days after it emerged that the Government launched the bounce back scheme, despite concerns raised by the British Business Bank, which administers the programme. Keith Morgan, chief executive of the British Business Bank at the time, wrote to Alok Sharma, the Business Secretary, four months ago warning that the scheme carried “very significant fraud and credit risks”.

Mr Morgan said: “The scheme is vulnerable to abuse by individuals and by participants in organised crime.”

The bounce back scheme was rushed into place in May as the Government tried to prop up millions of small businesses facing a cash crunch during the Covid-19 lockdown.

Many businesses applying for the loans have found they are ineligible and close to 300,000 applications have been rejected.

An NCA spokesman said: “Our intelligence suggests that the bounce back loan scheme is being exploited, including by organised criminals.

“On the basis of our assessments, we have provided red-flag indicators to the banking sector to aid their detection of fraudulent applications.

“We are providing intelligence to assist partner investigations, and we will investigate cases ourselves where there is a serious and organised crime element.” HSBC stopped accepting applications for bounce back loans from new customers this week, so that it can process and deal with a huge backlog of applications.

The bank is also halting the opening of new small business accounts as it ploughs resources into processing loan applications instead.

Taxpayers could be left with a £23bn bill for bad debts under the Government’s three main lending schemes, according to accounts published by the Department for Business, Energy and Industrial Strategy this week.

A government spokesman said this week that the loan schemes had helped thousands of businesses survive the coronavirus pandemic and protected millions of jobs.

“We have looked to minimise fraud – with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls.

“Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both,” the spokesman said.