Jurisdiction(s):
United Kingdom

UK COVID-19 Bounce Back Loan Fraud: Insolvency Service-led enforcement, director disqualifications, few prosecutions and value-for-money concerns

Published on: 03 April 2024

Published by a Law360 reporter

Legal News

Article summary

About £77bn was issued by lenders in government-guaranteed loans to keep firms afloat during the pandemic. Government data puts suspected fraud at £1.8bn. While sizeable, that sum is modest beside early assessments from the National Audit Office, the public spending watchdog, which suggested the real total for Covid loan fraud might reach £26bn. The revised outlook ‘is a world away from the sensationalist numbers bandied about four years earlier’, observed Daniel Staunton, an associate in Kingsley Napley LLP’s restructuring and insolvency team. The Bounce Back Loan Scheme, unveiled by the government in April 2020, enabled small and medium-sized enterprises to swiftly seek loans ranging from £2,000 to 25% of turnover, with a ceiling of £50,000. Ministers hailed the programme as successful, saying the schemes threw a lifeline to nearly 1.7m businesses nationwide and that 75% had been cleared in full by December 2023 or are progressing to be settled completely. Yet worries over fraud potential emerged rapidly. Accounts surfaced of insolvent entities obtaining loans, or directors extracting funds before closing their companies. There were claims that failed firms secured funding, and that some directors took out cash then swiftly closed their companies. Such allegations surfaced early and were reported publicly...

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