Independent review and analysis

Fraud risks in COVID loan schemes

When a senior officer from the National Crime Agency warns MPs about the substantial amount of fraud within the emergency loan schemes you know there is a problem.  With £43bn of government backed loans being provided to 1.4 million firms in a very short space of time, we should not be surprised.  At the same time, the Office for Budget Responsibility has warned that taxpayers could be left with a £29.5bn bill from bad debts. 

While most lenders were initially confident that their normal controls were sufficient to weed out fraudulent applications, the political pressures to provide funds quickly via a ‘lighter touch’ assessment process led to a high number of fraudulent cases getting through their systems.  Certainly, there is more fraud than would be expected in a similar sized portfolio of more traditional lending. 

As can now be seen, whatever underwriting techniques were employed were inadequate in a lot of cases.  We are aware that several banks have started freezing business accounts where loan fraud is suspected.  In our experience, timely action in these matters is vital to protect balance sheets.  While businesses are struggling to keep up to date with staff working remotely, this is one area of oversight that cannot be put off, even if it means using external resources to help.

We have already gained significant experience in relation to Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) lending and have spent many months helping funders re-underwrite loans and carry out ‘red flag’ reviews.   We are also aware that potential purchasers of Bounce Back Loans are beginning to appear. 

So, if you are a provider of BBLS or CBILS, there is no better time to subject your lending decisions to independent analysis and review.  We have a clearly defined menu of supervision services that enable funders and lenders focus on areas that are of specific concern.

If you would like to find out more, or if you would like to chat about how we can help you manage and mitigate risk, give us a call.

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