The UK’s National Crime Agency has joined other institutions in warning on the risk of emergency taxpayer-backed loans for small business being targeted by criminals.
The agency said there was intelligence that the Bounce Back loan scheme was being exploited by organised crime, according to a report in The Times on Saturday.
This follows warnings from the sate bank in charge of two COVID-19 support programmes that the schemes risked widespread fraud and poor value for money.
Keith Morgan, chief executive of the British Business Bank, twice wrote to business minister Alok Sharma in May raising concerns about the Bounce Back loan scheme and the Future Fund.
Billions has been leant and invested through both programmes. Bounce Back loans provide a 100% state guarantee to lenders offering low-interest loans. The support is capped at £50,000 ($65,000) per small business.
In a letter published on Wednesday, Morgan said the Bounce Back loan scheme was at risk of “very significant fraud.”
An investigation by the Mail on Sunday in August has also found fraudsters and criminals appear to be targeting the programme.
On top of other agencies’ concern, in recent months, the National Audit Office and parliament’s Public Accounts Committee have both launched investigations into the value for money and fraud risk of the Bounce Back loan scheme.
Part of the problem is that in order to transfer the money to businesses at speed, banks have bypassed many of their credit policies. Applicants also self-certify eligibility.
The NCA told The Times it was working with banks and other agencies to clamp down on the scheme.
About £38bn has so far been lent under the Bounce Back programme and the government has invested £720m into over 1,000 startups through the Future Fund.
The UK government fears its could lose as much as £23bn on Bounce Back loans.
The Department for Business, Energy, and Industrial Strategy (BEIS) said in its annual report, published late on Wednesday, that loss rates on the coronavirus loan programme could be between 35% and 60%.
At the top end of its forecast, that would leave the government with losses of £22.8bn of its current £38bn loan book.
On Wednesday, a government spokesperson said the figures were a “broad estimate” and “do not take account of the recent extension we have made to the repayment period for the loans.”
“We continue to work with banks to ensure businesses have the time, space and support needed to recover from the impact of coronavirus,” the spokesperson said.
Watch: The government’s job support scheme explained