Recommendation 15

The Department and the Bank recognised that there was a trade-off between getting loans to businesses quickly by removing lender checks and slowing down the delivery of the loans by putting in place more counter-fraud measures. The Bank said that this would have had consequences for the economy, but argued that the existing ‘know your customer’ and ‘anti money-laundering’ checks had prevented in excess of £2 billion of fraud. The Department did not set out at the outset of the Scheme, or in our evidence session, the level of fraud that it was prepared to tolerate as a result of such trade-offs.37 Although it knew from the start that the limited fraud prevention measures in place would make the scheme risky, it was slow to introduce detection and post-loan controls. It took eight months to bring in processes to verify borrowers’ self-declared turnover against existing HMRC data—by which time 93% of the loans by value had been issued. Similarly, the Department introduced a check to identify and prevent multiple applications on 2 June 2020, a month after the scheme’s launch—and made them mandatory by end of June when 60% of loans had already been made.38 The Department said that the delay was because of the time needed to set up data sharing processes.39 To date the Bank has identified 13,000 possible duplicate loan applications .40